Tim Ranzetta: ‘Financial Education Positively Impacts Almost All Financial Behaviors’

Jeff Ptak: Hi, and welcome to The Long View. I’m Jeff Ptak, chief ratings officer for Morningstar Research Services.

Christine Benz: And I’m Christine Benz, director of personal finance and retirement planning for Morningstar.

Ptak: Our guest on the podcast today is Tim Ranzetta. Tim is the co-founder of the nonprofit Next Gen Personal Finance, which provides free curricula, professional development, and advocacy tools to more than 40,000 teachers who reach 75{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of high school students in the U.S. The goal of Next Gen Personal Finance and its community of teachers is for all high school students to take at least one stand-alone one-semester course focusing on personal finance by the end of 2030. Prior to founding NGPF, Tim co-founded several companies, including Equilar, a compensation and corporate governance research firm; and Student Lending Analytics, a student loan research firm. He began his career as a management consultant at Bain & Company. He graduated from the University of Virginia with a Bachelor of Science degree in Commerce and received his MBA at the Stanford Graduate School of Business.

Tim, welcome to The Long View.

Tim Ranzetta: It’s great to be here.

Ptak: Let’s start with a bit of stage-setting. You worked at Bain and were an entrepreneur before starting up Next Gen Personal Finance. It sounds like your work in the student loan arena was one of the contributing influences on your current work in financial education. What were the lightbulb moments for you in that part of your career?

Ranzetta: It’s funny. You now have me thinking about my career, which is now over 30 years. And there is an interesting quote from Steve Jobs where he talks about connecting the dots and he says something along the lines of, you can only connect them looking backward. So, you just have to trust that the dots are going to somehow connect in the future. When I think about my career, it all makes a little bit of sense. When it was happening, it may not have. I started at Bain on the consulting side. That taught me how to be data-driven. I then jumped into the nonprofit world. That taught me what it meant to work at a mission-driven organization. I worked at an investment management firm for a short period of time, realized how difficult active management was when it came to beating the market. And then, the entrepreneurial businesses I was involved in taught me how to scale a business. And then, I was a stay-at-home dad for about five years and volunteered at a half-dozen education nonprofits, which really taught me a lot about that world.

But the business you’re talking about regarding student loans was a company called Student Lending Analytics. I clearly didn’t hire a naming consultant for that. That was a business that didn’t scale. In fact, my phone number was on the website. And I was just trying to help families and their kids make better decisions when it came to college. And there was one phone call in particular that still haunts me to this day, which was a parent calling me, a mom calling me to discuss the situation with her daughter who was a sophomore at a college, and they had $70,000 in student debt. So, this was a student about to complete their second year and mom was searching for solutions. And all I could think of was, what if? What if I could have reached that parent and reached that child and had a conversation before they signed on. Because a lot of this is preordained. When you make a decision about a college, you know what the financial aid package looks like if you just make some adjustments to inflation. You have a good sense of where people are going to be, but nobody wants to do that up front. And so, that really lit a fire to me. I didn’t want to have more phone calls like that. I said I need to get in front of this and that’s where the financial education piece came in.

Benz: Another major influence you cite in terms of your current trajectory is a financial education course that you taught at Eastside College Prep in East Palo Alto, California. How did you get involved in that educational effort and what made you think that you wanted financial education to be your mission? Because it sounds like that was really a crystalizing event for you.

Ranzetta: It certainly was. So, a little background. Eastside College Prep is an independent school serving first-generation students. These are kids seeking to be the first in their family to go to college. Twenty-five-year history. I serve on the board. I didn’t serve on the board at the time. But their mission is to get students to be college ready. So, I went toward the campus with Chris Bischof, who’s one of the co-founders along with Helen Kim, and was just so struck by what they were doing on campus—100{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of students going on to college. More impressively, 65{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 70{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} completing a four-year degree, which, for the student set they were serving, were just phenomenal numbers. So, I asked, how could I help. And he said, “Help start a personal finance course.” We have incoming 9th graders; 25 hours of curriculum you’ll need to develop, and there are three sections of students. So, I said yes before I really knew what I was in for. But it was in the process of creating that course and then teaching it that just really fired me up.

