Financial literacy in high school

[JumpinBug]

For the second half of class, they used a customized version of the the SIMS 3000 to apply what they had learned; they had to work, go to school, pay their bills, etc. Every now and then, the game would throw a random event, like a major car repair or (in my son's case) a burglary (he chose to save money by living in a bad neighborhood) and they would have to deal with it. Nearly everyone in the class died the first week . Death or bankruptcy equaled an automatic F.

Do you know anything more about the program? I tried a quick google search, but didn't come up with the right thing. It'd be fantastic if it was widely available... Thanks!

[stanhope]

You have no idea how badly I wish a class like this would have been taught in my high school.

All the things people mentioned already have been great. I would say an emphasis on student loans would be very helpful at their age. Teach them the difference between grants, scholarships, subsidized and unsubsidized Stafford loans, and direct loans. Tell them what current interest rates are so as to give them a picture of what loans are really going to cost them. Show them how much money they will have to make to afford their 10 or 15 year payment schedule.

[Anita18]

I'm so glad to read this, as I've often been completely that a country driven by capitalism doesn't have basic financial issues as part of a core high school curriculum.

Expanding on Twilight's comment about savings, I'd include:

- how to balance a checking / debit account (how many kids end up over drawing their accounts? )

- the true cost of debt - how something with a $20 purchase price can end up costing $40 or $60 with interest costs

- how to save, using examples of tangible purchases like a new pair of sneakers, a new cell phone, etc., to show how they could save up for these purchases by putting $x a way each week or month

- the impact of saving regularly, even if it's just a little bit of money at a time (maybe use the example of that lady who recently died a millionaire, yet she had only ever worked as a washer woman)

I think those are great basic things to go over for the younger group.

Interesting. I took Personal Finance when I was in high school and had assumed that it was available everywhere. I was surprised to find out that it wasn't. It is available in our school district, however, and my son took it last year.

In the first half of class, they covered:

Basic banking--savings, checking, fees, IRAs, other accounts
Personal taxes
Job benefits
Insurance--life and health
Credit--credit cards, bank loans, interest, etc.
Investment--the stock market (very briefly)
Budgeting--they had to do the same thing we did in school, which was create a budget based on having a minimum wage job and trying to live on our own. They had to find apartments and go shopping and things like that.

For the second half of class, they used a customized version of the the SIMS 3000 to apply what they had learned; they had to work, go to school, pay their bills, etc. Every now and then, the game would throw a random event, like a major car repair or (in my son's case) a burglary (he chose to save money by living in a bad neighborhood) and they would have to deal with it. Nearly everyone in the class died the first week . Death or bankruptcy equaled an automatic F.

My son learned a lot, just in time to get his first job .

The IRAs and investing stuff would probably be way early, but then again I was in a community where most people delayed getting into the real world until 22 because of college that was mostly paid for by their parents. So that list would probably be a great starter for people planning to work right out of high school.

[CynicElle]

Not me personally but many of my 20-something friends have zero understanding of how credit cards and loans work and consequently have got themselves into financial trouble.

That's what I'd have liked to know more about. I knew that running up a big card balance was bad but didn't know just *how* bad it would be in terms of galloping interest and in damage to my longterm credit rating. Talk about learning the hard way.

[vesperholly]

You have no idea how badly I wish a class like this would have been taught in my high school.

Agreed!!!

Another thing that I haven't seen brought up is renting your first apartment. How to find an apartment, splitting bills with a roommate, lease agreements, etc. Mortgage stuff is great, but the vast majority of people I know rent before they buy.

[BittyBug]

Not to mention that security deposit that's usually required up front!

[SBulgatz]

Hi 'KCC,' my name is Sarah Bulgatz and I work for Charles Schwab. ‘Barbk’ is correct (thanks, Barbk) -- we have an educational website, www.SchwabMoneyWise.com that’s focused on helping people learn and teach the nuts and bolts of personal finance. Check out the Teachers & Volunteers tab for resources on teaching the ABCs of money management, as well as a workshop for middle and high schoolers. You might also be interested in the pledge campaign we're sponsoring with Boys & Girls Clubs of America called Make Change Count, which encourages teens to commit to four simple steps to get on the path to a great financial future. Hope this is helpful!

[LilJen]

Great stuff, everyone. I got SO much out of one of the 'gut' courses I took in HS--home ec--because we had fake 'checking accounts' and had to budget based on the recipes we were assigned. Also the idea of debt growing exponentially via credit card interest rates, and the "save a little each week/month toward a big purchase" idea.

[KCC]

Hi 'KCC,' my name is Sarah Bulgatz and I work for Charles Schwab. ‘Barbk’ is correct (thanks, Barbk) -- we have an educational website, www.SchwabMoneyWise.com that’s focused on helping people learn and teach the nuts and bolts of personal finance. Check out the Teachers & Volunteers tab for resources on teaching the ABCs of money management, as well as a workshop for middle and high schoolers. You might also be interested in the pledge campaign we're sponsoring with Boys & Girls Clubs of America called Make Change Count, which encourages teens to commit to four simple steps to get on the path to a great financial future. Hope this is helpful!

