Working Financial Literacy in With the Three R's
by Tara Siegel Bernard
Most Americans aren't fluent in the language of money. Yet we're expected to make big financial decisions as early as our teensâ€”Should I take on thousands of dollars of student debt? Should I buy a car?â€”even though most of us received no formal instruction on financial matters until it was too late.
While no course in personal finance could have prevented many Americans from getting caught up in the housing bubble1, it's clear that most of us need some help, preferably starting when we're still in school. And I'm not just talking about learning to balance your checkbook. It's understanding concepts like the ...view middle of the document...
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But that hasn't stopped enterprising teachers like Mathew Frost, who teaches 11th and 12th graders American history and economics at Sunset High School in Dallas, from working the topic into his student's school day. The Texas economics curriculum carves out time for personal finance, but it doesn't test students on the material. Mr. Frost says it's just too important to ignore. So he tries to bring the lesson to life for his students by pairing them up as married couples and giving them a couple of children. The students must then create a budget based on the average income range for their neighborhood, or about $21,000 to $40,000 a year. As in the board game "Life," the students are dealt real-world circumstances. Mr. Frost has them randomly pick "chance cards" from a bag, which might tell them they need new brakes for their car, broke an arm, suffered a death in the family, or found $20.
"I try to make it as realistic as possible," he said. "We talk about building budgets, expenses, investing money," he added, as well as "how to use credit wisely, insurance and careers."
One of his students later wrote about the experience. The 11th grader, who simulated life with a wife and two children on $21,000 a year, told of balancing needs versus wants, trying to find an apartment in a safe neighborhood that fit the family budget, and the effect of an unexpected rent increase on their savings.
"I first learned that real life isn't going to be as nice as this game," he said. "I also learned that good budgeting has to be maintained throughout a person's life no matter the income, no matter the living conditions."
Research shows that this type of financial education tends to resonate with the students later.
Michael S. Gutter, an assistant professor of family financial management at the University of Florida, studied the issue in 2009, after he surveyed 15,700 students at 15 universities who came from states with different (or nonexistent) personal finance schooling requirements. The study was financed by the National Endowment for Financial Education, a nonprofit organization in Denver that provides financial education curriculums.
"College students who came from states where there was a course required were more likely to budget, were more likely to be saving, and were less likely to have maxed out their credit cards...