Two things happened. One is, every student in the classroom wanted to learn. They were raising their hands. They were engaged in learning. Every topic we talked about led to more and more questions. I think one measure of engagement with kids especially is, how active are they in the classroom. They couldn’t get enough of this. And then, the surprising thing was, I started to hear from parents. Kids were bringing this home to their parents. There was a ripple effect. Parents wanting to learn how to budget better, parents wanting to start to save for retirement, and then I was hooked.

Benz: You mentioned that level of engagement among the students. Is that always the case? I taught some personal finance classes in schools, or for high school students, and sometimes you have sleepers. Sometimes you have kids who are not that engaged. Do you think there was something specific about that population or something about the way that you were teaching it?

Ranzetta: I think the approach we’ve taken as an organization is active learning. And I had to learn this coming from a business background. I remember this—going into a classroom and just thinking, I had all this wisdom to share and the way I’m going to share it is to tell them. And then, about five minutes in, you do look around the classroom like, OK, I’ve just lost everybody, like the attention span. And so, what about we get them to engage—for example, as an organization we have move activities. These are get-out-of-the-seat activities where students are working in groups and they’re solving problems.

I think we recognized at the outset that students learn by doing, and so we better create a curriculum that has that level of engagement where teacher feels more like facilitator, because this is a really tough subject to teach—when you look at the broad expanse of what’s in a personal finance course. And so, if we can create activities, curate the resources, put teachers in the position of facilitating versus I’ve got to be sage on stage and teach all of these concepts. And I think it’s an important lesson. I know a lot of financial advisors, investment professionals might be listening—when you get invited to a classroom to speak, don’t think of it as a speaking engagement. Come in with some games up your sleeves or activities because that’s the best way to engage.

Ptak: What did you feel was missing in the financial education space when you launched Next Gen Personal Finance? It seems like a lot of different entities have been trying to enact positive change in this area for a long time. So, was there a specific angle you wanted to pursue with your foundation?

Ranzetta: When I got started, I was in an experimentation mode where I didn’t know if there was a there or there, because there are no shortage. Go online and search for personal finance resources or financial literacy and there’s hundreds, hundreds of them. The co-founder of Next Gen is an educator, Jessica Endlich. And so, she joined very early on board. I had all these zany, crazy ideas and she was the educator who is like, how do we create something that really can make a difference in a teacher’s life in terms of them delivering the curriculum? And I think over time what we settled on was the four Cs.

And so, the four Cs—basically, you start with Customizable. So, all of the lessons and activities we created, teachers can just make a copy of it and adapt it as they see fit to meet their students’ needs. So, this was not a workbook, this was not a PDF where you got to teach it the way it is. We recognized every classroom is so different. You might have ELL students in your classroom. You might have honors students. Your ability to adjust the curriculum—that was number one.

Number two is Current. There were a lot of workbooks and textbooks out there. The minute you publish the textbook, it’s outdated, because tax tables change, because new financial products, buy now, pay later or commission-free trading. All these things happen so quickly. And so, being able to deliver a curriculum digitally, starting with a blank sheet of paper was a huge advantage. When the GameStop and meme stock, when that event happened last year, we were ready. We created resources for teachers so that they could learn about it, but then also deliver activities around it. So, that was customizable, current.

Comprehensive. When you start a company, you have in mind a vision. My vision was a one-stop shop, because different organizations did different things when it came to curriculum, but nobody had the one place. So, when you talk to most teachers, they’d say, “Oh, I Google. That’s how I find stuff.” I want it to be that replace Google and come to NGPF.org. So, comprehensive.

And then, the last piece was Curated. The internet is a blessing and a curse. It’s a blessing because you have access to all of the world’s information. It’s a curse because you have access to all the world’s information. And so, we really got effective at curating resources that were out there. In some cases, we created activities. In other cases, like the Uber game, which was created for Financial Times. Somebody created the game, and we said, “Oh, that’s a great game. Let’s take it and build an activity around it.” So, that was the approach that we took, and we’ve continued to benefit from. That’s what I think has made our offering distinctive and has led to the point where we now have 63,000 teachers reaching 3 million students and most of our growth came through word of mouth, teachers telling teachers.

Benz: I wanted to get into the why behind teaching kids personal finance concepts in the K-12 setting. Can you talk about what the data say about whether these programs have an impact? Your website lists several behaviors that tend to be associated with someone having taken a personal finance class—they’re less likely to carry a credit card balance or take out a predatory loan, for example. Can you discuss the underpinning of why you think it’s so important to do this?

