By Sherry Posnick-Goodwin
Kenny Chen, a member of San Diego Education Association, shows Chelsea Mills (left) and Cassie Pugh that realistic budgeting often means cutting back. Photo by Scott Bushman
A study by Arizona Pathways to Life Success for University Students (APLUS) released in May shows nearly 73 percent of students surveyed resorted to at least one “risky” financial behavior, such as maxing out credit cards or not paying bills on time. Nearly one in five of those surveyed has used some extreme strategy for meeting day-to-day financial needs, such as taking out payday loans or using one credit card to pay another. Financial literacy is not required curriculum in California — and the most recent legislative attempt to make it a requirement was vetoed by the governor in January. Presently, 12 states require financial literacy courses for graduation. Several studies have concluded that students living in states requiring specific financial education coursework had higher overall test scores than students in other states.
Now there is a renewed push for schools to tackle the subject in light of mass layoffs, investors being scammed out of their life savings, the near stock market collapse and the foreclosure crisis. In fact, says a member of the President’s Advisory Council on Financial Literacy, the country’s recent economic woes have provided the best teachable moment to inform young people about finance since the Great Depression.
Last year businesses, educators, government officials and community groups gathered for the biennial California Summit on Financial Literacy. Co-sponsored by the California Society of Public Accountants and the California Jump$tart Coalition, the summit’s goal was to find ways to help combat financial illiteracy in California.
“As participants in this summit, we welcomed the opportunity to come together to discuss constructive ways we can help ensure that California’s young people have the skills to manage their personal finances responsibly,” said Jack O’Connell, state superintendent of public instruction, in a joint statement with personal finance expert Jean Chatzky. “If we fail, we not only put this generation of students at risk, but future generations and the stability of our economy.”
Teaching dollars and sense
Economics teacher Vicky Banks asks her students to pick out a future career they might pursue based on their skills, interests and salary. Students pour over the list of careers in their workbook and highlight those that are most appealing. Some of the jobs require years of college and others do not. Salaries are also listed.
Many of the students at Hoover High School in San Diego think they’ll be living lavishly until the next part of the lesson: taking their net pay and using a calculator to deduct expenses — already determined by a percentage of income — for rent, groceries, utilities, transportation, health care, education and entertainment. Students must also put money aside for savings and emergencies.
It’s the first time most students have ever budgeted. Many gasp as they discover that what once seemed like “lots of money” quickly dwindles into much less.
Savannah Rock chooses to be a multimedia specialist for a “huge salary” of $51,000 per year gross pay. But she learns quickly that at the end of each month, she’ll be lucky to have even $1,000 left over.
“If I don’t save anything for repairs or emergencies, I could be in trouble if something big happens, like my car breaking down,” she worries.
Rock admits that money sometimes burns a hole in her pocket. “Most of the time when I spend money, it’s not something that I really need,” she says. “I wouldn’t even think about saving any of my paycheck without this lesson. I’ve never budgeted before, but now I can see that it really makes a lot of sense.”
Curriculum for responsible spending
Rock and her classmates are on the second day of a unit titled “Personal Financial Literacy, the Game of Life,” designed to educate them about handling money. The crash course in financial literacy is taught during a regular economics class over a period of 11 days. San Diego Unified School District is presently the only district in the state that has financial literacy as a graduation requirement — and likely is a trendsetter in this area.
The unit covers a wide range of topics including recognizing identity theft; the importance of investing; how to balance a checkbook; the way a credit score can impact your job and lifestyle; and even how the Patriot Act can affect bank accounts. Teachers say it could be the most relevant information students learn during high school.
“We started working on this before the economic downturn, and it ended up being timely,” says Banks, a member of the San Diego Education Association (SDEA). “It’s critical for students to learn how to create a budget, monitor their spending, avoid debt and only spend money on things they really need.”
Teachers, including Banks, began developing the curriculum three years ago with the help of community members including Kristy Gregg, a vice president of San Diego National Bank, and John J. Hargrove, a retired judge at the U.S. Bankruptcy Court for the Southern District of California. After debuting as a pilot project, it’s now in place throughout the district’s 18 high schools.
“I think we used to assume that parents were teaching this,” says SDEA member Ellen Towers, who helped create the curriculum. “But that isn’t happening. Parents may think it’s a personal matter or may have trouble themselves with finances. Parents are more likely to talk to students about sex than finances.”
But somebody needs to talk to students about financial responsibility, because a credit score can have as much impact on them as their GPA — and students will be tempted with credit cards the minute they graduate, says Kenny Chen, an SDEA member who uses the curriculum in his economics classes at Patrick Henry High School.
“When they go to college they will walk through the student union and there will be vendors in carts and kiosks offering them credit cards with giveaways. Students think that when they turn 18 they’ll start working, get a car, rent an apartment and use a credit card to cover any deficit. But they need to learn that racking up debt can have drastic consequences. Just one late payment can stay on their credit report for seven years. Hopefully this will make them think about the lifestyle they want to lead.”
