How to educate kids on money matters

When Will Langella began teaching personal finance to junior-high students, he was surprised at how many of them thought borrowing money was the best way to handle unexpected expenses.

"They thought it was a good option because it was easy," said Langella, an accountant and Junior Achievement volunteer who recently finished teaching a personal finance class at a middle school in Fresno, Calif.  Once he explained the ins and outs of credit — home mortgages, car loans, etc. — it was the students' turn to be surprised.

"Some of them were shocked. They didn't realize how much you paid to use credit," he said.

Experts say Langella’s experience shows why students need financial knowledge. At a time when kids are just starting to learn the facts of life, they also should be learning about their finances. Instead of a simple allowance, many kids are being given credit cards by their parents.

A recent poll of teenagers in the Junior Achievement program found that more than 11 percent are carrying credit cards, and some of them are as young as 13 or 14 years old. In addition, three out of 10 teenagers have checking accounts, many linked to ATMs through debit cards.

An ‘F’ in finance
“Financial awareness is now key at an earlier age because young kids are becoming more aware of consumer issues, and marketers are responding to them,” said Brent Neiser, director of collaborative programs at the National Endowment of Financial Education (NEFE) in Denver. “Cell phones for 8-year-olds is a perfect example. Companies are trying to capture market share and brand affinity at an earlier age than ever before. That results in young kids making spending decisions earlier, but they’re still not learning how to save for the long term.”

And it certainly doesn’t help when they see the typical financial skills of their elders: The U.S. savings rate is at an all-time low, bankruptcies are at near-record highs and the average household has $9,000 in credit-card debt.

The JumpStart Coalition for Personal Financial Literacy does an annual personal finance survey of high-school seniors, and the results have been hardly stellar. The average score on the 2004 survey was 52.3 percent — a failing grade.

“The general consensus is that students don’t know enough and they aren’t learning enough about it either in school or at home,” said JumpStart’s executive director Laura Levine. “The majority of schools don’t have personal finance classes, and many parents find their own finances is a difficult subject to talk about.”

Yet, Levine said, the topic is important, because ignorance can have such dire consequences. Bankruptcy and bad credit can take years to overcome, and those with insufficient savings may face a grim retirement. “Today’s young people are faced with more choices and more marketing pressure on them.”

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