- The Washington Times - Saturday, January 1, 2005

The credit union tellers are busy counting money and helping a potential customer open an account. They have to work quickly, though. They still have homework to do.

These bankers are sophomores at Albert Einstein High School in Kensington. Their branch, an office of the Montgomery County Teachers Federal Credit Union, is located in the hallway outside the school cafeteria. Students can make a deposit and learn how to use a debit card — then sit down for pizza and gossip with their friends.

In the end, both the customers and the tellers will learn basic financial literacy, a lesson that hopefully will remain with them for years.

Teenagers are spending more money than ever — some $175 billion last year, according to Chicago-based Teenage Research Unlimited. However, most teens’ grasp of financial concepts has not grown along with their spending power.

About 15 percent of students nationwide graduate with a course in personal finance, says Carol Jarvis, executive director for the Maryland Council for Financial Literacy, an advocacy group aimed at improving economic and financial education in the schools.

Most teens are also not learning about checkbooks, credit cards and interest rates from their parents, Ms. Jarvis says.

“Parents either can’t do it or won’t do it,” she says. “I saw one survey that said parents would rather talk to their kids about sex than about money. The fastest-growing group of bankruptcies is among 18- to 24-year-olds. Kids today have so many ways to get into financial trouble.”

Some schools are working to ensure a grasp of money concepts. The credit union is one of several branches in Montgomery County public high schools. Einstein also has the National Academy of Finance, a school-within-a-school where students are required to take courses in accounting, personal finance, banking and credit, in addition to the regular school curriculum.

Twenty high schools in suburban Maryland, Northern Virginia and the District have academies of finance.

“I’ve learned a lot,” says Sylvia Cheng of Wheaton, a sophomore in Einstein’s Academy of Finance who also works as a lunchtime teller at the credit union. “I can do my own accounting instead of relying on someone else. I’ve saved up about $700 in Chinese New Year gifts. I need to put it in my bank account.”

Adds Cynthia Rivera, another Einstein sophomore: “I’ve learned how to not get ripped off.”

Financial literacy

When it comes to money, teenagers have a lot to learn, says Lewis Mandell, professor of finance at the State University of New York at Buffalo. Mr. Mandell created a financial literacy test for the Washington-based nonprofit JumpStart Coalition for Financial Literacy. More than 4,000 high school seniors nationwide took the survey in 2004.

The average student answered 52 percent of the questions correctly. That’s up from 50 percent in 2002, but there still is a long way to go, Mr. Mandell says.

“We’re such a consumer-oriented society, but we are not teaching these kids how to consume,” he says.

Survey questions were divided into four categories: income, money management, saving and spending. The students did a far better job answering questions about income and spending than they did about money management and saving, Mr. Mandell says.

He says it is interesting to note that 58 percent of the students said they learned money skills at home. What they are learning may not be such a great lesson, though.

“The kids who said they spent a lot of time talking about money and the kids who said they spent a little time had almost identical scores,” Mr. Mandell says. “So it appears talking to mom and dad does not do much good. Many families in today’s society have to live on the edge. Parents may feel they are giving excellent advice on how to obtain an additional line of credit. They may be teaching them how to balance precariously on a cliff when they should be teaching them how to save money.”

The JumpStart Coalition and other advocacy groups would like to see more personal finance education in schools. Currently, four states — Idaho, Illinois, Kentucky and New York — require a personal finance course for graduation.

Many jurisdictions have changed education requirements and lots of schools offer optional classes and programs. Baltimore County Public Schools now require a personal finance course. A similar math requirement recently went into effect in Anne Arundel County, Ms. Jarvis says.

Students in Virginia learn concepts of economics, including personal finance, as part of their Standards of Learning Requirement, says Martha Hopkins, associate director of the Center for Economic Education at James Madison University. Ms. Hopkins’ center formulatesa curriculum called Financial Fitness for Life, which teachers from kindergarten through 12th grade can use in the classroom.

