Reach your students with financial literacy

There’s no doubt it’s important for young people to learn about personal finance. Just 21 states required a financial literacy course for high school students in 2020, according to the Council for Economic Education. But there’s another reason to incorporate financial literacy into your teaching: It can also help keep students engaged.

Using relevant examples in class “can bring things to life for your students,” said KC Rakow, CPA, Ph.D., an assistant professor at Loyola University Chicago. For instance, many students use loans to finance their education. Engaging them on the subject of student loans can be an effective way to teach them about the importance of paying off debts and the time value of money, he said.

It can be tempting to assume that accounting and business students have a more advanced understanding of personal finance than their counterparts in other majors, but that’s not always the case, said accounting lecturer Dan Royer, CPA, Ed.D. He teaches financial literacy, a required course for all students at Ball State University, in Muncie, Ind. When it comes to existing financial literacy knowledge, students enter his classroom at very different places, he said. But they all leave better prepared for their future. Royer once had a student reach out after his class to say he was considering a minor or even major in finance after learning about financial literacy.

Rakow, Royer, and other educators shared these tips for introducing financial literacy concepts into your classes:

Focus on real scenarios. It’s helpful to find topics that your students could see translating to their own lives. For instance, Royer talks about his sister-in-law, who’s usually financially savvy. After trying Starbucks for the first time, however, she developed an expensive habit. She eventually kicked it by purchasing her own coffee machine. With multiple coffee shops on campus at Ball State, Royer’s students can relate to the story.

“This is just one example that goes with a topic we discuss very early on: the importance of knowing where your money goes,” he said.

Meanwhile, Ann Boyd Davis, CPA, CGMA, Ph.D., covers another topic in her accounting classes that can be critically important for future CPAs, though easily overlooked by students.

The associate professor of accounting at Tennessee Tech University in Cookeville, Tenn., discusses the possible cost of becoming a partner in a CPA firm. Buying into a firm may require a hefty loan, so it’s important for students to understand related financial literacy concepts. Those concepts become more real when students can see how they might affect their future.

Follow the news. Along the same lines, Royer and Rakow both use newsworthy topics to introduce discussions on financial literacy. For example, a lot of students were interested in the market manipulation that occurred earlier this year when day traders caused GameStop and AMC stock prices to surge, Rakow said. Some students believed they could get rich overnight too. Rakow used the incident as an avenue to discuss investing with his classes, encouraging students to approach it with caution.

“I tell them, if we were all good at predicting the market, we wouldn’t be in this classroom,” he said.

Pair it with the curriculum. Davis and her colleague Alma D. Hales, Ph.D., an associate professor of finance, incorporated financial literacy into the curriculum by creating a university-wide one-hour course. In this course, students from 23 majors learned the basics of financial statements, ratio analysis, time value of money, and credit scores.

Rakow incorporates financial literacy into his accounting classes when concepts overlap with the coursework.

For mortgages, this might be when the class covers long-term debt. When he discusses budgeting in his managerial course, it’s a good time to talk about personal budgets, he explained.

Another topic Royer and Rakow like to introduce is retirement. Though it can feel far away to students, the professors feel it’s important to discuss early. Rakow often broaches the subject during discussions of pensions. Davis agrees there’s value in teaching students to prepare for retirement. “I think it’s never too young to start letting students think about retirement and how to get there,” she said.

Make it fun. Royer uses an interactive learning platform to quiz his students on financial literacy topics. Throwing in lighter questions — like the multiple choice: “Which historical figure got caught up in a Ponzi scheme?” during their discussion on fraud — keeps students tuned in, he said. Before the pandemic, he also encouraged small group discussions, followed by polls, to break up his lectures and make his class as engaging as possible.

Ball State also partners with a local credit union that provides resources, including podcasts, on practical financial literacy topics. Students might be tasked with listening and then responding to the subject matter.

Ideally, young people would begin learning about financial literacy well before college. That’s part of the inspiration behind Money Maker$pace, a program created by Davis and Hales. During the initial session, children from preschool to third grade were given jobs, where they earned play money to spend, save, or donate to charities — after paying taxes, of course. Children could choose from several careers, each one incorporating its own fun activity. Architects built with blocks, while chemists made slime.

“I think it’s powerful to instill that idea in young kids: that ‘I’m going to work, and what I earn, I need to think about saving, spending, and sharing.’ We need all three legs for the stool to stand up,” she said.

Davis’s and Hales’ own Tennessee Tech students helped run the program, working with their counterparts from the College of Education to break down complicated financial literacy concepts for the children. Some got extra credit and some earned service hours for Beta Alpha Psi, an honors organization for finance and accounting students. Davis and Hales are hoping to grow the program moving forward.

— Megan Hart is a freelance writer based in Wisconsin. To comment on this article or to suggest an idea for another article, contact Courtney Vien, a JofA senior editor, at Courtney.Vien@aicpa-cima.com.