Are you smarter than a 10th-grader? At least when it comes to financial literacy? Maybe, but maybe not. Here’s a sample question from the 2012 National Financial Capability Challenge for high school students (ages 13-19). It’s designed to gauge their financial knowledge and capability.
1. Carolina has $5,000 saved from working at different jobs. She puts her money in a savings account that pays 4 percent per year in interest. How much money will be in her account at the end of the first year and at the end of the second year?
a. End of first year: $5,100; end of second year: $5,400.
b. End of first year: $5,200; end of second year: $5,400.
c. End of first year: $5,200; end of second year: $5,408.
d. I don't know.
About 80,000 U.S. students took the voluntary online challenge. The average score was a dismal 69 percent. Kentucky’s average was 67 percent.
“The low scores on these tests show us that when it comes to financial literacy, we’ve got a lot more work to do to get our students where they need to be,” U.S. Education Secretary Arne Duncan commented.
By the way, the answer to the sample question is C. But the savvy young money handler might also have asked: “Where in the world did Carolina find a savings account paying 4 percent interest these days?”
Studies have shown that young Americans have poor financial knowledge. The average 20-something reportedly carries debt of about $45,000, including credit cards, mortgages, cars and student loans.
Locally, Fayette County leaders are trying to head off this catastrophe in the making.
Junior Achievement, which labels itself the world’s largest organization educating students about workforce readiness and entrepreneurship, also offers a six-week volunteer-delivered financial literacy course for seventh-graders in public and private schools.
“One of Junior Achievement’s pillars is financial literacy. It’s sprinkled through many grades but Fayette County asked us for 2007-08 to write a program strictly for seventh-graders,” remarked Lynn Hudgens, president of Junior Achievement of the Bluegrass.
Among the many financial lessons taught are what earning an income and career planning mean and decision making, including budgeting, expenses and spending plans. It continues with banking services, including checking and savings accounts, credit and debit cards, credit scores and more.
It’s all done in a hands-on manner to appeal to young people’s sensibilities.
“Many kids don’t get this anywhere else. It’s usually not taught in school,” said Hudgens. “They usually get nothing about credit history, credit scores, debit, interest and so on. Kids need at least an overview about how and why you budget and what happens when things get out of whack and how best to rein it in,” she added.
The course allows ample time for personal financial stories to be shared.
“I tell them about the dumb things I’ve done and teach them not to repeat them. As soon as my kids hit 16, 17 years old, they got credit card offers in the mail. They go to college and are lured into getting a free T-shirt if they open a charge account. They are deluged earlier than ever,” Hudgens said.
Fifth Third Bank says it’s committed to increased financial literacy for all people, with an emphasis on the young. It offers programs free of charge to students and others.
“We know it’s necessary. If we can teach students, then maybe they won’t make the same mistakes adults fall into,” said Janet Beard, a vice president for community affairs.
The bank has four flagship programs. The Young Bankers Club for fifth-graders is coming to Fayette County this fall. Another is the Fifth Third Bank Financial Empowerment Mobile, better known as the E-Mobile. This is for adults in underserved communities who may desperately need some straight financial talk.
“We try to provide the tools and resources necessary to help people make good financial decisions,” Beard said.
Another in the series is the Teach a Child to Save program, in partnership with the American Bankers Association. It targets eighth-grade students.
“We deploy our employees to middle schools to teach financial literacy and to help students at a very young age understand the importance of saving and money management,” Beard said.
The last of Fifth Third’s financial literacy programs is a partnership with national talk radio money management guru Dave Ramsey. It’s a curriculum dedicated to high school students. About 60 public and private Kentucky high schools use the lessons.
Beard identified the most common financial mistake young people make.
“Kids live in a world of ‘see it and want it right now,’” Beard said. “There’s no discipline when it comes to saving. If they receive an allowance, a cash birthday gift or have a summer job, we want to teach them to save some of it.”
Financial literacy seems most crucial for a particular segment of the Fayette County student population that is out of the mainstream.
Ron Chi is principal of The Learning Center, a specially designed program for seventh- through twelfth-graders in Fayette County Public Schools. His students perform better in nontraditional school settings. Their learning style requires a different pace, smaller classes and more hands-on teaching. Financial instruction is part of their curriculum.
“We are an innovative program designed to reach kids who’ve not been committed to the traditional setting,” said Chi. “They fall through the cracks. There are certain obstacles that have stopped their learning and growing process.”
Chi said that many of his disadvantaged kids desperately need these financial lessons.
“It’s because of their environment, their neighborhood or an impoverished situation,” he said. “They just don’t know [about financial literacy]; they have no mentorship.”
Chi emphasized that the stakes are high for this group.
“Poor [financial] decisions can ultimately lead to unlawful decisions, crime and even mortality. The time is now,” he said passionately. “We have to change our mindset about our precious investments, and by that I mean the kids.”
Fayette County Public School administrators seem to agree that having a monetary education is just as important as earning a diploma.
“In this day and age, kids who leave high school are at a disadvantage if they aren’t financially literate to some degree,” said Mike McKenzie, director of FCPS high schools.
Jack Hayes, FCPS director of student achievement, said the state has a required educational component called practical living vocational studies. A small part of that includes financial literacy. There’s an activity some middle school students participate in called The Reality Store. Kids are randomly assigned an income figure they must live on, whether it’s $100,000 or $20,000 a year. With that, they must pay rent or a mortgage and buy food, insurance and transportation.
“It’s a way to talk to kids about financial planning and looking ahead. It’s a neat activity,” said Hayes.
Engaging in financial lessons for young people can be critical to their future success, as educators and community leaders alike have come to realize, and ultimately, many hope today’s investments in financial education will pay strong dividends not only for the students, but also in the form of better fiscal well-being for the entire community.