The average American has an abysmally low personal finance IQ, yet the public school system continues to ignore the importance of educating students in this key area of life. Why is this? And when will things change?

The State of Personal Finance in America

When you look at salary and income statistics, Americans are killing it. When you look at just about any other statistical category as it relates to personal finance, the average American is miserably failing. How bad are things? Take a look:

• Just 41 percent of Americans use a budget. In other words, 59 percent of Americans don’t have an accurate understanding of how much they earn or spend on a monthly basis. This tends to lead to overspending, poor saving, and a lack of investing.

• The average college graduate leaves school with $37,172 in student loan debt, which follows them around for more than a decade.

• Only 48 percent of Americans have enough cash in the bank to cover three months of expenses if they were to lose their job. A separate study suggests that two-thirds of people would have trouble scrounging up $1,000 in an emergency.

• When it comes to retirement, only 35 percent of the workforce has more than $100,000 tucked away. An even larger segment -- 38 percent to be exact -- has less than $10,000 saved.

• 35 percent of Americans with a credit file have debt in collections reported on their credit files. The average amount owed by these borrowers is $5,178.

• A study from the National Endowment for Financial Education shows that just 24 percent of millennials demonstrate “basic financial literacy.” The scariest part about this is that 69 percent of those surveyed rate their financial knowledge highly.

Sound personal finance habits are seemingly absent in America today. From a top-down perspective, it seems pretty clear that a lack of financial literacy is at least partially to blame. In order to fix this, we have to start from the bottom up and educate the next generation of young adults.

Why Financial Literacy Programs Belong in School

Opponents of teaching personal finance in school argue that they would prefer to instill their own personal finance values in their children, rather than having a school system choose which principles are sound and which ones aren’t. While this sounds fine in theory, the irony is that these same parents likely have poor personal finance habits themselves.

The numbers don’t lie. The average American parent lacks a budget, is saddled with overwhelming amounts of debt, is marked by poor credit, and has no retirement savings. Is this really who we want teaching our youth about financial literacy? In order to break the cycle and raise a generation of fiscally savvy individuals, we need an organized approach that uses sound principles to prepare students for the real world.

If a student can receive some personal finance education in the home, that’s great. But even these children can learn something from an organized financial literacy class that teaches the basics of money management -- including budgeting, saving, investing, debt, and even giving!

Concepts Students Should be Taught

Everyone has their own theories on how to best manage money. The goal of teaching personal finance in the public school system would not be to instill a specific ideology. Instead, the objective would be to provide students with knowledge of different concepts, strategies, and theories so they can develop informed opinions and make smart choices.

Here are a few concepts that could/should be taught:

1.) How Credit Cards Work

According to a Charles Schwab survey of 1,132 teens between the ages of 16 and 18, 42 percent stated that they want their parents to talk with them more about personal finance and money. Less than one in three teens said they know how credit card interest and fees work.

As soon as someone turns 18, they’re bombarded with credit card offers. For more than two out of three of these individuals to not understand how credit cards work is dangerous. By teaching them from an early age how credit works and why it’s important to make payments every month, we could save young adults from making many of the same damaging mistakes that older generations have.

2.) How Loans Work

Loans can be a blessing or a curse. They can help you reach financial goals, or they can hold you back from achieving financial freedom. The problem is that most people learn by trial and error – something that usually doesn’t end up well for the borrower.

It’s important for young people to learn about loans from an early age. Because of the simple approval process and small amounts, personal loans are ideal for illustrative purposes. By explaining how personal loans work, students can then continue to increase their knowledge as they understand things like car loans, student loans, mortgages, and even business loans.

3.) How to Develop a Budget

If you want a safe and sustainable house, you build it on a strong foundation. If you want sound personal finance habits, you build them on a budget. A budget is a key to smart financial decision making, so it’s imperative that we teach our students.

The best way to teach students about budgeting is to make a game out of it. (In fact, there are a number of board games that show how this works.) It’s also wise to show students how to use simple rules and formulas for allocating money – such as 25 percent to savings, 10 percent to giving, and 65 percent to monthly expenses. Again, the exact budgeting principles will vary from person to person. The point is that students need to be made aware of the importance of being intentional with their money.

4.) The Value of Compound Interest

Most students don’t understand saving. One of the reasons they don’t get it is they’ve never been taught about the value of compound interest.

Teaching students about compound interest as it relates to investing and retirement savings is a surefire way to get them excited about building wealth.

A favorite method of many personal finance teachers is to walk students through the Penny Doubling exercise in which students are given one of two options. They can either receive $10,000 per day (in fictional money, of course) for 30 days, or they can start with a penny and have it double every day for a month. They’ll be shocked to learn that the students with the penny end up making 17 times more money.

Forging a Stronger Future

Our current education system is set up to teach students how to read poetry, write essays, calculate mathematical equations, dissect frogs, explain chemical reactions, and understand history. While all of these things are interesting -- and many are integral to being a healthy, functioning adult in modern society -- much of our current curriculum lacks practical value.

If we want our public school system to prepare students to become healthy, functioning adults who contribute to society (rather than live off welfare and abuse the various systems that prop up lazy attitudes), we need to provide practical knowledge.

Considering that America’s personal finance habits have been getting progressively worse over the past two or three decades, it would stand to reason that financial literacy is sorely needed. By making personal finance curriculum a prerequisite to high school graduation, it’s possible that we could put a dent in some of the problems that are currently plaguing our country.