First introduced by Rep. Diana Farrington on July 1, 2021, the goal of the HB 5190 was to revise high school graduation requirements. This included first reducing the language other than English 2.0 credit requirement to 1.5 credits, and then to add a 0.5 credit requirement of “financial literacy.” On May 26, 2022 the bill passed within the Senate with a vote of 35 to 2. On June 7, 2022 the House passed the bill 94 to 13.
As explained by the National Conference of State Legislatures (NCSL), the HB 5190 will adjust the current Michigan merit curriculum to require students successfully complete a half credit course in personal finance including a financial literacy component to receive a high school diploma. This bill will go into effect in 2023, beginning in eighth grade.
What is Financial Literacy?
Many students graduate from high school without an understanding of what it means to save and invest. According to an independent Financial Industry Regulatory Authority (FINRA) literacy test that is given every few years, the most recent test has shown that there is widespread financial illiteracy–only 34% of respondents can correctly answer at least four out of the five questions. Financial literacy has become paramount, as individuals need to plan more long-term due to the rapidly changing economy.
Financial literacy is, “the ability to understand and apply various financial skills” (Zucchi, 2022). In high school parents manage the majority, if not all, the financial decisions of their children. This leaves little to no opportunity for students to gain real world experience on how to save, invest, and overall use their money once they become eighteen. As adults, the financial responsibilities many Americans face include student debt, retirement accounts, mortgage, online trading, budgeting, and much more.
The Need for Financial Literacy Courses
A large gap exists between different groups of individuals when it comes to financial literacy. According to the FINRA study, White and Asian adults are shown to be more proficient than the Black and Hispanix survey respondents. This gap between these two groups is not something that exists solely when determining financial literacy, but instead exists throughout all different aspects of education. The HB 5190 will help mend this gap for many individuals within Michigan, and will hopefully continue to reflect in different states as merit curriculums are adjusted.
As saving and investment options become more complex, there is growing stress among consumers as they are not able to make educated decisions. When choosing from investment and savings options many consumers do not realize the long-term effect these decisions can have. Rather than make decisions based on their own knowledge and understanding, many consumers are forced to rely on different institutions to steer them towards an option that might not best suit them. Tutor Zone’s CEO Manuel Bermudez perfectly sums up the fact that most individuals never receive any guidance on how to, “manage our own finances” (Bermudez, 2022).
Overall, we have seen how quickly the financial environment can change within these past few years. Technological advances, and the pandemic have led many individuals to feel overwhelmed when thinking about their financial future. One lesson on financial literacy is not enough for individuals to gain experience on how best to navigate their financial futures. At 18, we legally become adults without much preparation on how to navigate the real world. By learning about financial literacy at an earlier age, we could create successful long-term plans with preparation for large financial decisions (Bermudez, 2022).
Adopting the HB 5190 Across States
Michigan is not the first state to adopt a financial literacy requirement. In fact, 14 states currently have a personal finance requirement at the highschool level. The personal finance curriculum across these states vary from a one-year career preparedness course that includes personal finance lessons, to taking a half credit course in the area of personal finance (AXIOS). Personal finance courses allow students to know that the information they learn will be used in their real lives.
A study done by Standard and Poor in 2016 found that about 57% of adults in the United States are financially illiterate (Smith, 2022). This shocking statistic shows how significant it is for more states to adopt similar requirements within their curriculums to ensure that more students are able enter the world as adults with a knowledge and confidence in personal finance.
More states are beginning to follow in adopting similar financial literacy requirements across their school districts. As of April 2022, “61 bills about personal finance education have been proposed in 26 states, according to Next Gen Personal Finance” (Reinicke, 2022). Each state’s proposed bill may look slightly different than the next, but nonetheless share a personal financial education requirement.
Tutor Zone’s Financial Literacy Class
To help bridge the gapTutor Zone has a financial literacy class available to sign up for. There is a widespread lack of financial education offered in schools which is why it is important for students to seek knowledge and experience wherever they can.
Manuel Bermudez briefly explains the focus of Tutor Zone’s financial literacy course as, “an introduction to big concepts like real estate, budgeting, and the stock market with the overall goal to empower students,” with the hope of sparking curiosity so they can continue to learn more on their own. Tutor Zone’s first financial literacy course was launched in the Summer of 2020 to a group of eighth graders. The students were able to not only manage conversations about the topics discussed in the class with one another, but were also able to apply their knowledge to the real world.
Across the 14 states that financial literacy courses have been made a requirement, students will be able to immediately apply what they know to their real lives. In the future as more states adopt similar curriculum requirements, students will be able to enter the world more confident with established long-term plans on how to be successful.
By Viviana Cabrera
Bermudez, Manuel. Interview. Conducted by Viviana Cabrera. 15 June 2022