Thanks so much!! I will check your site against my outline and incorporate things that I may have left out. I appreciate your input!

[barbk]

KCC --
Since you're working on a seminar for each grade level, I'd like to advocate making college finance and expenses the key priority for juniors, since it ought to affect how they think about the college application process, and what it means to have a "financial safety school" -- one that you and your family are SURE you can afford AND that is a school that your are willing to attend. Even though I live in an affluent area, every year we see kids and parents who are in shock come spring of senior year when they finally figure out that the private college with the $52K cost of attendance that gave them $18K annual scholarships, or the out-of-state public university with the $36K cost of attendance simply are unaffordable for their families. Usually they didn't understand very basic things about financial aid: that neither the feds nor private colleges considers any debt you may have (including mortgage or car loans), adds back to your available income any contributions you made during the year to 401K or IRA plans, and that a step-parent's income is included as an income source for college if the step-parent is living in the household with the student. At a number of private colleges, students are shocked to learn that in the case of divorced parents, many schools expect contributions from both sets of parents, assess a percentage of home equity, and treat any property other than the family home as an asset that is no different than money in the bank. And that's before we even talk about student loans, and the life impact of starting out with huge debts from college. I've seen way too many "Had I but known" moments, and it is really, really sad. All too often kids are encouraged to apply to whatever schools they want, because neither the kid nor the parents understand the realities of college costs and financial aid.

There are some great websites out there on the student loan crisis, and I think that high school kids need to be aware of the potential impacts on their lives:

"The 33-year-old woman last month endured a painful breakup with her boyfriend of seven years. "Much of it was to do to the fact that I have over $150,000 in student loan debt and he did not want to be responsible, or help me, pay it back," she told WalletPop. "He wanted other things, such as a house and kids, and that is simply not an option for me as I have this mountain of debt to pay back.""

http://www.walletpop.com/2010/08/20/...an-can-happen/

[danceronice]

CREDIT CARDS AND HOW THEY WORK.

Sheesh, I do not understand how people do not get that if you don't pay it, they come back at you and want their interest, too. Except apparently no one ever explains it to them.

If you Talk To Chuck (as barbk suggests--I use Schwab as my primary brokers and find them to be insanely helpful even when you're not a big-money client) try to get some marterial on explaining things like stocks, CDs, 401ks, IRAs and such. They're neither scary nor confusing once you understand them.

[Prancer]

Do you know anything more about the program? I tried a quick google search, but didn't come up with the right thing. It'd be fantastic if it was widely available... Thanks!

I don't have a clue, but I could try to find out.

It was very entertaining for ME when my son was doing the program. He would come home and complain about how little he had in his paycheck after taxes, and how much things cost, and how all his classmates had bought cars and rented expensive apartments and then starved to death because they hadn't budgeted for food.

He got sick at one point in the game because he was working two jobs and taking classes and wasn't sleeping enough. He also ended up in counseling because he worked too much and refused to pay for entertainment .

He told me that life sucks on minimum wage and he now understands how some adults end up living in their mom' basements.

The IRAs and investing stuff would probably be way early, but then again I was in a community where most people delayed getting into the real world until 22 because of college that was mostly paid for by their parents. So that list would probably be a great starter for people planning to work right out of high school.

Believe it or not, about half the kids my son knows have investment portfolios. A couple of them have college paid for already, no matter where they want to go. He knows a lot of geeky, nerdy types, but still--that's quite a few who have investments.

The class isn't mandatory, which I think is a mistake. My daughter and I are tussling over it, as she thinks it willl be boring and refuses to sign up for it, and I think she needs it much more than her skinflint brother did.

[sailornyanko]

Great thread! I didn't take such a course in high school, but they did have an introduction to accounting at my med school focused mostly because doctors tend to be really ignorant about running their own business. However my parents aren't millionaires and haven't stressed enough to NEVER stay in debt for long. My parents who are huge penny pinchers currently owe about 3000 dollars in credit card debt which I'll probably have to help chip in considering part of the debt was because my mom bought me my laptop last year I need for work. I also owe my parents a lot because I'm graduating med school debt free.

I'm quite a penny saver. I was only earning 100 dollars a month at my job last year. I didn't have to pay for rent, electricity or water because the government covered that for me, but did have to pay for food and travel. Despite spending some of the cash to survive because my parents rarely (if ever) gave me any cash and I couldn't get a second job, I was able to save 1000 dollars that's in my bank account. I was even able to do tourism and go to Zihuatanejo a few days which was nice. Most of my friends didn't save anything. If you know how to spend on the cheap it's not hard to have some fun every now and then. Hostels are cheap and fun as hell instead of a pricey all-inclusive.

One mistake I've seen with some people I know is that they choose the wrong university for the wrong reasons.