Ranzetta: I think on the research side, I think this story just keeps getting better. There is a recent study out from a host of researchers—Kaiser, Lusardi, Menkhoff, and Urban—that was a meta-analysis of 76 randomized experiments. And what the conclusion was that financial education positively impacts almost all financial behaviors, so that’s budgeting, that’s saving, that’s credit, and insurance. And some of this is content related. You need to understand what goes into a credit score so you can behave accordingly. You need to understand technical terms like utilization rate, how much of the credit that you have available to you are you actually using—that has an impact. So, some of it’s that. But a big piece of it is behavioral, too. And so, we incorporate a lot of behavioral economics and psychology, because that’s actually the first unit in our semester course, is we have to understand what our relationship to money is, what are the money scripts playing in our head, what have we learned that’s been modeled by our parents, guardians, friends? Being able to address that, because this is not just a content, like, you learn the content, let’s look pretest, post-test, that’s what really matters. No, it’s not. Ultimately, we have to get to behaviors. And the good news is, we’re starting to see more and more research showing the positive effects.

And I would just add one other thing, which is, we talk about the research element of it, and I think you’ll also need to incorporate what teachers see in the classroom. And again, it’s anecdotal information, but I can tell you there’s not a teacher out there that doesn’t have dozens of stories about students they see at the grocery store and thank them for helping them start an IRA or teaching them that setting up a LinkedIn profile is how you get jobs in today’s economy. So, there’s the high-level research which says it works. I think if you talk to most educators about what happens in their classroom, I think they would say, “Yeah, it’s obvious that it works; let me share with you the stories that I’ve heard.”

Benz: How do you measure the success of Next Gen PF’s efforts? Do you do pretests and post-tests? How do you look at whether the courses you’re teaching are actually having an impact and actually sinking in?

Ranzetta: We’re in the process of doing exactly what you said, which is to create an instrument that can be used across the country that will give us those sorts of high-level statistics. Because we want to also make sure the approaches, both in terms of teacher preparation as well as the curriculum itself, is leading to those gains in learning. So, that’s in process. We’re moving through that process as quickly as possible. The short answer is, I don’t think there’s any other better gauge of whether curriculum is working or not than the teacher who is teaching it. And I think the fact that we’ve grown as quickly as we have from 0 to 63,000 teachers with half of those coming through word of mouth and a consistent month in, month out 1,000 to 1,500 new teachers, like, clockwork coming onto our platform—I think that for me, until we are able to show those results, which I’m confident we will with pre- and post-tests, that that’s a great indicator that we’re creating something that’s working for them.

Benz: One criticism about teaching financial education, especially investing, to young people is that they may have no immediate opportunity to apply what they’ve learned. If you teach them about stock investing, for example, most high school students do not have the wherewithal to purchase stocks. So, how big of an issue is that in your view, and how does Next Gen Personal Finance try to address it?

Ranzetta: So, let’s talk about investing first. I think there has been a tectonic shift in terms of access to financial markets—commission-free investing, low minimum, start as low as a dollar, fractional shares. So, I think investing on that specific topic has never been more accessible. Obviously, if you’re under the age of 18, you’ll need to open a custodial account. But our recommendation is these courses are taught at the junior or senior level. So, you’re talking about somebody who might be a year away from being able to open their own account.

We’re also seeing large firms, like Fidelity, where if you have an account at Fidelity, you’re able to set up a youth account for your kids where they can actually make trades, they can make decisions with some oversight from you, but we’re seeing younger and younger folks get engaged in the market. So, I think with investing we’re seeing more and more young people engage in the markets because of these tectonic shifts.

Ptak: What’s the right age to teach personal finance? It seems like high schools are the most likely to offer a personal finance curriculum, but should it come earlier on?

Ranzetta: So, we initially focused on high school, and I think our team felt this urgency that all of these young people were getting sent off into the wild and were going to be forced to learn through the school of hard knocks. And the other thing about high school, when you think about their life stage, how many events are coming at them fast and furious. Just a few, right? You’re getting access to the family car. Isn’t that a great opportunity to understand how insurance works and reading a policy statement? Or maybe they’re getting their first part-time job. Well, they’re going to have to learn how to complete all of those forms as well as their taxes and reading a pay stub. Maybe they have a bank account. They’ve opened a bank account. They better understand what the fee structure is. And we know, based on research, about a third of young people don’t know the difference between a debit card and a credit card. So, it’s an opportunity to teach that.

