Give a basic financial literacy test to most Americans, and you’ll find that nearly two-thirds won’t be able to pass it. In the decade following the Great Recession of 2008, Americans are less confident about money than ever before. Financial literacy – the ability to understand the connections between earning, managing, and investing money – has declined significantly each year.
While most states do not currently require financial literacy education, many school systems are voluntarily teaching financial literacy skills and basic concepts.
The Importance of Financial Literacy
It’s no secret that modern life is more expensive today than in previous generations. College tuitions have risen 213% over the past three decades. And while home values have risen steadily since the 1940s, student loan debt, higher expenses, and concerns about saving for retirement cause many young professionals to delay purchasing a home. Additionally, up to 60% of adults have not been offered financial education, either at school or through their employer, leaving many ill-equipped to manage money effectively.
Clearly, today’s students need the financial knowledge to become tomorrow’s successful adults.
Fortunately, learning how to earn, manage, and invest money is an important life skill that can be learned from a young age. Conversations about money can begin as early as Kindergarten, and the lessons learned can build from year to year. Of course, a classroom token economy is a natural way to bring lesson plans to life. Earning points and tokens, purchasing items from the school store with these tokens, and planning for larger purchases are all principles of financial literacy in action.
How a Digital Token Economy Can Teach Financial Literacy
Traditional token economies use a lot of paper and require manual accounting, which can be cumbersome and inaccurate at best. Damaged or lost tokens can mean that students don’t get the full experience of using what they’ve earned to make purchases. Manual tracking of points or tokens earned and used can be tricky, especially if there is more than one teacher awarding points.
As a fully digital token economy, PBIS Rewards is more accurate and reflects current financial practices, which can be helpful for developing financial literacy. Points accumulate in a student’s account and can be spent in the school store, without the hassle of using physical tokens.
PBIS Rewards Features to Help Teach Financial Literacy
The student account balance is like a debit account. As the student earn points, they accumulate in their account. Incentives can be requested to deduct points from the account. Some of the formats available for schools to provide incentives are the store, classroom stores, events, and raffles. Any points students use are deducted from their account balance.
Students can set a goal for an item in the school store or classroom store. This needs to be an item that the student cannot currently afford. When the student attempts to purchase something different, they are reminded of their goal. This gives the student a moment to consider if they want to proceed with the purchase or use these points toward saving for their goal item or privilege.
Schools can turn on the earning of interest. Students will earn interest on points in their account balance. The school determines the rate of interest earned.
If students attempt to purchase an item that they cannot afford, they are given an insufficient funds message. Each school can decide if they would like a staff member to override and continue to sell the item, or if they will need to let the student know that they do not have sufficient funds for that purchase.
Teaching Financial Literacy Prepares Students for the Future
Because PBIS Rewards is fully digital, the process of earning and accumulating points works much the same way direct deposit and debit accounts operate in the working world. As students earn points, their account balance grows. (No need to keep track of paper tokens!) School store or raffle purchases automatically deduct from the account, just as purchases would deduct from a bank account with a debit card or online transaction. Students learn to manage their points and purchases, develop budgeting skills, and learn goal setting.
Teaching financial literacy at an early age can help to eliminate some of the financial mistakes common among today’s consumers. Students who learn the basics of saving, budgeting, and investing will have the skills necessary to better evaluate personal financial decisions. Currently, only five states require a personal finance class as a requirement for high school graduation.
PBIS Rewards can help to make financial literacy lessons more useful and realistic.