Improving financial literacy among teens

WASHINGTON — In the summer of 2008, Jacob Karlin, currently a senior at Walter Johnson High School in Bethesda, Md., scored his first job: selling doughnuts on the boardwalk in Ocean City, Md. But it wasn’t long before the manager gathered the staff. “We can’t afford to keep most of you,” he said. Just like that, Karlin was unemployed.

He tried to find another job with no luck. “A lot of teens couldn’t find jobs,” Karlin recalls. “And I thought, ‘Well, that’s the recession at work right there.’”

Meanwhile, his father’s small insurance company also started losing clients, forcing the family to become more frugal. “When our parents are worrying, that transfers onto us,” Karlin says.

According to a 2011 study commissioned by Charles Schwab, 93 percent of teens ages 16 to 18 say their families have been affected by the recession. Because of that, young people’s attitudes toward money have begun to change. According to the Schwab study, high percentages say they are more grateful for what they have and are less likely to ask for things they want today than in 2007.

Coming of age in the Great Recession has made students more aware of financial concerns, but it hasn’t provided them the tools to be more financially responsible.

Educators have recognized this, and in September, Virginia became the fourth state (alongside Tennessee, Utah and Missouri) to implement a mandatory class in personal finance and economics for all incoming freshmen. And Maryland just became one of 21 states to adopt an “integrated” approach to teaching these subjects, folding them into social studies and math.

Still, it’s unclear whether these various approaches to financial education will make kids more responsible than their parents. “We need to see much more education and research to know what’s effective,” says Laura Levine, president and chief executive of Jump$tart, an umbrella organization that publishes the national standards for personal finance education. “This is a very young discipline.”

Informed choices

For a number of years, a version of personal finance and economics (PFE) has been offered as an elective in Fairfax County. Now, the Virginia Board of Education has identified 18 standards, or economic concepts, which all incoming freshmen must learn before they graduate. Some schools are teaching economics and personal finance as separate courses. Others, like Marshall, have combined them. Topics include budgeting, banking, credit, insurance, taxes, saving, investing, buying/leasing a vehicle and inheritance.

Before she took PFE, freshman Sanam Analouei, 14, had never thought about the cost of her extracurricular activities and monthly cell phone bill — not to mention her basic necessities. “I realized how much I’m worth every month,” she says. “And in a family of four, that’s a lot of money. I can’t believe my dad has to pay for all that.”

“The en masse marketing tools didn’t exist when we were young,” says Edward Grenier, president and chief executive of Junior Achievement of Greater Washing- ton, an area program that promotes financial literacy. “But today young people are bombarded.”

Grenier says financial literacy is fundamentally about making informed choices. “By the time marketers start creeping into kids’ lives, they should have a backdrop of knowledge — know the difference between a want versus a need. Waiting until high school to do this is too late.”

Program exposure

Kids’ relationship to money is complicated. You wouldn’t expect most high schoolers to consider the difference in price between a burrito from Chipotle and the cost of a homemade sandwich. But you might not expect them to become visibly sheepish or even guilty when they do. Kids are poised to take these money issues to heart, but the question is: What is the best way to prepare them?

To be sure, the new financial curriculum teaches useful skills, such as how to read a W-2 form and write a check. But some educators are concerned that this classroom work is too abstract. “When we have students sit there and try to memorize a lot of terms, they’ll think of money management as something for adults,” Grenier says. “These concepts needs to be brought to life.”

Many Virginia schools offer programs in career and technical education, or CTE, where students can earn industry certifications and as many as six college credits in fields including entrepreneurship, cybersecurity, automotive technology and cosmetology. CTE isn’t vocational training.

“It’s not a school-towork program, but you get exposed,” says Jeff Mcfarland, who runs the CTE Academy at Marshall. “If you’re studying nursing, you can see if blood bothers you,” he says.

Part of the problem

Last February, Walter Johnson High School senior Catrina Johnson was feeling stressed. In just a few months, the all-important letter from Emory University would arrive. But Johnson, 17, was almost as anxious about getting a thick letter as she was about getting a thin one.

“Emory costs $55,000 a year,” she said. “If I go there, I’ll have to do work-study or get a job to pay for school. I’m going for pre-med, and I’m not sure I can handle all that.” She has considered loans but is worried about being able to pay them back.

Of course, there’s an alternative.

“UMBC (University of Maryland Baltimore County) costs just under $20,000,” she said, sighing. “When you have your heart set on a dream school, the reality can be disappointing.”

In some ways, these kids are more realistic than the adults in their lives. The “do what you love” mantra is based on the assumption that hard work and passion reap rewards. But both Karlin and Johnson think that a flailing economy means you have to fight that much harder for what you want.

“If you want to succeed,” Karlin says, “you better make some good friends.”

Both seniors have different opinions about which option they think is better: Virginia’s standalone financial literacy and economics class or Maryland’s integrated curriculum. But looking back on their high school careers, they wish they’d had some element of financial literacy. Johnson jokes about needing a class solely dedicated to her Free Application for Federal Student Aid forms, known as the FAFSA. Karlin wishes someone had clued him in about the W-2 form.

“I opened it up, and I had no idea what to do with it,” he says, “I’m supposed to be working on it with my parents, but I still don’t really understand it.”

And this is part of the problem. Parents aren’t totally equipped to teach financial literacy to their kids. Johnson says her parents recently took a class about wills and inheritance. “And I said, ‘You guys are, like, over 50 years old! How did you not know how to do this?’”

Real world economics

Meanwhile, nonprofit organizations are ramping up their own financial literacy projects. Perhaps the largest is JA Finance Park, a 20,000square-foot complex in Fairfax run by Junior Achievement, where students role-play real-life scenarios in money management.

All Fairfax County eighth-graders receive 21 hours of in-class economics and financial literacy education and are then sent to Finance Park to put their knowledge to the test. “A kid can learn what a transportation line of a budget is,” Grenier says, “but when they’re making decisions as if it was their own family’s budget, they have that ‘aha’ moment.”

But are educators placing too much pressure on 13- and 14-year-olds to grapple with these realworld economic responsibilities, or on older adolescents by mandating that they know the ins and outs of stocks and credit? Currently, young people coming of age in the recession remain optimistic about the future, with 65 percent saying they plan to choose a career based not on economic considerations but on their passions, according to the Schwab study. Perhaps a wake-up call is necessary, but what if they, too, become cynical, overwhelmed by the challenging future that awaits them?

Laura Levine, of Jump$tart, believes the push for financial education will provide a “healthy dose of realism.” But she doesn’t see this as a risk. “If young consumers have a better understanding of how finance works, it should add to their peace of mind, rather than to their anxiety,” she says. “They might start to understand that they won’t make as much money as they thought, but they will have the knowledge and skills for their financial well-being anyway.”

It’s this practical knowledge that Karlin still seeks, just a few months shy of graduation. “You can’t prepare people enough for what it’s gonna be like without their parents,” he says and alludes to that impenetrable W-2 form. “The more help we get the better.”