I think the closer you are to making decisions, the more motivated you are to learn. And so, I think high school is an ideal time. Having said that, I think the earlier you can learn these concepts, the better. We have a middle school curriculum also and very quickly have more than 10,000 teachers who are using that curriculum. So, clearly, there’s an appetite. It’s got to be developmentally appropriate, but there’s an appetite to bring these lessons at even a younger age. And if I can make a pitch—we also support a podcast called Million Bazillion, which is created by Marketplace. And so, anybody who has young children, this is really intended for an audience 9-, 10-, 11-, 12-year-olds. It’s a podcast really geared to help start those conversations, because it can be difficult for parents to engage with young people and a podcast like Million Bazillion can be a great way to get that conversation started.

Benz: Speaking of parents, it seems like you have aimed to get parents in to be part of the discussion, to be part of this learning. How have you done that and how is that working?

Ranzetta: So, principally, parents are really hard to reach. Let’s just kind of put that out there. When you talk to most educators, they say it’s really challenging to get teachers to show up beyond the beginning of the school year where parents come through. So, our principal channel to parents is through teachers. And so, for example, we provide them, teachers, with customizable parent newsletters. No better way to get parents involved than to let them know what’s being taught in the classroom. We encourage, we create activities that really encourage conversations with parents. So, it might be an assignment where you’re asking a child to go home to learn about how their parent or guardian learned about financial education, or the most important lesson they learned from their parents. But just anyway to start the conversation, because we know it’s often a really challenging conversational piece in terms of having those conversations take place.

I think those are just a few of the ways. There was some recent research. We always thought parents were the way most young people learn about money, and I still believe that’s the case for very young folks. Whether you talk about it or not, the behavior you’re modeling, they’re watching. Kids are really observant that way. But when you look at Gen Z, so these are late teens, early 20s, where they’re learning about money, the number one source is social media, and parents and family tends to be number two. I think that’s why education becomes even more critical. How do you determine what’s good advice versus bad advice unless you have a foundation in personal finance to be able to ask the right questions so that when the influencer is pitching a day-trading platform, do you have that base of knowledge to call into question is that really an effective strategy for investing or not? So, I think because of the prevalence of social media, it makes education even more important.

Ptak: Maybe sticking to that topic, has there been research on the connection between social media and financial decision-making? I think you’ve indicated that there’s a negative relationship between the two.

Ranzetta: Go on social media, and you’ll see there are some really good, I guess they call them fin talkers. In 90 seconds or less they’re able to take this really challenging topic and be able to deliver it in a way. But we also know there’s a lot of bad advice out there, and there’s also a lack of disclosure around financial products, like, is that influencer who is pitching you on a crypto investment, do you know what the arrangement they have is in pitching that product? It seems like the U.K. might be a little further ahead than us in terms of thinking about that sort of regulation.

Let me just give you one example. This is something I teach in my behavioral economics course. You go on YouTube, and you search for “day trading,” and you’ll find what are the videos that are watched more than 10 million times. I found one in particular for a day-trading system. These are the “Pay us $99, $199, we will give you the secrets to the kingdom and you’ll make a ton of money day trading.” So, keep that number in mind, 10 million views. And then, there’s a gentleman named Ben Felix, who has got some really high-quality videos. He does a video, “The Truth About Day Trading.” He takes the various research studies from Terry Odean and Brad Barber at Cal to the Taiwanese day traders and just shows how the more you trade, the more likely you’re going to underperform in a very small percentage, single digits or less are able to utilize day-trading strategies that work. How many views does that video have? Well, it’s about 140,000.

That’s what you’re fighting against. You’re fighting against if I’m going to social media, very easy, this get-rich-quick scheme, especially for young people, which can be really attractive. And so, you’re fighting that battle 10 million versus 140,000.

Benz: You mentioned activities and the role of games and fun and engagement and all of this. What are your thoughts on that basic stock market game that so many students play in the classroom to help them learn about the market? How does the arcade game section of your website attempt to teach key principles through a game format?

