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Personal Finance Notebook: Money lessons high school kids need

Posted on: April 22, 2008
Source: Sacramento Bee (Claudia Buck - cbuck@sacbee.com)


Students at Luther Burbank High School who completed a seven-month after-school financial program join their teachers at a graduation ceremony. Bryan Patrick / bpatrick@sacbee.com

For the 15 high school girls clasping hands in celebration, their graduation ceremony at Luther Burbank last week was a rite of passage.

But it wasn't based on passing final exams or worrying about grade-point average. For these young women, who've spent the last seven months in a weekly after-school class on personal finance, it was about how to write a check, shopping smarter, getting the best rates on car insurance and avoiding predatory lenders.

Oshualique McDaniel, a 15-year-old freshman, summed up what she learned: "Save your money in a bank and for things like scholarships. It'll help me in my future, so I'll have money saved and not just spend it like crazy."

At a time when the mortgage meltdown has knocked a good number of adults to their financial knees, McDaniel and her classmates are benefiting from a renewed urgency nationwide to get young people financially fit before they leave high school.

Billionaire investor Warren Buffett is doing voice-overs for kids' cartoons on investing. NFL players are showing up at high school campuses to tackle money concepts with a "Financial Football" video game. Web sites and books aimed at teens are proliferating.

Even Federal Reserve Chairman Ben Bernanke took a stand. Speaking in Washington, D.C., earlier this month, Bernanke said it's "critically important" that young people "become financially literate at an early age so they are better prepared to … navigate an increasingly complex financial marketplace."

They've got a long way to go. According to a nationwide survey released recently by the JumpStart Coalition for Personal Financial Literacy, 6,860 high school seniors correctly answered only 48.3 percent of questions on financial concepts. In California, the number was even lower: 44 percent.

Jack O'Connell, state superintendent of public instruction, said the current economic crisis has been "a wakeup call" emphasizing the need to do more.

"Students in college are handed credit card applications almost the moment they walk onto campus," O'Connell said. " … If we miss the opportunity to teach them about having good credit, saving responsibly and making smart financial decisions before they leave the K-12 system, it may be too late to protect their financial future."

O'Connell, along with dozens of personal finance experts from media, business, politics and academia, will participate in the free California Summit on Financial Literacy from 10 a.m. to 4 p.m. Wednesday at the Sacramento Convention Center. The summit is aimed at a wide cross-section of the community.(For more information, go to www.calcpa.org/summit .)

Like 17 states nationwide, California requires high school students to complete one semester of economics, usually in the senior year. But personal finance – how-tos on budgeting, saving, insurance and the like – isn't mandated. Only seven states require it for graduation.

At Sheldon High School, economics teacher Jacob Reed uses his "Real World" project to show his 34 seniors what it will cost to live on their own. Students must write a résumé, fill out a job application (for employment requiring only a high school diploma) and hypothetically rent an apartment, buy a car, purchase auto insurance and prepare a budget to cover food, clothing and entertainment. Oh, and file for taxes.

What they discover, Reed said, is this: "If they want to live the way they're used to – going out for dinner, going to movies, wearing nice clothes, living with cable and Internet, driving all over the place – they'll need to cut back."


Instructor Tiffany Miller talks to her students in the Luther Burbank program. The program was called particularly important for teens in low-income areas who may face predatory lending practices. Bryan Patrick / bpatrick@sacbee.com

Over in the regular economics class at Luther Burbank, David White's students spend part of their semester playing "The Stock Market Game." Student teams compete in investing a hypothetical $100,000 in companies they research and select.

Not all economists laud such investing games. Timothy Taylor, an economist at Macalester College in St. Paul, Minn., who trains high school teachers in how to teach economics, says it's a big mistake.

"That's really not useful for the average high school student to know," said Taylor, who recommends more "how-tos" on financial basics: insurance, loans, budgeting and borrowing.

But White says if done correctly, the game wakes students up to what's in the news: "When oil was going up, they'd be in my classroom: 'Hey, Mr. White, the price of oil is $105 a barrel. That's going to affect the airlines.' They notice the correlation."

One of White's students, 17-year-old Thom Scott, said his teammates started with 100 shares in five companies. So far, Scott says his team's portfolio has lost about 11 percent. And he's learned one lesson: "If I had to make these decisions with my own money, I wouldn't do it. It's too big of a gamble."

Parents and teachers say more financial literacy education is needed. Robin Fox, whose two college-age kids graduated from Oakridge High School in El Dorado Hills, said too many students leave high school knowing nothing about everyday finances.

"In this day and age, the lack of that kind of knowledge can be harmful, especially if kids don't have a mentor or parent to show them," she said.

The need for financial literacy is particularly acute among teens in low-income communities, said Clarence Williams, president of the nonprofit California Capital Financial Development Corp., which created Luther Burbank's after-school curriculum of 36 one-hour sessions.


Student Cassandra Michelle Thurman, center, receives her diploma from instructor Melinda Watts. Thurman was one of 15 students who completed the program of 36 one-hour lessons. Bryan Patrick / bpatrick@sacbee.com

"It's a different financial system in lower-income communities," said Williams. "There are predatory forces, everything from check cashing and payday loans to rent-to-loan agreements where people end up paying three times the price of a TV."

He and others contend that if kids aren't getting these lessons at home, schools and after-school programs can fill the gap.

That's why groups like Cal-CPA send volunteer certified public accountants out to hundreds of high school classrooms statewide every year, explaining concepts like credit card debt, 401(k)s and investing.

Bruce Kajiwara, a Sacramento CPA and certified financial planner, who's in classrooms this week at Sacramento's Burbank and West Campus, says he hopes one message sticks: "I tell them, they've got one huge advantage over me, their teachers, their parents: Time. So many clients in their 50s come in telling me they should have started saving and investing sooner. For these students: sooner is now."

Some appear to be taking that message to heart. For 11th-grader NaKiesha Nolan, the Luther Burbank class "opened my eyes to what's going to happen the day I turn 18," she wrote in a class evaluation last week. "Bills, rent, insurance … now I'm prepared."