While California high school students beginning with the 2027-28 school year must be taught the ABCs of finance, some districts are ahead of the curve, with financial literacy already part of the curriculum.

This is the seventh year Sarah Velasquez has been teaching financial algebra at Buckingham Collegiate Charter in Vacaville, which evolved from two years of teaching business math “on steroids.”

“It’s definitely an impactful class for them. It is the knowledge they were yearning for,” Velasquez said.

While it’s not a required class, about one-quarter of Buckingham students willingly sign up for it. The yearlong course counts as a math requirement — which isn’t true of all of these types of classes.

California will allow financial literacy to be a substitute for economics, which falls under the social studies guidelines. Financial literacy will be a graduation requirement starting with the class of 2030.

Velasquez believes a class like hers is important for all students no matter what their plans are after high school.

“One unifying thing is they all need to know how to manage money,” Velasquez said.

With the legislation’s passage this year, California becomes the 26th state to mandate this type of curriculum.

“Financial literacy is a critical tool that pays dividends for a lifetime,” state Senate President Pro Tem Mike McGuire, D-Geyserville, said in a statement. “There’s a wealth of data about the benefits of learning these valuable lessons in high school, from improving credit scores and reducing default rates, to increasing the likelihood that our future generations will maintain three months of savings for emergencies and have at least one kind of retirement account.”

Tyton Partners, a consulting firm aiming to transform the education landscape, put out a report titled  “2024 Investing in Tomorrow: Lifetime Value of Financial Education in High School.”

It says students in California who take financial literacy are likely to realize a $127,000 return on investment based on applying what they’ve learned to real-life situations.

“For example, reduced credit/debt costs and student loan costs come into play as soon as one establishes a line of credit,” the report says. “On the other hand, reduced insurance and borrowing costs may not take effect until one’s 30s, and retirement wealth—while accumulating over a lifetime— is not realized until relatively late in life.”

Hundreds of students in Napa take part in Redwood Credit Union’s Bite of Reality program. (Image: Redwood Credit Union)

Understanding finances

Those in the world of finance applaud the state’s decision.

“This is something that is long overdue and I couldn’t be happier that they will be teaching financial literacy in high school. We need to teach our youth how credit card debt actually works,” said Matt Delaney with JDH Wealth Management in Santa Rosa. “If we can get people to avoid credit card debt before it’s too late, we will be setting people up for success. Too many people think that they are getting ahead by earning 3 percent on their money at the bank when they have $10,000 in credit card debt, making the minimum payments and paying 25 percent in interest. The economics don’t work out in their favor.”

John Mackey, senior vice president and managing director of investment and fiduciary services at Exchange Bank Trust & Investment Management in Santa Rosa, echoed Delaney’s words.

It’s not uncommon for Mackey and his colleagues to have to teach basic principles of investing to clients. While he admitted it will take time to see if the new curriculum will have a profound impact, he hopes it will mean people making fewer financial mistakes.

Mackey is encouraged young people will be taught real world issues like the drawbacks of running up credit card debt and the benefits of putting away money for the end game.

For more than 20 years Santa Rosa-based Redwood Credit Union has focused on adult financial education. It has since broadened its teachings to high school and college students.

“We realize our community is stronger with financial education,” said Matt Martin, senior vice president of community and government relations. “Finances can be daunting. Sometimes we talk to members and they don’t know the questions to ask.”

The credit union started using Bite of Reality curriculum in 2013 to provide hands-on learning. Since then the financial institution has reached more than 41,000 people through 900 financial literary and Bite of Reality sessions.

Young people are given a persona—a fictional occupation with salary, credit score, debt, family—and then go to various stations where they have to pay for things such as housing, transportation, food, clothing and other necessities.

Bite of Reality has been taught to juniors and seniors in high school, nonprofit partners of RCU’s that serve teens, as well to college students.

Information that is disseminated changes as necessary.

“The increased incidents of fraud and scams has really led us to change how we teach these programs,” Martin said. “We find we need to provide people with the information they need to know how to identify and prevent scams and fraud. It’s one of biggest changes through the years in our financial education.”

Proven record

At San Rafael’s Dominican University of California components of financial literacy are integrated in various classes at the undergraduate and graduate levels. Bite of Reality is part of the freshmen curriculum.

“It helps them increase their social mobility, to move from one socio-economic quartile to the next,” Giulia Welch, director of Career Development and an adjunct professor in the business school, said of the offerings.

Velasquez has each of her students pick a career other than an entertainer or professional athlete to research. They find out starting salaries, all the taxes they will have to pay, as well as insurance bills they are likely to encounter, along with all the other cost of adulting.

“I want these kids to leave high school to be prepared for the real world at least a lit bit,” Velasquez said.

Maggie Steiner is in her third year of teaching personal finance at Casa Grande High School in Petaluma.

Some of the more pertinent lessons Steiner likes students to learn include understanding the importance of an emergency fund, how their credit score impacts the interest rates they’ll be given on loans, how investing now will compound to be much greater when they are older, and figuring how to pay for college and the ramification of student loans.

Steiner and Velasquez credit Burlingame-based Next Gen Personal Finance for providing relevant curriculum for their classes.

“The level of professional development is so impressive,” Steiner said. “You can tell a teacher who has been in the classroom designed the curriculum.”

Tim Ranzetta, co-founded the nonprofit in 2014, with the goal of having all high school students in the United States be taught financial literacy by 2030. When he started, five states were on board. With the addition of California, that makes 64 percent of high schoolers who will receive this education.

“California prior to this legislation was the worst in nation (for) access to personal finance. Only a quarter of schools had an elective in personal finance,” Ranzetta said.

Next Gen’s curriculum is online and free. It’s also always being updated.

“Textbooks don’t work well in personal finance because the world of personal finance keeps changing,” Ranzetta said.

A new unit focuses on gambling and sports betting because states that allow online betting are finding young people drawn to this activity without understanding potential consequences.

Units for middle school are also available.

Ranzetta believes the three key takeaways are learning to manage credit scores, the power of compounding, and the importance of understanding the psychology of money.

“Four-hundred and fifty thousand kids graduate every year from high school in California. Think about the economic value they could create with understanding money,” Ranzetta said.

Note: A version of this story first appeared in the North Bay Business Journal.