To a Happier New Financial Year: Smart Decision-Making Begins in the Classroom

12/26/2012 12:54 pm ET Updated Feb 25, 2013
FILE - In this May 9, 2012 file photo, a Visa credit card is tendered at opening of the Superdry store in New York's Times Sq
FILE - In this May 9, 2012 file photo, a Visa credit card is tendered at opening of the Superdry store in New York's Times Square. Americans boosted their borrowing in August by the largest amount in three months with strong gains in the category that covers auto and student loans and in credit card debt. (AP Photo/Richard Drew)

With less than a week until the new year, there's a lot of anxiety mounting over the approaching "fiscal cliff," the nickname for a series of tax measures set to go into effect at the stroke of midnight. Between now and then, and in the months after, politicians are going to have a lot of big decisions to make, including when and where to make cuts. I can't personally say how much austerity is enough, or too much -- I'll leave that debate to the experts and economists.

But I'm sure I'm not alone in my hope that when the time comes, politicians will make informed and balanced decisions, and that education remains a priority. Especially when you consider the future of our economic system.

Look at the current state of our nation's collective literacy in personal finance and economics. According to research conducted by Annamaria Lusardi, Professor of Economics at George Washington University, there's a shocking lack of it:

We found that even though most individuals deal frequently with credit cards and other forms of borrowing, only a minority of individuals in the United States possess basic financial knowledge relating to debt.

And yet, in a world of ever-increasing market complexity and individual responsibility, financial literacy is more essential than ever. Unemployment numbers remain high while debt continues to rise, making financial management more and more difficult. Which supports Lusardi's conclusion:

Just as it has proven to be impossible to succeed in the modern world without the ability to read and write, so it will be impossible to succeed in the present-day financial system without knowing the ABC's of economics and finance.

All evidence points to the necessity of teaching these critical decision-making skills at an early age. So it might surprise you to know that only 14 states require a course in personal finance, and only 22 states require a course in economics -- and that's considerable progress from just a decade ago.

That said, in recent years there have been many pockets of progress: take Chicago Public Schools as a most recent example. Missing from their senior course catalog was a class offering engaging real-world content, something they could use in college and beyond. So in advance of their new K-12 Financial Literacy Framework launching in Fall 2013, CPS is introducing a personal finance capstone course for 12th-graders this semester, created by the Council for Economic Education (CEE). Traditional classroom instruction in financial literacy is supplemented by an important online component, fostering learning both in and out of school. It's a great example of how education can head off poor decision-making by teaching valuable lessons early on.

One can't help wondering, if businesses and the general populace had better understood the ramifications of their pre-recession actions, perhaps we'd be in a different situation today. It's important to remember that this program and others like it are completely contingent on continued funding, both private and public.

So as we ponder solutions to the economic problems before us, let's not forget the impact that today's actions will undoubtedly have on tomorrow. If we don't want history to repeat itself, it's our responsibility to provide the next generation with the tools and lessons they need.