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Dan Loney: Well, as kids head back
to school, one of the areas of
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focus that schools are looking
at implementing or already have,
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is that of financial literacy
classes. The feeling is that
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having this as a component of
their education is vital to
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their future success. But how
much is this occurring at the
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moment, and how much further
does it have to go as we move
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ahead? Pleasure to be joined
here in studio by David Musto,
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who's Finance Professor here at
the Wharton School. He's also
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director of the Stevens Center
for Innovation in Finance.
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Great to see you, David.
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Hi. Great to be back.
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Thank you. I mean, I
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remember talking with you about
this topic a few years ago. So
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how has financial literacy education
advanced in the last several years?
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Well, more states have discussed implementing mandatory financial
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literacy education, and I think
more and more schools have
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gotten excited about the
possibility of getting their
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students ready to be financial
citizens. And I've been— what we
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were starting, I think we spoke
last— we were starting, here at
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Wharton, offering a financial
literacy course that I've
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overseen. I made a bunch of
videos for it talking about the
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whole range of topics. And now
we have about 1000 students a
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year across the country taking
this, with our— our MBAs and our
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undergrads as— as teachers
doing the synchronous sessions
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for this. So it's actually a
big, big effort here at Wharton.
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Do you view, then, as you think
about curriculums building out,
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does financial literacy—does it
need to be mandated? I mean, it
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can't be an optional thing as we
move forward, right?
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Well, I think it's a good idea
to mandate it. And I think you
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understand also why states and
the federal government want it
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to happen, is that when people
are not financially literate,
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then that ends up being a
problem for states and the
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federal government trying to
help people who get into trouble
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down the road. I think it makes
sense to make it mandatory.
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There are just, you know— you
are— you are engaged in the
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financial industry before you
know it. You know, just
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the way you pay for things. And
then you're taking out student
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loans, which are huge when
you're 17 years old. All these
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things happen very quickly. And
so you really need that
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astuteness as soon as possible.
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And then there's the component
of the kids who maybe don't go
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to college, who go right into
the workforce, and need that— for
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that understanding as well, on
just the basic day to day living.
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Oh, for sure, yeah. I mean,
just— you know, it's just how
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you finance the little things,
how you finance the big things,
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and then, of course, how you
finance your retirement, which
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is— maybe to the high school
students, it feels odd to be
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talking about your 60s and your
70s, and hopefully your 80s and
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90s, when you're in high school.
But, you know, those long, long-
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term returns on your— what
you save in your early days, you
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know— you'll be happy you did it.
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So when you think about the
type of topics and areas of
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focus, as you said, that you're
doing with students right now,
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what do you feel are the most
important components that need
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to be part of that— that
understanding?
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Well, I see it as having three groups
of topics. And there— these are
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not mutually exclusive. I see it
as, number one, the things that
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are already happening in your
life right now. Like, you know,
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if you're paying with this app
versus that app, or with debit
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card, credit card, all the
different ways you can pay.
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You're doing that already. And
to understand what's being taken
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out of your payments, who's
making money off you, how are they
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making money off you. There's
that. And as I mentioned,
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student loans. That comes up
before you even finished high
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school, if you're going to go to
college. And those are huge. So
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there's that, that's just news
you can use right now. And
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then, you know, of course, once
you're 18, you're a voter and
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and then there's topics that we
want our voters to be educated
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about. Right now, the big topic
is Social Security. Everyone
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talks about, "Well, there's a
trust fund." People say, "Well,
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there isn't exactly a trust
fund." "Yes, there is a trust
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fund." "It's running out." "No, it
isn't running out." There's all
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these things that you hear
politicians say, and I think to
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some extent, they're taking
advantage of the fact, sometimes,
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that people don't really
understand what they're talking
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about, and they try to express
it in ways to get people to vote
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this way or that way, without
ever really understanding it.
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Especially for the younger
people, to understand how Social
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Security works. What are the
issues? Well, you know. What
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is being stressed right
now? What isn't? - Right.
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What do you think? How do you
think it should look?
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These things
are all key, right?
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So there's news you can use.
There is being
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an educated voter. And then, as
I said, there is— there's just
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those long-run things that you
just— you simply have to start
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now. Largely, we're talking about
saving for retirement. So they
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might seem very abstract and
distant, but in fact, there's a
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huge benefit from starting as
soon as possible.
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Are you getting feedback from
some of the students and maybe
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from some of the schools that
they understand the importance
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of having this education as part
of their their
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time in high school?
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Well, I get feedback through the
course I'm involved with, right?
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So the course I'm involved— we
call it Finance 2. It's— it's
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it's a Penn course. It's
only for high school students.
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We offer it through our Global
Youth Outreach. And we have
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these 1000 students a year.
There are events where I meet
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them. And then we have a chance
to talk about what we covered in
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class and how they apply this
to— to their daily
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lives. Here's one fun thing that
we talk about in the course that
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I enjoy, which maybe doesn't
sound like finance, but ends up
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it is, which is negotiating.
- Right. - Right?
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Negotiating, where— you know,
if you apply to college,
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chances are you'll get
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into more than one college.
They're going to give you
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offers. And just talking to some
of our Philly high school
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students, I've heard about, some
of them realize this is an
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opportunity to say, "Hey, if you
give me what they're giving, you
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got me. I'm yours." And that
works. I mean, that kind of
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thing that didn't occur to me
when I was applying to college.
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Negotiate, right? But in fact,
it's hugely valuable.
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Is high school, then, the right
time to start programs like
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this? Or can you see a value of
doing this, say, when kids are
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in middle school and working
their way up through that, those
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six years, through their high
school days?
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Well, you know, the
sooner, the better. It's— you
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know, as as a middle
school student, you wouldn't
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have that many decisions to make
that are financial, but you
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will, you know— these days, I
guess, you know, how many middle
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school kids have a phone? And
now they're starting to—
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starting to make their payments
that way. And anytime someone is
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making money off you, especially
if a business is making money
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off someone who's 12 or 13 years
old, you want to know, right?
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People— it's the famous line
about the internet, which is,
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you know—it's famous because
it's true, which is that, you
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know, "If it seems like the
product is free, then you're the
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product." Right? - Right.
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Know when you're the product.
That— that's—
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it's never too— never too early
to learn that.
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David, great to see you
again. Thanks very much.
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Right! Great to be here.
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Thank you. David Musto,
Finance Professor
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here at the Wharton School and
director of the Stevens Center
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for Innovation in Finance.