Ranzetta: The positives of the stock market game, and this is what we hear from educators, is there’s a subset of students that love it, gets them interested in how the stock market works. They are able to learn like the stock market is a market of stocks, behind a stock is a company. So, letting them choose companies based on products all around them, I think it demystifies it. It makes it approachable to them. And there’s a competitive element. There’s a winner at the end, and we love lionizing the stock market winner. The downsides we hear from teachers are it encourages short-term thinking, the people who win are generally taking big risks, so you’re not creating a diversified portfolio. You can create rules about how you administer the game, which I think, putting guardrails in place can be helpful, but they’re often taking big risks. Some of the games allow margin, which we know amplifies the upside, but also the downside and puts teachers in the weird position of saying, “The way you win this game is very different from the way you win the long-term investing game.” And then, lastly, especially folks who played the game in the last—it’s a short-term game, it’s 12 weeks, oftentimes 8 to 12 weeks—if you played the game in the last four months, what are students walking away from? The stock market is a loser. It’s a losing game. We’re now in bear territory for the S&P 500. So, what’s the lesson they walk away with? I think you kind of have to weigh the positives versus negatives.

We created a game, we call it Stax, and I think it’s been played 5 million times since it came out two or three years ago. Our goal with the game was to teach students to invest over a 20-year period in 20 minutes. So, number one, it just doesn’t take up a ton of time. It’s fast-paced. Students are allocating among seven different asset classes. They can day-trade stocks, they can buy gold, they can put their money in a CD. We give them a lot of choices. Meanwhile, they’re competing against the computer. And what they don’t know, the big reveal at the end, is the computer is just dollar-cost averaging into index funds. The computer wins 70{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 80{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of the time. Index funds are really difficult to teach because they’re really boring, but we wanted to teach them a game with all these bells and whistles and levels of excitement, and in the end, I want every student to walk out of the class knowing there’s a strategy they can implement. Because for many folks, they get intimidated. I have to do all this research to pick an individual stock versus buying an index fund, betting on the U.S. economy, the international economy—depending on what index you buy—but not feeling like you need to have all of this special expertise. When we started eight years ago, I’d be in a room full of teachers at a conference and I’d ask, “How many of you are teaching index funds?” And if it was five teachers in a room full of 100, that was like, wow, that’s quite a few. And so, one of the things we’ve tried to incorporate in our curriculum, to a large extent, is making sure you can play the stock market game, great. Understand what the positives and the negatives are, but let’s make sure we’re also taking the time to teach index funds, because you all know the stats at Morningstar. I think over 50{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of mutual fund assets are now in index funds, and we’re leaving out a significant part of how people are going to invest if we just play the stock market game.

Ptak: Maybe to follow up on that—this is something that Christine has written extensively about, the importance of humility to investing and financial success. And I think that choosing to index, for instance, there’s an aspect of humility in that you’re going to let the market do the work for you instead of attempting to pick individual stocks or other types of securities that will outperform. So, I’m curious how you present the concept of humility to younger people, especially who are brimming with optimism in a sense of possibility? How do you thread that needle in practice when you’re presenting your curriculum to them?

Ranzetta: I think you’d try a couple different ways. I think, number one, you try and present the facts. We have a question of the day. We update it every time SPIVA updates their records about how successful are professionals in beating the market over the long run, 15 to 20 years? And so, recognizing if these folks—whose career, who spend 40, 50, 60 hours a week, they have this pedigree of advanced degrees—if 85{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 95{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} can’t beat the market, what gives you the sense that you can. Out of business school I joined an active manager, believing that, yeah, actually I believe it’s possible. Well, my year there, I think it became clear to me there’s some structural challenges to beating the market. And I think as time goes on, we’ve seen the case for indexing become stronger and stronger. But there’s also going to be a subset of kids you’re just not going to convince because what do I know? If I was so successful, then why am I teaching? You hear things like that. What I just say is, “OK, go down the path that you want to go down, picking individual stocks, taking leverage bets, investing in speculative investments. But do me a favor and take half of whatever you are planning to invest and put it into total stock market fund or a target-date fund or S&P 500, pick a mutual fund. Just do me that favor so you can compare over time how the various investments perform.” Because, yeah, I can’t pretend that everybody adheres to the message because I think we want to believe. There’s confirmation bias. The problem of social media is you’re always going to hear about the person who made a killing. What you don’t hear about is all of those who didn’t.

Benz: Speaking of social media, I’m curious to hear what you were hearing from teachers during the meme stock mania when cryptocurrency was just going up, up, up. Were teachers hearing from students about them wanting to invest in those kinds of things, and what were you thinking during that environment?