I know vaguely a girl that wanted to get 2 degrees at the same time: Tourism and chef. However the only way her parents could afford both was if she went to a middle tier university. What did she do? Go to the most insanely expensive university in the country for the chef degree just because some of her HS friends were going there but to another faculty.
She got the chef degree, her schedules never were the same as her friends so she never saw them on campus anyways and had to get a part-time job to pay for her Tourism degree in a third tier university instead of graduating in a double major at age 22.

I know someone else more closely who did the same mistake of going to the most expensive university for a Law degree because some friends were going to be on campus. Her parent's money ran out halfway, she had to drop out and get a part-time job as an elementary school teacher, transferred credits to a second tier university (but still quite good) which should have been where she should have studied in the first place and on her own by penny pinching has been taking scattered courses here and there. She's expected to FINALLY graduate sometime this year I believe. She would have graduated at least 3 years ago if she skipped going to the insanely expensive university.

For the kids in the later years, start giving them ideas of what career they want. Jamie likes marine biology and might think scuba diving with the dolphins and making bank by doing it is a smart move, but marine biologists earn very poorly and have a hard time finding a job. One mistake I hear a lot is that people prefer risking getting student loans they will never be able to pay to get a less lucrative degree in an Ivy. I've heard people that get english degrees from Harvard have the exact same job salaries on the real job as the guy next door that went to a community college.. but have much more debt.

People also need to know early on it might be a good idea to start saving in their 20's for their retirement account. Just tell them how much living in a long term home costs when you're old and how much money they could sacrifice now in their 20's. I told my former nurse assistant that she should consider the 401 account where she only sacrificed 10 dollars from her check a month and have a pretty sweet savings account once she retires. She has small kids that go to a public school and rarely spends cash, I'm sure 10 bucks a month isn't even a sacrifice.

[Choupette]

How about the psychology behind spending? For example, somebody may badly want a new flatscreen TV and will buy one through a 12 months payment. But a month or two after, the excitement over the new TV has worn-out, and then comes the need for a new expensive item, while the first one isn't even paid for... Many people get into debt like that.

[PDilemma]

I would suggest that you start from where they are. How do they manage the money they have now?

My just turned 16 year old nephew goes to boarding school and gets $40 a week from his dad for spending money. His room and board is pre-paid. That money is for incidentals--laundry, shampoo, snacks, entertainment, etc... He runs out every week. Recently, my brother found out that he has on occasion bought pizza for the half the dorm floor so he can be the popular guy then called in the morning asking for more money.

I taught high school kids who worked part time jobs, but their parents paid for all their basic needs and car insurance, gas, etc...so they took every paycheck to the mall and bought expensive stuff they didn't need.

How to budget for what they need and why they need to learn to do so is a great starting point with teens. How and why to save for big purchases is another good starting point. There are a lot of things my nephew wants and begs his parents to pay for that they won't. If he budgeted the money they do give him better, he could eventually have them.

Once they have that idea, then you can talk about the future.

[KCC]

How about the psychology behind spending? For example, somebody may badly want a new flatscreen TV and will buy one through a 12 months payment. But a month or two after, the excitement over the new TV has worn-out, and then comes the need for a new expensive item, while the first one isn't even paid for... Many people get into debt like that.

I had not thought about this before, but it would go nicely in the budgeting session. Again, so many good ideas!

[Aceon6]

Loved sailornyanko's whole post. A work friend is helping her son through the college process now. She's had him work out how much he needs to borrow to go to "Well Known U" vs. "Good U" as well as how much he thinks he'll earn upon graduation as he already has a career plan. He figured out that "Well Known U" would increase his salary potential by only a few thousand a year to start, not nearly enough to cover the loans.

[skaternum]

CREDIT CARDS AND HOW THEY WORK.

Agree. It seems like a simple concept, but apparently most people need to be hit on a hammer and have this clearly explained to them.

stocks, CDs, 401ks, IRAs and such. They're neither scary nor confusing once you understand them.

I think this is a bit too advanced for a short high school level financial literacy program. I think she needs to stay focused on more basic info. These are kids who, for the most part, don't understand how to use a check register or balance an account or how credit cards work. I just don't see the use of explaining stocks, 401(k)s, IRAs, etc. Maybe for an "advanced" follow-on course, but not to start.

[Tinami Amori]

I am updating my working outline and am interested in your ideas on "things you wish you knew about money when you were in high school". What, if anything, would have made an impact on or difference to you at that age?

Good for you! Such education is needed!

I have little to add as far as “subjects to cover” in view of others’ posts and suggestions, except one aspect:

When teaching your students about various forms of “debt”, “loans” and “borrowing” please stress not just the fear of financial penalties and legal consequences of “not paying back”, but the moral factor of “giving back what one took”.

That it is one’s duty to make good on a contract and promise to pay.

That it does not matter that the “lender” is richer than you or has more money; you take “others’” money on a promise to pay back – PAY BACK, it’s NOT YOUR MONEY, some-one or some entity did you a FAVOR when you needed an advance - it's your duty to return what you took, plus the agreed upon fee/interest for the service provided.