When Butte resident Mike Paffhausen graduated from Carroll College in 2009, he received a thin, purple book from the school that he says changed his life. It was titled “Life After Graduation: His Guide to Success.”
Paffhausen proceeded to make a to-do list on a couple of blank pages in the back of the book, filled with items that the book advised on. The list spanned a page, plus a few, and included things like ‘buy life insurance’, ‘create a budget’ and ‘make a will’.
Today, he still has the book and crossed off every item on the list within the first two years of reading it.
The book, and the lessons learned from it, were pivotal in Paffhausen’s life, he said, and after that, he became determined to make sure other young adults benefited from those lessons.
“Finance is like sex, religion and politics,” Paffhausen said. “That is no longer talked about at the table; it’s inappropriate and taboo, and it shouldn’t be. And it is really inappropriate in those families where they are not good with money. So we perpetuate poverty.”
Paffhausen’s many efforts to improve the financial literacy of the community include working with Carroll, local high schools, through her church, and even raising funds to continue purchasing books for future seniors.
In the summer of last year, he told the board of the National Association of Montana Insurance and Financial Advisors, of which he is a member, about his goal of getting personal finance classes guaranteed to every high school student in Montana. Paffhausen and other advocates refer to it as guaranteed rather than required, since a financial education class is guaranteed to every high school student.
Paffhausen connected with Next Gen Personal Finance, a nonprofit organization that he says has been working with him and the NAIFA MT board of directors for nearly the entire year to make his goal a reality. Paffhausen met Carly Urban, an economist with a Ph.D. in economics and associate professor at Montana State University in Bozeman, through Next Gen.
In October 2021, Paffhausen spoke at the Montana Association of American Business Professionals fall leadership conference as part of NAIFA MT. Paffhausen said he spoke at a roundtable with teachers from the organization about guaranteed financial literacy classes in Montana high schools, and that they were all “resoundingly supportive,” prompting him and the NAIFA MT board of directors to go ahead.
He became president of the Montana National Association of Insurance and Financial Advisors in January.
On Tuesday, Urban, who is a leading researcher in the field, presented her findings on guaranteed personal finance classes in schools at the 2022 NAIFA MT State Convention at the Fairmont Hot Springs Conference Center near Anaconda, where NAIFA members MT who were not in attended the meeting.
About the literacy classes
The idea behind financial education in schools is that high school graduates have to make a lot of very important financial decisions when they graduate, and they need to learn about money before they start doing so.
The case for financial education, Urban said during his presentation, can be found in his favorite thing: data. According to his research, only 27% of 23-28 year olds can correctly answer three basic questions about interest, inflation and diversification.
“And when I say basic questions, I mean, ‘You have $100 today, the interest rate is 2%, how much money will you have next year? Will you have more than $100, exactly $100, or do you really not know?’” Urban said.
She said her research also found that 54% of student loan borrowers didn’t calculate their future monthly payments before choosing a loan and, a statistic she found very revealing: 38% of 18-34 year olds reported having used alternative financial services. services, such as payday loans, in the last five years.
Urban called these alternative financial services a “debt trap for young people.”
“If you want to make sure you’ll never be able to start a small business as a young adult, or in your life, start the payday cycle,” he said.
When his research looked at states that guaranteed financial education classes as a graduation requirement, it showed that the first graduating class had no change in credit scores at age 23 and had a 1.4% decrease in loan delinquencies. loans for 90 days. The second graduating class had a credit score improvement of 16 points and a 3.4% decrease in 90+ day delinquencies, and the third graduating class had a credit score increase of 32 points and a 5.8% decrease in delinquencies over 90 days by age 23. Urban called the results of the third generation of high school students “enormous.”
Their research also shows that people want financial literacy classes in schools, with 88% of respondents in a 2022 survey saying high school students should take a semester or year-long course in personal finance.
Student loan repayment rates for first-generation and low-income students and a shift from high-cost to low-cost lending methods also increased with guaranteed financial education classes, and payday loans decreased. Students who had guaranteed financial literacy classes in high school were also 21% less likely to carry a credit card balance. In addition, his research found that this requirement helped students from low-income families the most.
However, Urban said, there is no evidence that guaranteed financial education classes increase the likelihood of opening a retirement account, a non-retirement savings account or owning a home.
She said this is because at 16, 17 and 18 years old, most students are thinking about what’s going on right now, like car loans and student loans, and they’re not ready to think about the retirement or owning a home.
Guaranteed personal finance courses also do not change graduation rates, college attendance rates, college completion rates, income, or workplace.
Eight states across the country guarantee financial education classes for all high school students, according to Urban’s presentation, and another five are in the early stages of implementation.
The reason these classes should be required rather than optional, Urban said, is because research shows that making them optional doesn’t make a difference to students’ future credit scores, borrowing habits, or student delinquency rates. the loans.
Paffhausen said that in addition to the other researched benefits of guaranteed financial education classes, it’s a nonpartisan cause that everyone he’s talked to supports.
State of Courses in Montana
Eight schools in Montana currently require financial literacy to be taught, including Absarokee High School, Anaconda Sr. High School, Box Elder High School, Hamilton High School, Polson High School, St. Ignatius High School, Sweet Grass County High School, and Victor Secondary, according to Urbano’s presentation.
About three weeks ago, Paffhausen said, the efforts he and the NAIFA MT board of directors made paid off. Paffhausen and Urban were able to meet with Elsie Arntzen, Montana’s Superintendent of Public Instruction, and found in her a home for her cause.
According to documents from the Montana Office of Public Instruction, updated Chapters 55, 57 and 58 of the Montana Administrative Rules, which include guaranteed financial education courses for high school students, would take effect in January 2023 if adopted.
Currently, four units of English language arts, three units of math, three units of science, three units of social studies, two units of career and technical education, two units of the arts, one unit of health improvement, two units of world languages and two elective units.
The proposed rule changes include adding a required one-half credit of civics or government in the three social studies units and adding a required half-credit of economics and financial literacy in the three social studies units or the two career and technical units. education, according to OPI materials.
Urban’s research shows that social studies is actually the best course to implement financial literacy, and not math, as some people may think.
There will be challenges, Paffhausen said, and they will be primarily “strategic and tactical issues” of implementing coursework, such as training existing teachers to teach personal finance and finding room for the new content in the high school curriculum.
According to research on personal finance classes required in Peru, the teachers of the classes also benefit. Instructors in the Peru study saw their savings increase after teaching the class, because they, too, were learning personal finance in a more fun and digestible way than is sometimes explained to adults.
The cost to schools can also be free, Urban said, with Next Gen Personal Finance offering free, high-quality training and accreditation for teachers, and free curriculum.
Arntzen also said he will make personal finance units available as part of the 60 units teachers must take every five years to maintain an active teaching license.
Paffhausen said that NAIFA MT is the right organization to champion this cause. “Which organization is more appropriate to bring this conversation to the forefront?” he said. “Everyone in that room has had clients that we’ve sat across from that we wish we’d gotten off to a better start and had a simple, fundamental education on how money works.”
And while NAIFA MT is an advocacy organization, Paffhausen said advocating for guaranteed personal finance classes doesn’t directly benefit them.
“Society does not know who NAIFA Montana is and will never know,” he said. “We don’t have any perceivable benefit of outcome in this.”
As for his own children, he said, they will learn financial literacy anyway. But she said he believes in this cause for all the other kids who might not and ultimately because it’s a good thing to do.