Ranzetta: Absolutely. We heard that. That’s a great thing about having a network of 63,000 teachers is they’re very comfortable reaching out to us to say, “Hey, this is what they’re hearing.” So, yes, absolutely, whether it was young people who had set up accounts under their parents’ name. There was a ton of interest and a ton of activity in that January period, where the meme stock GameStop going from $4 to $400 in a really short period of time. So, it definitely generated a ton of interest. And then, it was incumbent upon the educators to say, “Let’s take advantage of this excitement to teach them what’s the difference between investing and speculating. Let’s teach them the difference between an income-producing asset versus something that’s more speculative.” I think it opened a window of opportunity to be able to talk about investing because you had all ears.

We’re not in the game of saying you should do this; you should do that. It’s called personal finance for a reason. People are making decisions that make a lot of sense to them in the moment. What we’re trying to do is expand their view. So, instead of relying on social media or going to WallStreetBets, asking critical questions, or if you are going to make a decision to understanding with a speculative bet, maybe you don’t want to put all your eggs in that basket and being able to diversify. So, I think it created a great opportunity for a more expansive conversation about, OK, that’s one type of investment at one point in time. Now let’s talk about other ways that you can accomplish creating long-term wealth for yourself.

Ptak: A related question is whether making mistakes is essential to learning. Some knowledgeable financial practitioners insist that getting started in investing by dabbling in individual stocks is a small-stakes way to teach lasting lessons. Do you agree with that thinking?

Ranzetta: Absolutely. I just think about my own experience. So, must have been my first month on the job at Bain, had my first paycheck. And my roommate came home one day with a hot stock tip. It was a company that was going to automate checkout counters at supermarkets. So, I like to think I was right, but I was about 30 years too early, because they eventually did automate. You go to your Home Depot and you’re able to go through the checkout line yourself. But it looked like a great opportunity and all I could envision was how the stock was going to go from 7 to 70 instead of from 7 to 2, which it ultimately did. So, that was a lesson that I learned early, and it was a phenomenal lesson, because I may have lost a couple of hundred dollars, but I learned that you probably want to do a little bit more research; speculative startups are different than established blue-chip companies. So, I think, absolutely.

I think it also, again, takes something that’s very difficult for people to grasp: the stock market. I have a couple of children myself and when they want to invest, I encourage them to pick companies that they’re familiar with: Nike, Chipotle, Netflix, Roblox. I was surprised when my 13-year-old said Scholastic, too. They would hand out those Scholastic forms to buy books in schools, similar to what they were doing 40, 50 years ago. But I think you also use that as an opportunity, as I mentioned earlier, to talk about index funds, so that they’re aware that there’s different ways to invest.

There’s a great site called finviz.com, which is a great visualization of the S&P 500. And we incorporate that into an activity because if you want to explain what an index fund is and you have no experience in investing, really difficult to do. But if you can visualize those 500 companies that are sorted by industry, that are sized based on market capitalization, that are red or green based on their performance, suddenly it becomes a little more interesting, as well as easier for them to grasp.

Benz: We wanted to discuss the state of financial education in the U.S. NGPF produces an annual state of financial education report. The April 2022 edition noted that 23{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of high school students have taken a stand-alone personal finance class, and that figure has been trending steadily upward. What’s driving the improvement?

Ranzetta: I think there’s a couple different factors. So, first of all, 23{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} is the number that are currently guaranteed to take a semester-long course. If we look at the states that have written into law and are in the process of implementing that guarantee, we get to 38{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}. So, this is a trend that’s really accelerated. I think there’s a couple different factors. I think the pandemic exposed the precarious nature of family finances. I think there’s tremendous grassroot support for this. So, for example, there are 14 states that currently guarantee a course in personal finance. There are a thousand schools outside of those 14 states that also have made that guarantee. And the way it happens, it’s a teacher, it’s a student, it’s a parent, it’s an administrator, it’s maybe all of them creating a coalition and saying, hey, this is important enough, we ought to be guaranteeing it to all. I think there is a movement in states to reconsider what are important skills for students to have before they leave high school.

And I think anytime you ask outgoing seniors about either the most important class they did have or the class they wished they had, I think personal finance is going to be at the top of the list. I think there’s access to real high-quality and free curriculum and professional development from organizations like ours as well as Jump$tart, the Jump$tart Coalition, as well as the Council for Economic Education. So, this isn’t a high-cost proposition. In fact, you don’t want to buy textbooks. You want to have digital curriculums that are enabled to keep up to date.

