April is National Financial Literacy Month, and it's easy to
find evidence that for many young people the
is also a failing grade.
For instance, in Junior Achievement's latest survey on Teens and
Personal Finance, nearly one-fourth of teens said that they don't
budget their money (frankly, I'm surprised the percentage isn't
higher). Among those who fall into this group, 42% say that they
aren't interested in money management, 37% say that they don't know
how to manage their money, and 32% think that budgeting is for
adults so it doesn't matter how they spend their money.
That's the bad news. But let me kick off the month with some
words of encouragement. In my experience, when a committed teacher
lights a fire under motivated students, their financial IQs go
through the roof.
Recently, I had the opportunity to chat with a group of eighth
graders at the Washington Middle School for Girls, in Washington,
D.C., and with their math teacher, Kelly Lockard. The girls had
just finished a unit in class called the Real World Project, in
which they randomly selected an education level -- high school,
college, PhD -- and then used Web resources to write a résumé and
find a job.
After that, they were required to set up savings and checking
accounts, budget for food and other expenses, buy a house and apply
for a mortgage, purchase and finance a car -- plus pay their weekly
bills by 8 a.m. each Wednesday. And Lockard was tougher than many
banks: If the kids missed the deadline by even one minute, she
charged them a $35 late fee.
The students, who come from low-income backgrounds, were a
high-energy bunch eager to chime in about what they had learned.
For instance, they were able to compare the pros and cons of a
five-year car loan (lower payments than a shorter-term loan, but
more interest overall). And they engaged in a spirited discussion
of why pro basketball players make more money than teachers,
therapists and even doctors.
"People who help others make less because it's not
commercialized," theorized Carsan Johnson. Tayauna Perry was
sympathetic to basketball players because, she says, "We need
entertainment." The girls figured that the high salaries paid to
sports stars might have something to do with the value that people
place on various occupations. But they hadn't quite grasped the
connection between supply and demand -- that big demand for a
relatively small pool of top players also helps drive up
Tayauna admitted that having to budget her expenses in school
hadn't cured her of shopping at her favorite mall stores -- Forever
21, Victoria's Secret, Old Navy. But now she's more cautious. "I
catch things on sale." she says.
I think financial exercises such as Lockard's are one of the
best ways to get kids interested in managing money and introducing
them to real-life choices and responsibilities. And I got
unsolicited support from Carsan, who volunteered that she used to
take her mother's bills for granted. "I thought bills were $25 for
this, $300 for that. I had no idea that a mortgage could be $1,000
or more." Now she knows.