Econ and Personal Finance: Complements Not Substitutes

Personal financial education is important. Everyone agrees that managing personal finances is an important life skill that, used properly, can lead to a more comfortable life and avoid a lot of heartache. For that purpose, there is a national effort to mandate personal finance education in every state. In 1998, only 14 states required personal finance standards to be implemented in their school curriculum, according to “Country Survey (PDF)” reports. By 2022, that number will rise to 40, according to the biennial survey by the Council of Economic Education.

But there are risks associated with this mandate. With a limited number of hours in the school schedule and many subjects to be taught, administrators, teachers and curriculum directors must make sacrifices when they provide scarce educational resources (classroom time). As a result, administrators too often see economics and personal finance as substitutes and drop time spent on econ; that is, mandating personal finance pushes out economic instruction.

In reality, the subject is not substitutes, and we do not have to sacrifice the economy for personal finance. Economic reasoning can be used to make decisions in all areas of life, but especially when making personal financial decisions. In fact, personal finance can be seen as the application of economic thinking to everyday decisions. If anything, economics and personal finance are complements, not substitutes.

Economics is a Core Subject in Social Studies

Economics is one of the core disciplines in social studies. The economic standards are part of the College, Career, and Civic Life (C3) framework developed by 20 states (five states are part of the Federal Reserve Bank of St. Louis) and published by the National Council of the Social Studies. (NCSS). NCSS and its membership believe that social studies, including economics, prepares students for a postsecondary future. These include “discipline and literacy practices necessary for college-level work in social studies academic courses, and critical thinking, problem-solving, and collaboration skills necessary for the workplace,” according to one revision. NCSS position statement published in 2016.

“The National Council for Social Studies reaffirms that a good education in social studies is essential for civic competence and the maintenance and improvement of a free and democratic society,” the statement said.

The economic way of thinking-applying informed decision-making and cost-benefit analysis and recognizing cost opportunities-is at the core of economic standards. This content can be used for decisions that students will make as consumers, employees, entrepreneurs, savers, investors and citizens.

Economics Shows the Big Picture beyond Personal Finance

Although it is difficult to find space in the school year for personal finance and economics, both contribute in important ways to a student’s education. Studying economics has added benefits: students’ understanding expands beyond their personal purchases and spending to the issues we face living in a global economy. As the economy goes through periods of growth and recession, having economic knowledge helps people understand what’s going on around them and how they fit into the bigger picture.

The Federal Reserve Bank of St. Louis (and others Reserve bank) offers a variety of practical, free lessons and resources for teachers to incorporate economics, including personal finance, into their classroom instruction.

Here are just a few examples of important economic content, and some resources to help students learn about some of those concepts.

“Once Upon a Decision” is part of the series Adventures St. Louis Fed Ella’s.

Make a decision

Developing strong decision-making skills is important for all aspects of life. Poorly informed decisions and policies can have unintended consequences. Applying cost-benefit analysis can help people make more informed decisions.

Learning tools

“The Art of Decisionmaking” online module provides five steps to make a careful decision.

the”Once upon a decision“An online module for elementary school students introduces the five-step decision-making process.

Invest in yourself

Investments in human capital generally generate higher incomes and can help people out of unemployment to some extent. The decisions young people make about staying in school and seeking training or post-graduate education have significant consequences throughout their lives.

This does not mean that everyone should go to college. That means postsecondary education and training is important. Learning about investing in human capital is relevant to economics, personal finance, and career and technical education.

Learning tools

“Invest in Yourself” is an online module for upper elementary students.

Here’s Your Salary—Lesson 1: Invest in Yourself” is an online module for high school students.

Both modules emphasize that people invest in human capital through education, training and on-the-job training and that the investment pays dividends.


Inflation reduces purchasing power. Understanding the difference between nominal (value measured in current prices) and real (adjusted for inflation) interest rates is important for financial decision-making.

But not everyone has that understanding. For example, respondents in financial capability surveys are often asked the following questions:

Imagine that the interest rate on your savings account is 1% per year and inflation is 2% per year. After one year, how much can you buy with the money in this account?

  1. More than today
  2. Exactly the same
  3. Less than today
  4. Don’t know/Refused to answer

According to the 2011 work of Annamaria Lusardi and Olivia S. Mitchell, less than two-thirds of people surveyed in the United States were able to answer the multiple choice question correctly (“C”), and it led to significant consequences for them.

Learning tools

The “Inflation” episode of the Economic Lowdown Video Series below provides an introduction to inflation.

The “Getting Real About Interest Rates” episode of the Economic Lowdown Podcast Series explains nominal and real interest rates.

Fiscal and monetary policy

Fiscal policy and monetary policy have an impact on household budgets, savings, spending and investment decisions. Fiscal policy is the spending and taxing actions taken by the federal government (Congress and the president) to affect the economy. Monetary policy is action taken by the central bank (Federal Reserve) involving the use of interest rates or money supply tools to achieve goals, such as maximum employment and stable prices.

Learning tools

In the online module “Government Budgeting,” students take on the role of a new lawmaker in the U.S. House of Representatives trying to serve the goals of their constituents and the long-term goals of the U.S.

Teachers and students can earn digital badges:

And they can learn about the Fed’s monetary policy tools and how the central bank’s policy decisions deliver the economy.

Measure the economy

Gross Domestic Product (GDP) is a measure of how much the economy produces in a year. There’s a lot to learn about GDP, and it’s important because it tells us whether the economy is growing or slowing down over time. When we compare economic production year-over-year, we use GDP adjusted for inflation-called real GDP. We also use real GDP to determine real GDP per capita, which is sometimes used as a proxy for living standards.

The “GDP and Pizza” video covers some key concepts of gross domestic product.

Learning tools

Watch “GDP and Pizza Video Explained,” a series of short videos that provide an overview of this very important measure of economic production.

Other resources to help teachers and parents with economic and personal finance education can be found at Our students, especially the most vulnerable, need to understand the economy to better navigate our economy and increase their financial stability.


  1. See 2011 Journal of Pension Economics and Finance article “Financial Literacy and retirement planning in the United States” Annamaria Lusardi and Olivia S. Mitchell.

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