And then, the last thing I will say is something from behavioral economics and that’s FOMO, the fear of missing out. There’s research that suggests that if your district offers a personal finance course, there’s a higher likelihood that the neighboring district will also guarantee that course, and I think we’re starting to see that in states. You tend to see clusters of states that adopt these because who wants to be known as the only state in the southeast that doesn’t currently guarantee the course?

Ptak: While that trend is encouraging, I think what I’m hearing you say is that the clear majority of schools still are not offering personal finance instruction classes, if you will. What are the key reasons that many schools don’t teach basic personal finance concepts? Is it boiled down to schools just having a lot of other subjects to teach, and they just don’t have room for it?

Ranzetta: It’s a great question. I think nationwide about 70{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of students have access to either an elective course in personal finance or they’re guaranteed to take it. So, the courses are there. The question is, is there a commitment to guarantee that every student gets it? There’s a quote from Hemingway. He talked about bankruptcy. The way bankruptcy happens, it’s gradually then suddenly, and I think that’s exactly what’s happening here. Because I think the force that typically has prevented this from happening, it’s the same—I call it the most powerful force in financial services, too—which is inertia. Anytime there’s change, particularly, if we’re talking about changing graduation requirements, it means you have to change the schedule of when students are going to take certain courses; you have to find somebody who’s going to teach the course; you have to pick a curriculum; you have to make sure that teacher is trained. And the good news is, most of these guarantees that states are making are implemented over time. So, they’re implemented over a three-, four-year period, so you have time in order to make sure it’s done well, because there’s no value to laws on the books if it’s not being implemented successfully.

The irony is, and this is what I always look for as an entrepreneur is, pick a survey—80{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 90{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} of people support this concept that personal finance should be taught as a course in high school. NEFE had a survey out, the National Endowment for Financial Education, which was 88{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} nationally. We’ve polled in six different states. The range was 80{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} to 84{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550}. What was interesting in our polls too is urgency. More than 80{ac23b82de22bd478cde2a3afa9e55fd5f696f5668b46466ac4c8be2ee1b69550} said, this is an urgent need. And so, I think you’re going to continue to see that number roll. I’m talking today at the end of June that there are 14 states that have guaranteed financial education. Chances are, when this airs in July, they will be 16 or 17. It’s moving that rapidly.

Benz: Which states have financial education programs that you think are first rate, and what are they doing that other states and programs should emulate?

Ranzetta: The state of Utah is generally considered the gold standard, and I think one of the reasons is they were one of the earliest to adopt this guaranteed course. I would point people to— and maybe we can put a link—there was an auditor’s report from the state of Utah on their program, and I just thought they did a great job. Very in-depth study of what are the positives of the program, as well as what the opportunities for improvement are, because I think we always have to have our eye on how do we continue to make it better.

I think the key elements to a successful, when you’re talking about scaling a program like this statewide, is you better have solid standards about what’s being taught, what should be taught in the class. There has to be an investment and an ongoing emphasis in teacher professional development. Number one, it’s not being taught in teacher prep programs. So, you have to be willing to provide on-the-job training in effect. And because, just look at the billions of dollars that have been invested in fintech means product evolution is only accelerating and we better make sure that young people are aware both of the pros and cons of these various products.

And I think the third piece is surveying teachers within the state to say what curriculum are you currently using. I’ve seen too many resource lists that are about 100, 50, 60, 70 resources long and teachers don’t have time to wade through all of that. Let’s give teachers a short list of what curriculum is already being used, has been vetted by teachers there. I also want to make sure I just highlight some states that are in the process or just recently implemented these guarantees, because I think they’ve done a nice job of focusing on the professional development. In Mississippi, they have a master teacher program, pretty exhaustive rigorous program for teachers, to upskill teachers, because they put a guarantee in place. The class of 2022 was the first class in Mississippi that graduated having taken a course. North Carolina, the Council for Economic Education in North Carolina has run summer institutes for the last three summers. Their class of 2023 will be the first to graduate having taken that course. And we’ve been happy supporting both of those programs. And the last is Rhode Island, where they just adopted the law last year, and they’ve got an ambassador program, like a mentorship program for ambassadors to help new teachers teaching the course, and they also have a very strong emphasis on professional development.

Ptak: How about people who might be listening? Many of them work in the financial field, and I think we would guess that all of our listeners believe that financial wellness in the broad population is a valuable goal. How can they get involved in driving positive change in this area?

