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Need for financial education is crucial for our children

A few weeks back, I asked one of our baby sitters what she’s doing with all of the money she’s being paid.

”Right now,” she said, ”I’m sticking it in a jar.” When you’re 15, that’s not a market timing call, that’s financial management.

By Charles A. Jaffe, Boston Globe

And in this country, where the average credit card debt is rising faster than high tide in a hurricane, a teenager putting money into a jar rather than blowing it on worthless trinkets during the next trip to the mall passes for a savvy saver.

That shouldn’t be the case.

According to the Council on Economic Education, 39 states currently have some educational requirement to teach personal finance to students. But of those states, most do not have a consistent curriculum that is applied across the board [Oregon being the notable exception], and financial education in this country remains a low priority.

With April designated as National Financial Literacy Month [think of the themed parties you can have to celebrate!], it’s a good time to re-examine the priority personal financial education gets in America.

A good gauge of the low status of financial education is on display in Wisconsin, where a bill was recently floated that would require students to have a half-credit in personal finance education – along with their math, social studies, English and physical education credits – to graduate.

The bill is fairly consistent with proposals passed by states that have mandated some level of financial education. If passed, it will take effect with the graduating class of 2008.

While legislators seem to agree on the bill, educators aren’t particularly high on it. The Wisconsin Association of School Boards has come out against it, not on the grounds that personal finance isn’t crucial learning, but because it’s an issue for local school districts to decide on. The state’s Department of Public Instruction wants to solve the problem without adding a requirement to the curriculum.

An official there noted that 91 of Wisconsin’s 426 public school districts already require a financial literacy course, that 121 more offer it as an elective and that 77 school districts offer ”some financial instruction” as part of other courses.

That sounds good until you learn that a survey by the JumpStart Coalition for Personal Financial Literacy showed that, on average, seniors in Wisconsin high schools could correctly answer just 59 percent of the questions on a test about credit cards, taxes and spending and saving issues.

That’s a failing grade in my book. If it were my kid bringing home an F on the report card, there’d be some hell to pay and some mandatory tutoring involved until things improve.

If it’s my school district, mandatory educational requirements designed to improve that result would seem to be the right move. Worse yet, that Wisconsin score was significantly better than the national average. According to the JumpStart group, the average score of the 4,000-plus seniors who took its 31-question test was a 50.2. In other words, this is a problem everywhere.

Educators against mandatory personal finance education – not just in Wisconsin but nationally – have one particularly good argument against it, namely trying to decide what current requirement gets eased to teach kids about money.

Every required subject would have its purpose and its supporters. But there is one reason why personal finance and financial literacy are so important: Every student will handle money in their lifetime.

They won’t all study sciences or use their math education for more than balancing a checkbook – assuming they ever learn to balance a checkbook – but they will all be consumers, shoppers, spenders, and savers.

And they will all pay taxes.

”Favoring education in economics over personal finance is putting the cart before the horse, and I’m a big believer in the need for economics education,” says Paul Richard, executive director of the Institute for Consumer Financial Education. ”But I think we have to find a way to teach children life skills, and that means teaching personal finance, and it’s just not being done consistently in the schools today.”

If the educational community sticks to its guns and its established curriculum, the only choice for parents trying to raise money-smart kids is to do most of the education through home schooling. For some people, this will mean acquiring some money management skills on their own so that they can teach their children, because if you’ve never balanced a checkbook or budgeted for expenses or comparison shopped to hold costs down, you may not be able to model good behavior for the kids.

If you want financial education taught in schools and your educators balk, you may have to go to community banks and other organizations for help in developing a curriculum, while also rounding up parent volunteers with money skills to pitch in as guest teachers.

That sounds hard, but it’s not as difficult as paying off the major credit debt that statistics show most teenagers will accumulate before they wise up about money. Richard sits on a task force with a California credit union executive whose branch is on a college campus. Recently, that executive told of coming in on a Monday morning to more than 200 overdrafts, all from students who presumably never learned to handle a checking account properly.

Clearly, in this day and age, no child should graduate into the real world without being able to manage a checking account – including knowing the rules for overdraft – without understanding how credit works, without an understanding of how bad financial behaviors can show up on a credit report and hurt a student’s future job prospects, and without some knowledge of the benefits of saving early for long-term goals. It’s a shame that, without a change in attitude among educators and parents, so many children will matriculate without those basic skills.

Charles A. Jaffe is a senior columnist at CBS Marketwatch. He can be reached at [email protected] or at P.O. Box 70, Cohasset, MA 02025-0070.

http://www.boston.com/dailyglobe2/107/business/Need_for_financial_education+.shtml

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