- The Washington Times - Sunday, March 16, 2008

It’s a four-letter word that’s been in the news a lot lately. Yet American children and teenagers don’t know much about it. No, not that four-letter word, but an equally nasty one: debt.

“We’re seeing that students don’t know much about personal finance,” says Laura Levine, executive director for Jump$tart Coalition for Personal Financial Literacy, a Washington-based nonprofit that aims to improve personal finance knowledge among youths from kindergarten through college age.

“Some of what we’re facing as a nation in terms of financial [hardship] — the mortgage crisis, personal debt — we might be able to prevent in future generations if we arm them with information,” says Ms. Levine, whose group does biannual surveys of teens’ personal finance knowledge — or lack thereof.

Just three states — Utah, Missouri and Tennessee — require a semester-long course in financial literacy for school-age children. All other states, including Maryland, Virginia and the District of Columbia, have to incorporate the topic — or not — when teaching other subjects.

In Fairfax County — where financial literacy is taught — eighth-graders are given personal finance instruction through a partnership with Junior Achievement, a nonprofit group that provides life-skills programs for children.

“We give them a chance to get hands-on experience in something they’re already studying,” says Amy Marcenaro Heckman. “This program shows them that what they’re learning is relevant.”

The “program” refers to a 2,000-square-foot mobile unit (in Tysons Corner recently, but moving to the District shortly) whose interior sports 19 storefronts — with interactive computer features — representing various budget categories, such as housing and transportation.

“You can pick a car on this one,” says Jason Fabian, the mobile unit manager, standing in front of the transportation computer on a recent morning as 48 students from Whitman Middle School file into the space to learn about personal budgeting.

“Here’s a Porsche for $811 a month,” Mr. Fabian says. Obviously, not an ideal choice for a low-income earner. Students instead could pick low-budget cars in the $200- to $300-per-month range.

“It’s really interesting to watch the kids as the light bulbs go off,” Mr. Fabian says. “They see the relationship between what they earn and how much things really cost.”

The first thing the 13- and 14-year-olds have to do is figure out their net income. They’re given a persona who earns a particular amount each year, is married or single, has children or doesn’t.

Gladys Pemberton, a Junior Achievement instructor, is going through the work sheet, telling the students to deduct taxes from their gross income.

“You have to figure out your net monthly income,” says Ms. Pemberton, a former high school teacher. “It can be a real eye-opener to see what remains after taxes.”

Once they’re finished with the income and tax figures, the teenagers go to the storefronts to pick housing, transportation, utilities and insurance that fit their persona’s budget. Then they go back to the classroom to figure out how it all works — or doesn’t work — out.

“They quickly figure out that buying things on credit can be a problem,” Ms. Pemberton says. “If you make minimum payments, how long will it take to pay off furniture and home improvement? How much will you end up paying?”

She further instructs the class to make a distinction between needs and wants and to realize that if they want a better lifestyle, they need to work for it or get more education to get a higher-paying job.

“Oh, and no matter what you make, please make sure that your car note doesn’t cost more than your house note,” she says.

Ashley Pool, 14, working on her budget, says she went for a cheap car.

“I’m going to go with what I can afford, not what I want,” Ashley says. “If I make more money later on, I can get something more expensive.”

Ms. Pemberton encourages the children to share their budgets with their parents. She says the young and their elders can learn a lot from the work sheets and the discussion that likely will follow.

This held true for Ashley and her parents.

“She said she learned a lot, and she said she had a greater appreciation for ‘what you and dad go through every month,’ ” says Ashley’s mother, Laura Banks. “Teens tend not to know what it takes. … I think this type of instruction really helps.”

More is needed, however, says Ms. Levine, who adds that she would like to see mandatory instruction in all states. The latest survey by her group showed that just 15 percent of teenagers thought stocks would have a higher rate of return than a checking account over the next 18 years, and about 40 percent thought they could live well off Social Security when they retire.

“Our goals are very lofty, and they need to be,” Ms. Levine says. “We want every child to receive financial literacy [education] in school.”

Ms. Banks says the Junior Achievement program in which her daughter participated seemed to drive home the wants-versus-needs point well.

“She’s 14, and she picked basic cable. … We’re very proud of her.”

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