His students, who recently ended the study unit, have already put the information to good use. Some say they have helped parents with filing college financial aid forms. Others have researched buying cars or filed their own tax returns.
Cassie Pugh, 18, says she is now more aware of “wants versus needs” and is going to cut back on her spending. Once she started budgeting, she was startled to learn that her coffee habit at Starbucks was costing close to $80 per month.
Mary Nooristani vows she will avoid credit card debt. “I am not going to be tempted with free things. They try and get you on a hot day with free ice cream, but it’s not free if you sign for a card with a 20 percent interest rate.”
Stock market lesson pays dividends
Does the ringing mean it’s time for class to begin — or is it the Opening Bell? There’s excitement in the air as students open their laptops and begin trading stocks, bonds and mutual funds.
Eduardo Lopez, a government and economics teacher at Roosevelt High School in Los Angeles, is proud that his students know how to read a financial table and understand the jargon of the stock market. When he began teaching four years ago he considered the stock market his weakest content area and worried about how he would cover it.
After attending a workshop sponsored by the California Council on Economic Education (CCEE), his class signed up for the council’s California State University Stock Market Simulation Game. Teams of students invest a hypothetical $100,000 in stocks and mutual funds via an internet site and compete locally and statewide for awards. Last year his class came in 50th out of 500 schools.
“The kids love it,” says Lopez, a member of United Teachers Los Angeles. “Pretty soon, they are speaking of splits and dividends, and they start talking about terms like opportunity loss. And the CCEE provides a subscription to the Wall Street Journal, so kids are reading in the paper to see which companies are up and coming. They realize that their investments are connected to the real-life economy.”
“Today, we had a loss of $40,” says student Peter Cuzul of his team, The Studs. “It’s frustrating, because we have only one stable stock and the others fluctuate. But it’s fun, and I’m learning how to invest and how to read charts of companies. In the future, if I decide to invest in the market, I’ll know how.”
The class is about to end and Lopez urges them to make trades before it’s too late. “If you want to compete, sometimes you have to risk it all,” Tony Pineda urges teammates on The Brokers, first-place team in the class.
“We’d do a lot more research and be much more careful if it was real money,” says team member Carlos Gutierrez. “Maybe we’re lucky that it’s not.”
Keeping it real
“How many of you want to buy a car?” asks David Ellington, a resource teacher at San Leandro High School. Every student raises his or her hand.
When he asks students to name “hidden fees” that come with purchasing an automobile, no hands go up. The San Leandro Teachers Association member explains they will also have to pay sales tax, inspection fees, insurance, warranty, vehicle registration fees and maintenance costs.
“They never tell you about these things. But most people pay an additional $3,000 to $7,000 the first year, no matter how cheap the car is.”
Ellington believes financial literacy is a way to get his mild-to-moderate special education students fully involved in the community and enfranchised into society. He invites community entrepreneurs, stockbrokers, real estate brokers and bankers into his classroom to speak with students about money.
“I talk to my students a lot about debt,” says the San Leandro Teachers Association member. “I had a senior who was already $1,400 in debt, and I realized that students need a better understanding of finances. They think they can pay something off in months and it can take years. Sometimes they purchase a cell phone and find themselves in a bad contract for years.”
Venetta Cormier-Walker, a teacher at the San Lorenzo Adult School, revamped her curriculum during the summer to include lessons on financial literacy. Some of the curriculum is tied to math lessons, reflecting her philosophy of keeping it real and proving to students that school has practical applications in the real world.
“I felt the need to do this because everyone should know how to save money, how to shop, and how to manage limited funds with diminishing resources,” says Walker, a member of the San Lorenzo Education Association.
Her students are young adults, but many of them are not savvy with money. One of the lessons she has constructed alerts students to the dangers of super sales and hidden delivery fees. Another looks at buying gasoline from a station that advertises for less, then charges more because there is a fee for using a credit or debit card.
“Many of my students come from challenging environments and have not learned how to budget or save,” Walker explains. “It’s not easy. One of the biggest issues in educating these students is that their generation has a sense of entitlement — and that includes finances. My job is to help prepare them for the future, and teaching them to make smart choices.”
Visit us online: Learn more about the financial curriculum Vicky Banks and her colleagues helped create by going to www.sdccte.org and clicking the “Personal Financial Literacy” link.
Visit us online: Experience the Stock Market Simulation Game for yourself at www.csusms.com.
A wealth of resources:
- The state Department of Education has launched an online library on its website listing numerous – and mostly free – money-managing sources for k-12 teachers, students and parents. www.cde.ca.gov/eo/in/fl/finlitk12.asp
- The California Council on Economic Education offers a web-based program that teaches financial and economic education through animated vignettes. www.moneywiseteen.org
- The California Jump$tart Coalition encourages curriculum that ensures the basic personal financial management skills are attained during the K-12 educational experience. www.jumpstartcoalition.org
- The public-private partnership between the state Department of Education, State Board of Equalization member Betty Yee and Visa Inc. developed a free, NFL-themed money-management video game called Financial Football. www.practicalmoneyskills.com/games/trainingcamp