DHP Financial Post - Financial Education in the Schools
There needs to be an across the board financial education for kids from k-12 in this country. Perhaps that's the best way to keep more people out of debt and credit problems as oppossed to learning the hard way as many of us have. Too many parents don't talk to their kids about money let alone sex, so we must focus our attention on the schools to do what many parents either are not willing or are unable to do - teach kids about money and finance.
Fiscal education pays off
Congress joins call for boosting children's financial literacy
By Allen Kenney, Medill News Service
Last Update: 6:42 PM ET Oct. 29, 2003
WASHINGTON (CBS.MW) -- Adults who manifest shoddy personal finance behaviors might have exhibited more fiscal control had they learned better habits when they were young, according to leading education experts. Consequently, government officials are exploring new ways to bolster financial education in America's schools.
"Enhancing elementary and secondary education in economics provides the grounding necessary for a lifetime of learning and financial decision-making," Bob Duvall, president and CEO of the National Council on Economic Education, told a congressional subcommittee this week.
Poor credit-card usage, high debt levels and low savings rates have raised the concerns of financial experts and legislators alike.
"These grown-up financial problems have everything to do with how we prepare children for economics adulthood and why we need to be talking about financial literacy in schools here today," said Dan Iannicola Jr., deputy assistant secretary for financial education in the Treasury department, in testimony before the House Subcommittee on Education Reform.
"The downstream, adult problems of rising bankruptcy rates, low savings rates and frequent misuse of credit can all be traced upstream to how our schools fail to adequately prepare children for their financial futures," he said.
Even Federal Reserve Chairman Alan Greenspan has weighed in on the issue, saying that mastery of basic financial skills "underscores the need to begin the learning process as early as possible."
More than 1 million Americans filed for bankruptcy in 2002. CardWeb.com, a credit-card information Web site, found that the average American family carried nearly $9,000 in credit-card debt by the end of 2002, up more than 35 percent from 1997 and nearly 175 percent from 1992.
Improved financial literacy is one the planks in the platform of the No Child Left Behind Act, a staple of the White House's education program. NCLB provides incentives for financial education programs, including funding for local school districts and nonprofit groups to teach financial literacy.
In September, Rep. Judy Biggert, R-Ill., introduced legislation in the House that would create a government panel to study and promote financial education in the United States. Duvall says moves like Biggert's are steps in the right direction.
"Establishing such a commission would give us all -- policymakers, advocates and educators -- a clear picture of what is being done, what works, what doesn't and what needs to be done to ensure that all our students are well-educated in economics and enter the 'real world' financially literate," he said.
More than piggybanks
Financial education proponents claim that the increasing complexity of the financial world makes teaching children the basics of money even more important today.
"When we were kids, a child's financial portfolio consisted of an allowance, earnings from mowing lawns and babysitting and a piggy bank," Iannicola said. "Today's young people must be familiar with things like credit cards, ATMs and variable APRs."
Students' financial knowledge actually appears to be declining. Sixty-eight percent of graduating high school seniors surveyed by the JumpStart Coalition for Personal Financial Literacy failed a personal finance test in 2002, compared with 44 percent who failed in 1997.
Iannicola advocates mixing financial education into pre-existing curricula, as opposed to mandating stand-alone finance classes in schools. He says this approach is the most cost effective for school districts and does not force them to cut back on other subjects.
Teachers, for example, could use making change for a dollar as an example when teaching first graders about addition and subtraction.
A study conducted by Stanford University economists in 1997 found a positive correlation between states with financial education programs in schools and high levels of net worth and savings. Federal Reserve research shows that former financial education students are more likely to participate at high rates in their 401(k) plans and make larger contributions.
College students 'at risk' too
Angela Lyons, an assistant professor of economics at the University of Illinois at Urbana-Champaign and co-director of the University of Illinois Center for Economic Education, has tried to examine financial literacy at the college level. Her research has identified a growing number of what she calls "financially at risk" students in both Illinois and across the country.
"These at-risk groups have specific needs for financial education programs," Lyons said. "Addressing these needs insures that they are not at a financial disadvantage after graduation and are able to make informed financial decisions."
Lyons says those at risk are more likely to be financially independent and recipients of need-based aid. They also tend to work more than other students and are more likely to drop out or take reduced course loads.
Lyons suggests tailor-made education programs for students most likely to be at risk are a good way to attack the problem. Iannicola agrees.
"The education you give to kids is different for kids whose parents have brokers than those whose parents have case workers," he said.
Lyons also indicated that parents could do more to teach their children about their finances by talking more with them.
"We talk to our children about 'sex, drugs and rock 'n roll,' but we don't talk to them about money," she lamented.
In the end, though, Iannicola argues that financial literacy is "much more of an awareness issue than an education issue." He says that America's youth simply need to be told about the resources available to them.
"Kids need to see that there is, literally and figuratively, a payoff."
Allen Kenney is a reporter for Medill News Service in Washington.
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It ain't how much you know, it's what you do with what you do know!