In Our View: Making Sense of Dollars

Now more than ever, it\u2019s vital to start learning about finance at a young age

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In a nation where the federal government has a debt of more than $16 trillion, perhaps it's not surprising that American teenagers are less money-savvy than many of their peers around the world.

A survey of 15-year-olds released recently by the Paris-based Organization for Economic Cooperation and Development found that teens in the United States rank in the middle of the pack when it comes to financial literacy. A total of 18 economies were studied, with Shanghai, China, having the most economically savvy teens. The United States ranked ninth, between Latvia and Russia, while Italy and Colombia ranked at the bottom.

Among American teens, more than 1 in 6 participants were unable to reach the baseline of proficiency, such as recognizing the difference between needs and wants — which is listed as a first-grade skill under Washington's education standards. We can empathize with 15-year-olds who might have difficulty differentiating between "needing" a new Xbox and "wanting" one, but a lack of such basic understanding is something that can present lifelong hurdles. And it's clear that many people in this country have little understanding of personal finance.

Just look at the situation surrounding student loans, which has become a point of emphasis for President Barack Obama. While a college education can be an important step toward a secure financial future, many students fail to weigh the cost of their loans against their likely future earnings. Or look at the amount of personal debt in this country; according to CNN, households with at least one credit card carry an average of about $16,000 in credit card debt. And that's the average. Essentially, for every household that pays off its credit cards each month, there is another with more than $30,000 in such debt.

For its part, the K-12 education standards in Washington stipulate that one of the state's goals is for students to "understand the importance of work and finance and how performance, effort and decisions directly affect future career and educational opportunities." This is a necessary goal, and yet it is one that can be obfuscated by a society that values instant gratification, excessive consumerism and spending rather than saving. Responsible financial education in the classroom can be undermined if those lessons are not being reinforced in the home.

The study by the Organization for Economic Cooperation and Development found that 9.4 percent of American students — about the same as the international average — are top performers in financial literacy. Such students can, for example, calculate the balance on a bank statement and understand the implication of income-tax brackets.

While its not necessary for every student to be a budding Warren Buffett, it is essential for Americans to start developing a better understanding of personal finance. In an age when few professions have old-fashioned pension systems, the need to begin preparing for retirement now arrives in one's 20s rather than one's mid-50s. And, as the past decade taught us, a lack of understanding in how mortgages work and how much somebody can afford to pay for a house can have far-reaching implications.

Education is crucial to avoiding such financial pitfalls. Not only can it assist in developing personal responsibility, but it can help consumers protect themselves against predatory lending practices or other financial scams. All of these are important when chasing the traditional American Dream, but our nation's culture of debt can hamper how effectively those lessons get through.