“Financial education absolutely needs to be mandated in schools,” says Laura Levine, executive director of the JumpStart Coalition. “But we can’t wait for that. So many subjects need to get covered at school. We need to be teaching them in school, after school and at home.”

More progress: Congress recently passed the $1.5 million Excellence in Education Act, an addendum to the No Child Left Behind legislation that will focus on boosting economic understanding.

However, with the increased attention on technology and SAT scores, rising competition to get into college and shrinking school budgets, financial education is unlikely to become a higher priority, many educators say.

“I don’t think it will ever be required,” says John Brewer, head of Einstein High’s Academy of Finance and a resource teacher in the business and technology department. “English, math, SAT scores, that’s what the public looks to. It is only natural that the school systems respond.”

Filling in gaps

Bethany Curry has seen her future, and she is sure it won’t include a credit card or a mountain of debt.

Bethany, who lives in Silver Spring, is a junior at Einstein’s Academy of Finance. She has been saving her money since first grade, when a bank branch opened at her elementary school.

Less than a decade later, Bethany is a financially savvy teen.

“My teacher was telling us about how at college, they will pass out free Frisbees with credit card applications,” she says. “I don’t even think I want a credit card. I’ll use a debit card instead.”

Bethany’s mother, Linda, has also taught her a lot about how to handle money. In fact, the two have bonded over it.

“My mom does some accounting at her job,” Bethany says. “So we’ll talk about accounting.”

They have also talked about savings accounts, certificates of deposit and how to build equity, says Ms. Curry, who works for the Montgomery County Office of Health and Human Services.

“I’ve told Bethany that whenever she gets money, she needs to save some of it,” she says. “She can still have fun with the rest. She has a lot of money in the bank now, and she opened up a CD earlier this year. I showed her how her money can earn more interest that way than in a regular bank account.

“I’ve also talked to her about the importance of handling credit,” Ms. Curry says. “Credit cards are convenient, but know that you should only spend what you can pay.”

It is the credit card issue that is the most seductive — and destructive — for teenagers and young adults. JumpStart Coalition statistics show the average family has more than $8,000 in credit card debt. Nearly 50 percent of credit card users pays the just the minimum payment each month.

Meanwhile, 83 percent of undergraduate students have at least one credit card, with a median balance of $1,770, according to data from student loan originator Nellie Mae. The average student today graduates with an average of $20,402 in combined student loan and credit card debt, the Nellie Mae statistics show.

“Young people absolutely need education in this more than ever,” Ms. Levine says. “Credit card companies are marketing to a younger audience, and kids have to have some kind of education about this before they get out of high school.”

Nathan Dungan, a Minneapolis financial planner and author of the book “Prodigal Sons & Material Girls: How Not to Be Your Child’s ATM,” says that education should actually begin way before high school.

“If you wait until their teens, your child’s habits are already set,” he says. “It is so much easier to instill healthy habits than it is to unravel unhealthy habits.”

Exposing children and teens to money is the best way to teach them how to handle it, Mr. Dungan says.

“You need to put money in their hands,” he says. “Just like we need to teach them to read, we need to teach them to use money responsibly. You also need to teach as you go. Dropping in with a big ‘here’s what you need to know’ lecture may be too much for a young person to absorb.”

Mr. Mandell agrees that access to money is the best way to learn about it. Having a part-time job teaches lessons in money management — as well as financial management, he says.

“If you are flipping burgers at McDonald’s, you are going to care more about that money than if mom and dad gave it to you,” he says.

Money savvy starts early

It is never to soon to teach children the basics of money. Here are some ideas to take you from preschool to high school:

Ages 3 to 5

• Take advantage of learning opportunities such as turning shopping trips into lessons on making choices regarding value and quality.

• Help children learn to identify forms and value of coins and cash by providing a small amount of money to make a purchase and receive change.

