When Mike graduated from high school, his state didn’t require a financial literacy or economics course to graduate. So because he focused on advanced placement and college courses, and everything he needed to get into his college of choice, he didn’t take the elective financial class. Then on one of his first days of college, a credit card rep on the quad convinced him he needed a low-limit credit card. Because he didn’t understand how credit cards worked, that card with a $500 limit destroyed his credit for years.

Perhaps if Mike had taken a financial literacy course in high school, or if his parents had taught him even simple concepts of financial literacy, he may not have ruined his credit when he was 18. Luckily for others, his state—Utah—now has the most comprehensive requirements for financial literacy of high school students in the country. In fact, it was the only state to get an A-plus on the most recent National Report Card on State Efforts to Improve Financial Literacy in High Schools, giving teens one of the most-needed life skills. So why is financial literacy important for teens, what does Utah require, and what are the long-term impacts of financially literate high school grads?

Why financial literacy is essential for teens

The world of finance is becoming more and more complicated, and understanding it is a vital life skill, just like reading. From payday loans to credit cards to student loans, teenagers start making financial decisions as soon as they graduate from high school, or even before. Some important financial concepts for teens include:

Debt: For most teenagers, college is one of the most significant expenses they’ll have in their young lives. And many college students take on massive debt to cover tuition and living expenses. So it’s important for young people to understand how financial aid works and how college debt will affect their finances during college and beyond.

Credit scores: Like Mike, it’s difficult for many teenagers to understand how a credit card or loan—big or small—can impact their lives for years. But poor credit scores are hard to leave behind.

Retirement: It’s hard to fathom retirement at age 18, but with pension plans becoming rarer than unicorns, it’s important for every worker to understand retirement savings products. For healthy retirement savings, it’s important to start saving and investing young.

Debt, credit and retirement savings are only some of the important financial concepts that teens need to understand for successful financial lives.

What Utah requires

Utah is the only A-plus state in the nation for teen financial literacy, and for a good reason. State law requires all high-schoolers to take a half-year course focused on personal finance topics. And at the end of the course, they must take a state-administered test on the subject. Also, course teachers need a general financial literacy endorsement. And Utah gives financial literacy teachers the tools and resources they need to be successful. Some of the subjects teachers cover in the course include

  • Budgeting
  • Financial investments and saving
  • Rights and responsibilities of renting or buying a home
  • Bankruptcy
  • Financial and banking services
  • Entrepreneurism
  • Planning for retirement
  • Loans and borrowing money, including credit card debt, interest, payday loans and predatory Lending
  • Taxes

For more than 10 years, Utah has been committed to educating high-schoolers in financial literacy.

How financially literate teens impact communities

Financially literate people help create stable communities, and research has shown that financial literacy reduces income inequality. Financial education also gives teens the tools they need to strike out on their own—either in the workforce or college, buy homes, pay debt and save for retirement and other emergencies. And with those tools, they rely less on social services. They’re also less likely to become victims of fraud or identity theft. But it’s not too late if you missed the financial education requirement in high school—you can find free financial literacy help in your community or online. Financial literacy helps make communities stable.

Financial literacy is a vital life skill. Giving teens the financial tools and understanding they need—like Utah requires—will put them on a path toward a prosperous and stable life, and impact their communities for the better.