Ranzetta: I think there’s so many ways. I like to think of that phrase: act locally and think globally. First of all, find out what’s happening in your community. We have a map. We work with the Montana State University every year to go into the course catalogues of 12,000 high schools to document how are they providing access to personal finance today? Is it a guaranteed course? Is it an elective or is it embedded in another course? So, find out what’s happening in your community today. If you feel strongly about it, go to a board meeting and advocate for it. I think you have a ton of credibility as a financial professional to be able to go in and say, you’ll have stories of your clients or your clients’ children and how little they know. And they’re going to be better clients. I think that’s what the financial industry recognizes is, building a level of financial capability is in everybody’s best interest. So, testify at a school board meeting. Show up and volunteer. Reach out to an economics teacher. Or if your children are at the school, it’s obviously a lot easier. But volunteer to come in and talk about what you do. I will encourage you not to talk though, I’ll encourage you to bring an activity. Go to our website at NGPF.org and find one of our games like Stax, or find an activity that you can do, because that’s what they’ll remember more than what you tell them.

If your state is one of the 36 that doesn’t guarantee a personal finance course, reach out to your state legislator, reach out to a representative. This is a state-wide initiative. This is not something that’s going to get solved at the federal level. So, if you know your state rep or your state senator. And there were 26 states that introduced bills. So, a lot of states are introducing bills and many of them, I believe, at this point in time, seven or eight states have made it to the finish line. So, if there’s a bill that’s active, and we have a bill tracker to show that, having citizens reach out to senators can make a difference. And lastly, I would just say, if you want to be even more ambitious, organize an event. We have a documentary called The Most Important Class You Never Had, where we went across the country, went into classrooms in eight communities, you meet incredible educators, and you hear directly from students about the impact this course has on their lives.

Benz: Jeff and I had a great conversation with Dan Otter and Scott Dauenhauer for this podcast earlier this year. They discussed your foundation’s financial backing of 403(b)wise. They do advocacy in the 403(b) space, talking about how bad 403(b)s are. What got you interested in making a contribution in that area? Is there a direct connection with Next Gen?

Ranzetta: So, the way that happened is, I read a column, Ron Lieber’s column in The New York Times, where he profiled the work that Dan and Scott do to improve 403(b)s. Those of you not familiar, 403(b) is a defined-contribution plan that is similar in some ways to 401(k) but very distinct in others and actually goes by a different set of rules. And the short of it is that teachers have been getting the short end of the stick in terms of the way these programs are structured. And Dan and Scott, for them, it’s been a 20-year journey to fight, both advocate as well as educate. And so, it really just resonated with me. The fact that Dan and Scott were doing this as a side hustle for 20 years told me something. And so, if I could help support them, so their energies, particularly Dan’s energy, on a full-time basis could be dedicated to helping teachers improve their 403(b) plans, because it’s incomprehensible to me as to how those are sold and marketed. High-cost options that when you compare it to 401(k) just it doesn’t make a lot of sense. So, their story, their passion really resonated with me.

In terms of how we work together—again, our model is everything we do is at no cost at Next Gen Personal Finance. We provide curriculum as well as professional development because our mission is, Mission 2030, is that by the year 2030, every high school student in America will walk across that graduation stage with the financial skills they need to thrive in the future. And so, we recognize that kind of in order for that to happen, we’ve got to do everything for free, and we’re funded through an endowment that I helped to create. So, it really resonated with me the work that Dan and Scott were doing and the opportunity for us to be able to deliver education to educate—very similar models in that they’re educating and they’re advocating, and they’re working directly with teachers, and I can’t imagine a better purpose, a better mission for an organization than to help teachers make better decisions or have better options when it comes to their own retirement plans.

Ptak: Well, Tim, this has been a very enlightening discussion. Thanks so much for sharing your time and insights with us. We’ve really enjoyed talking to you.

Ranzetta: Thank you, Christine and Jeff. I appreciate you using our platform to share our story.

Benz: Thanks so much, Tim.

Ranzetta: Thank you.

Ptak: Thanks for joining us on The Long View. If you could, please take a minute to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.

You can follow us on Twitter @Syouth1, which is, S-Y-O-U-T-H and the number 1.

Benz: And @Christine_Benz.

Ptak: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at [email protected]. Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis, or opinions, or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)