Classes that teach kids about money are failing. Here's what parents and teachers must do now.

American students may be poor at math, but when it comes to understanding the money in their lives, they are positively bankrupt. A recent national survey testing high school seniors about basic financial facts tells the story: The average score was a dismal 52% -- the fifth time in a row that students overall have flunked the exam.

Disappointing results like these, coupled with a national savings rate below zero, have galvanized educators and legislators to push hard for financial literacy programs to teach kids how to manage money. More than 40 resolutions and bills were introduced in state legislatures last year promoting money courses in the classroom. Nonprofits such as Junior Achievement and the National Endowment for Financial Education have rolled out programs to schools throughout the country. The Treasury Department even has a deputy assistant secretary devoted to financial education. All told, at least $50 million is spent a year teaching kids about money, to help ensure they'll be better savers and smarter investors as adults.

There's just one problem with this noble effort: Financial education doesn't seem to work. High school seniors who have taken financial literacy classes don't do any better on the personal-finance test than students who haven't taken a course. Now new research from Lewis Mandell, a leading scholar in the financial education movement, suggests that taking finance classes doesn't make kids better spenders or savers either, and may increase the likelihood that they'll pick up some harmful habits, such as running up credit-card debt. "As an educator, I'd like to believe you can teach people to do everything," says Mandell. "But clearly, the way we are going about it needs to be improved."

Coming from Mandell, this is no less startling a pronouncement than if Sigmund Freud had renounced the id. The SUNY-Buffalo professor and former business school dean has been an outspoken advocate of financial education for a decade. He sits on the boards of both the JumpStart Coalition for Personal Financial Literacy and the American Financial Services Association Education Foundation. And, yes, he's the author of that financial survey of high school students that has served as the basis for much of our understanding about what kids know and don't know about money.

No one, including Mandell, is ready to write off financial literacy efforts before far more research has been done. But at a time when financial education is increasingly seen as the solution to everything from Americans' growing problem with debt to the high incidence of consumer fraud, Mandell's studies raise an important question: What if everything we're teaching our kids about money is wrong?

Mandell's research may also help point the way toward getting it right. His most significant findings, detailed below, offer strong hints about a more successful approach to teaching kids about money -- and maybe, in the process, making the rest of us smarter about money too.

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