What Schools are Teaching Teens about Personal Finance
As parents, we teach our kids to be responsible for feeding their pets and cleaning their rooms. But are we teaching them how to be responsible with their money? According to a report published by Demos, an economic think tank, young adults today (ages 24-35) are starting life with more credit card debt than any previous generation. Their findings indicate the average consumer debt among young adults increased by 55 percent between 1992 and 2001, to $4,088. Financial experts say young people today are largely ill-equipped to handle the realities of credit and budgeting.
Getting a credit card without understanding how credit works “is like saying when our child turns 16, ‘I know we haven’t given you a minute’s worth of instruction but we’re feeling pretty good about it. Here are the car keys,’ ” notes Julie Heath, chair and professor of the department of economics at the University of Memphis. “We wouldn’t dream of doing that but that’s exactly what we’re doing with these kids.”
Brittany Pieraccini, 22, a recent graduate of the U of M, is a good example. She applied for a credit card to establish her credit. But plastic made overspending easy. Initially, she says, “it felt like free money.” Pieraccini didn’t think of it as her own until her balance had crept to $900.
“You tell yourself ‘I’m not going to do it again,’ and then you see something you want and think you’ll pay it back later,” says Pieraccini, who eventually cut up a department store card she frequently overused. “If I didn’t cut it up I knew I’d keep using it because I didn’t have the willpower.”
College students are easy prey for credit companies because they’re experiencing their first taste of financial independence. Lured by free gifts, and laden with heavy interest rates, young adults tend to misuse their cards, buying electronics or bingeing on spring break trips they can’t afford. Others pile up dozens of small charges during college and don’t bother to pay much beyond the minimum monthly balance.
Then reality set in.
“You don’t realize how fast [the balance] climbs up there,” Pieraccini says. “You just pay $30 or $40 and then all of a sudden it’s astronomical.” Some parents bail their kids out when they get in over their heads. Others let them feel the sting by making them pay off the debt themselves.
But one U.S. Bankruptcy Court judge is hoping to save families from facing such dilemmas. Judge John C. Ninfo II, in Rochester, New York, launched Credit Abuse Resistance Education (CARE) in 2002. This education outreach program is aimed at high school juniors, seniors, and college freshmen in an effort to improve what he describes as “the national epidemic of financial illiteracy.”
“We’re trying to reach young people in high school and college before they naively abuse consumer credit,” Ninfo explains. “Ten percent of college students will drop out of school because of credit debt,” he notes. “The bottom line is that kids today are not getting [financial education] at home or at school to the extent that they need to be. Sixty-eight percent of high school and college students say they’ve never had a meaningful conversation with their parents about personal finances.”
Getting To Teens Before Credit Cards Do
Now available in 47 states, CARE. offers a series of presentations on the hazards of credit abuse, as well as the importance of good credit and budgeting. Using real life stories from people who’ve been through the court system, Ninfo says the program gives students a unique perspective on how abusing credit can devastate their lives.
Locally, the CARE program is offered through the West Tennessee division of the U.S. Bankruptcy Court. Kelley Rousseau, the education outreach coordinator, says the program is particularly needed in Shelby County, where personal bankruptcy is rampant. Last year, 12,000 people filed for bankruptcy through the West Tennessee courts. Rousseau says she’s adapted the program by focusing on high school seniors and presenting the information over a two-day period.
Learning From Life Examples
On the first day, Rousseau presents an overview of how consumer credit, mortgages, and car loans work. On the second day, the class divides into groups and analyzes different life scenarios: from a college student who is broke to a single parent family with bad credit and an upper-middle class family with good credit. Students then create a budget based on an income and monthly living expenses, with the aim of having money left over at the end of the month.
“We’re really trying to get teens to see [the difference between] wants versus needs and how having bad credit or no credit can really affect the price you pay for things,” explains Rousseau.
Kathleen Kennedy, a 12th-grade economics teacher at Cordova High School, introduced the CARE program to her class last year. She’d seen a presentation from the bankruptcy court during the summer. She likes it because, “this gives teens real world exposure.” During the budgeting exercise, “A lot of light bulbs go off,” says Kennedy. “Declarations are spouted such as ’I need to become a doctor,’ and, ‘It’s either peanut butter and jelly or a baloney sandwich for lunch everyday.’ “ Some even vow to save money by not having kids.
One of the biggest messages the CARE program drives home is the significance of a credit score. Low credit scores can affect one’s ability to qualify for a job, student loans, apartments, or admission to graduate school.
“[Bad credit] is not a mistake you can afford to make,” warns Ninfo. “The consequences are too great.”
Finance Education Becoming a State Priority
In addition to the CARE program, other personal finance courses are starting to be offered in the public schools. Last year, social studies and economics teachers in the Memphis City and Shelby County Schools were trained to teach a state-approved personal finance course which is now available to most high-school juniors and seniors. This hands-on course covers every aspect of personal finance — from filling out job applications to identifying predatory credit companies.
“When the state approved the course, I jumped on it because I would have loved to have taught this in my class,” says Marilyn Taylor, social studies coordinator for Memphis City Schools, and former high-school history teacher. The state Board of Education is even considering making the course a requirement for graduation.
In an effort to build a more permanent foundation for responsible consumerism, the state of Tennessee partnered with the First Tennessee Corporation to develop $mart Tennessee, a statewide initiative to integrate financial literacy into the existing K-12 curriculum. Economics professor Julie Heath is the director of training for the program.
“My argument all along has been that financial literacy should be taught the same way as reading literacy,” explains Heath. “That is, you teach children how to read [starting with] the ABCs, the building blocks, then every year you add on to that.”
The $mart Tennessee program is making its way through the city and county school systems, training teachers in modules during the next few years until teachers at all grade levels are up to speed. In addition to classroom exercises, some homework assignments are designed to be worked on with parents.
For children in kindergarten, teachers introduce the concept of borrowing and what it means to return things to people. Older kids learn about the importance of delayed gratification and saving money towards a specific goal.
“It’s not just [about parents] saying no, it’s saying no with an alternative plan,” says Heath. “Give examples of how saving money now helps [your child] get things later.” Relzie Payton, instructional specialist for the Shelby County Schools, says she opted into $mart Tennessee last year in response to weaknesses in financial education. “Teachers aren’t as well-equipped on the financial side as we need to be,” she says. At first, teachers were hesitant about covering more material in their classes but after the training, they were enthusiastic.
“It was wonderful for [the teachers],” Payton says. “Every one of the teachers saw the need and saw themselves as playing a part.”
by Holli W. Haynie at Memphis Parent on January 1, 2008