Op-ed: California’s personal finance education requirement is a commitment to future generations

The perceived benefits of financial education are so great that in a 2022 survey from the National Endowment for Financial Education, more than 85% of Americans polled said learning about personal finance should be a requirement to graduate from high school.

Lawmakers have responded to this need with the unanimous passage this week of a bill in the California Legislature to guarantee rising generations with one semester of a stand-alone personal finance course. Gov. Gavin Newsom signed Assembly Bill 2927 on Saturday, assuring that future California high school students will receive a huge leg up in terms of their understanding and managing their own personal finances.

As a proponent of this legislation and co-founder of Next Gen Personal Finance, I am elated that with the stroke of Newsom's pen, fully 64% of all U.S. high schoolers will be required to take a one-semester personal finance course as a condition for graduation.

California becomes the 26th state to require a stand-alone personal finance class. Just five years ago, only five states did so, covering 17% of high school students, according to Next Gen Personal Finance 2019 State of Financial Education report.

The dramatic adoption of this policy across the country speaks to the impact and equity inherent in providing real world skills that will help prepare every student to navigate a life after graduation, whether that involves college or a career.

So many adults I have met over the years share with me this common refrain about personal finance: "This is a class that I wish I had." They have shared with me how they struggled to manage credit and the deleterious impact it had on their credit scores, or how their lack of investing knowledge prevented them from starting early to benefit from compounding.

There's also the economic benefit for the student.

California students who take a one-semester course in personal finance experience a $127,000 lifetime positive benefit, according to research from Next Gen Personal Finance and consulting firm Tyton Partners.

The benefits don't stop with the student. As a volunteer teacher at Eastside College Preparatory School in East Palo Alto, California, I saw this impact extend beyond the classroom as students brought lessons home to siblings and parents. This experience inspired me to co-found Next Gen Personal Finance.

It is high time that the most populous state in the nation and one of the most diverse, the home of innovation and opportunity, joined other states in requiring a personal finance class as a high school graduation requirement. Its dismal performance in this subject area got the state an "F" in financial literacy in a 2023 report from Champlain College's Center for Financial Literacy. Hardly something to hang on the fridge.

Currently in California, a personal finance course as a condition for graduation is required of only 1% of high school students, according to the Next Gen Personal Finance 2024 State of Financial Education report. Compare that to 53% nationally. With the passage of this requirement, California puts a welcomed end to that failure.

Every student in the state — regardless of where they go to school or their economic status — will now have equal opportunity to learn such vital 21st century skills including budgeting, credit management and understanding financial options for career or college.

For those states yet to make a commitment to universal personal finance education in high school, they need only recognize how these skills empower students. I have listened to hundreds of students testifying in state capitals across the country, and they often describe how the critical thinking skills they have gained inoculate them against the questionable advice proliferating on social media.

This matters to our future and to that of the next generation. As Newsom said in announcing his commitment to sign the measure into law, "We need to help Californians prepare for their financial futures as early as possible. Saving for the future, making investments and spending wisely are lifelong skills that young adults need to learn before they start their careers, not after."

He's right, and the kids in California will be all right, because now managing their finances will be part of their life's toolbox. After all, the future success and stability of our countless generations is at the heart of the matter.

— Tim Ranzetta is co-founder of Next Gen Personal Finance and a member of the CNBC Global Financial Wellness Advisory Board.