Ages 6 to 10

• By age 6, your child may be ready for an allowance. Clearly explain to your child what the allowance will cover, such as clothing, school lunches, gifts or just personal extras. Encourage your child to put away 10 to 20 percent of her allowance as savings.

• Purchase a small, lockable safe for your child to save money in, or go to your local savings institution and help them open an account.

• Start stressing the importance of saving, and help your child set specific saving goals, such as a new bicycle.

• Start involving your child in real-life money lessons. For instance, assign your child a task at the grocery store such as searching for the best deal on juice.

• Begin to include your child in discussions about family money decisions such as where to vacation and how the family will save for the trip.

Ages 11 to 14

• This is a key time for learning about money. Give your child more control of his money, as well as room to make mistakes and learn lessons.

• Increase the amount of your child’s allowance and add the responsibility of paying for school lunches and other necessities. Make the allowance large enough to cover all your child’s entertainment, but let your child decide how the money will be divided among such things as DVDs, computer games, CDs and outings with friends.

• Provide more decision-making opportunities by setting a spending limit and letting your child shop for gifts for others.

• Continue to teach the value of saving. If your child wants something that costs more than you want to spend, brainstorm together on ways she can earn the difference, such as lawn mowing or baby-sitting.

Ages 15 to 18

• If your teen now has a part-time job, now is the time to open a checking account. Make sure your teen knows how to write a check and keep track of the account.

• Give your teen more responsibility for handling money decisions. With an expanded allowance, an older teen can be trusted to shop for his own school supplies and clothes.

• Consider letting your teen use your credit card, but remember the pros and cons. It will be convenient and she will learn how credit works, but remember you won’t have as much control over the spending and will still be responsible for paying the bill.

• Go over the costs of everyday life with your teen. Take the time to work up a realistic list of expenses that a young person would have living on their own in your area (such as rent, food, utilities, car payments and taxes). This breakdown will help them see that adult paychecks have to cover so much more than clothing and electronics.

• Walk the walk. “Do as I say, not as I do” may not work here. If your children see you racking up bills on your credit card and only paying the minimum, you will have difficulty when you give them the “live within your means,” speech. However, acknowledging your own occasional missteps, can be a healthy part of your teen’s learning process.

More info:

Books —

• “Prodigal Sons & Material Girls: How Not to be Your Child’s ATM,” by Nathan Dungan, John Wiley & Sons, 2003. This book outlines financial planner Nathan Dungan’s “share-save-spend” philosophy.

• “Rich Dad, Poor Dad for Teens: The Secrets About Money — That You Don’t Learn in School!” by Robert T. Kiyosaki with Sharon L. Lechter, Warner Books, 2004. This installment of Mr. Kiyosaki’s best-selling “Rich Dad” series shows teens how wise decisions now will pay off in wealth later.

Associations —

• JumpStart Coalition for Personal Financial Literacy, 919 18th St. NW, Suite 300, Washington, D.C. 20006 Phone: 888/4-EDUCATE. Web site: www.jumpstart.org. This nonprofit group is a coalition of organizations with an interest in financial literacy. JumpStart tracks state developments in financial literacy education; provides resources for teachers, students and parents; and conducts research into the state of financial literacy and teens.

Online —

• Visa sponsors a Practical Money Skills for Life program, where teens can learn or educators can download materials for classroom lessons. For more information, click on www.practicalmoneyskills.com.

• Junior Achievement, the nonprofit organization that helps educate youth about business and economics, has a personal finance center available online (www.ja.org/studentcenter/persfin/). There are worksheets to download, online calculators, information and links to other youth finance Web sites.

• The Girl Scouts of the USA and JPMorgan Chase have teamed up to sponsor Money Smarts (www.girlscouts.org/moneysmarts/ home.html). The site offers some basic lessons in earning, saving, budgeting and investing.

Sources: Montgomery County Teachers Federal Credit Union; financial adviser Nathan Dungan.

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