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High schoolers learn hard money lessons

Posted: February 28, 2014 10:41 p.m.
Updated: February 28, 2014 10:41 p.m.
 

When Gene Natali teaches high school students about money, he likes to give them two simple imaginary tasks.
First, he has the students imagine they were given a week to spend $1 million.

The students tell Natali, who is senior vice president at C.S. McKee, a Pittsburgh-based investment firm, that they would have no problem doing that.

Then he gives the students another task: Save $5 each day for a week.

“If I came back in a week, how many would have done it?” wonders Natali, the co-author of “The Missing Semester: Your Financial Choices Have Consequences.”

Saving money is just one simple financial skill that students can learn that would help them have a more secure future, he says.

The Council for Economic Education, an organization that promotes the teaching of economics and finances, just released a survey that found, for the first time, that all 50 states and the District of Columbia include economics in their K-12 standards.

But having standards doesn’t mean economics is required for graduation from high school. Only 22 states require students to take economics. Even fewer — 17 states — require personal finance courses. Only six states require testing of the students’ knowledge in personal finance.

In an economy still trying to recover from a recession, where student loan debt is growing and health care costs speed past inflation, some experts, like Natali, say financial literacy efforts will help people make better financial choices.

Bret Wims of Thrivent Financial, a non-profit financial services organization, couldn’t agree more.

“It’s no secret that we, as Americans, are poor savers, so how can we expect our children to learn that which we do not understand?” said Wims, a Santa Clarita-based financial consultant with Thrivent.

“We can’t expect them to learn from television, where the message is: ‘What you own and how you look defines who you are as a person.’ We need to teach them a new lesson. We need to give them a better example.”

“People ask me all the time to give them just one piece of advice, and my message is always the same: ‘Give 10 percent of your income, save 10 percent of your income, live on 80 percent of your income.’ If you do this you will never worry about money.”

“If you can’t, you need to make changes.”

 

Against the world

Natali says the world is stacked against young people. “Instant temptation is everywhere around them,” he says. “How can we expect people to save money?”

But Natali feels strongly about getting young people to understand how important it is to start a sensible financial life while they are still young. “Age is an opportunity,” he says. “If we can teach high school and college students to capture that potential, we won’t have the problems a lot of older people are facing now.”

That potential, he says, can be seen in another example he uses in his classes. He compares two savers: One person saves $3 a day for 10 years from about age 25 to 35 and then just lets the interest grow on that investment.

Another person starts saving $3 a day for 30 years from age 35 to 65. Because of the way interest works, the one who saved $3 a day for just 10 years will have almost twice the amount of money as the person who saved $3 a day for 30 years.

But knowing this doesn’t mean people will do it. “They have these constant temptations,” he says. “What is more fun? Putting $100 in a Roth IRA or spending it having fun with your friends?”

 

Financial literacy

Morgan Vandagriff, the co-founder of an online financial literacy company called Banzai, is also passionate about teaching youth how to better handle their money. He says the recession and sub-prime mortgage crisis happened for a lot of reasons, including bad decisions by banks and regulators.

“But if people avoided mortgages they couldn’t afford, we wouldn’t have had the problems we did,” he says. “It was (individuals who) put their name on the dotted line. Ultimately, they were the ones on the hook for it.”

The 17 states that have some personal finance requirements for high school graduation imply an underlying belief that if people knew more about finances, they would make better decisions.

Standards include topics such as earning income, using credit, investing, insuring and saving.

Vandagriff says the basic skill underlying financial literacy is budgeting. Those who run financial literacy courses can talk about the pros and cons of leasing or buying a car, or renting or buying a home, “but none of this matters if you can’t create a budget,” he says.

“People are hosed if they can’t budget. No other knowledge will be of any use without it.”

Banzai offers their courses for free at www.teachbanzai.com (parents can sign up as “teachers” on the site, according to Vandagriff).

 

Not a panacea

But Billy Hensley says no single class on finances will set a person up for life.

“There is no such thing as a one-time class or a one-time intervention that’s going to be a one-size-fits-all for every personal finance choice throughout your life,” says Hensley, director of education for the National Endowment for Financial Education, a national non-profit based in Denver that promotes financial education. “I think in general, we can’t put that expectation on each personal finance course or each personal finance intervention or workshop we go to, and think, ‘This is the one thing I’m going to go to and all my personal finance choices will be so much easier.’ We don’t do that with any other education subject. Why are we doing that with personal finance?”

Hensley says it is a combination of “smart regulation” and education that will have an impact on improving people’s financial situations. He says that teacher training, for example, will help improve the outcomes of financial literacy classes.

He also says that more work needs to be done to figure out how to integrate behavior into successful classes.
“It is not either/or, it is not us versus them, it is not regulation versus education,” he says. “Why can’t it be all those things together?”

Deseret News Service contributed to this report.

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