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When is the right time to start financial education?

Pam Bailey, NeighborWorks blogger | 10/22/2014 12:20:33 PM

According to a recent study by Northwestern Mutual Life Insurance, Americans would rather talk about sex than about money. And an earlier survey by Wells Fargo found that for most people, personal finance is a thornier topic than religion or politics. It’s not surprising, then, that the T. Rowe Group found in its own research that nearly three-quarters of parents admitted to feeling “reluctant” to discuss financial topics with their children. And yet, money has ranked as Americans’ No. 1 source of stress for six years running, according to the American Psychological Assn. What gives?

Other than learning how to count money in school, I don’t remember much instruction about budgeting and costs vs. consequences. And when my father was laid off during secondary school, my parents tried to shield us kids from worry as much as possible. My siblings and I were only told that we’d be “tightening our belts” for a little bit – not what each of us could do to contribute to the family’s well-being.

At risk of dating myself, I’ll admit that that was quite a long time ago. But apparently, for many, not much has changed. When interviewing several young adults for my previous blog post on student loans, a common theme ran through them all: “I wish I had gotten some practical education long before I needed a loan!” And some NeighborWorks network members are responding to that need.
“We’ve taught financial capability for a long time as part of our homeownership division,” says Jenna Johnson, marketing and development director for Family Services in North Charleston, SC. “But for years, we kept hearing from the adults we see that they wished they had learned this or that when they were younger, like in high school or middle school even.”

One approach: Money Rocks

Students celebrate at the last Money Rocks conference
Volunteers kick off the April 2014 Money Rocks.
So that’s what Family Services did. This year it sponsored its fourth annual Money Rocks, a youth financial literacy conference targeting schools in a tri-county area. Funded by a combination of individual donations from events and contributions from banks and other corporations, the event attracted about 100 students in 2011, and grew to nearly 500 this year. The day begins with a community-resource fair, including hiring companies, organizations looking for volunteers, banks offering financial services, etc. The students then are split into three age groups: 12-14, 15-17 and 18-21. Last year, a supplementary workshop was added for parents.

The focus is on educational entertainment for the younger students, explains Johnson. The 12- to 14-year-olds play a stock market game and the 15- to 17-year-olds participate in a “real-life” simulation in which they have to live off of a budget. The oldest students discuss college financial aid, and is expanding it to include student loan debt.

“Two of the lessons we’ve learned is that it’s important to work with the schools early, and to know your audience,” says Johnson. “That has meant that we take a holistic approach, offering more than just strict financial education – buying a car, resume skills, social media etiquette, etc.”

Another approach: Project ASPIRE

Neighborworks-image-4138In Texas, NeighborWorks Waco has gone a step further with its Project ASPIRE, a financial-literacy program integrated into local schools.

“Building stronger neighborhoods is our mission. To be a good renter or homeowner, you need to have financial stability,” explains Roy Nash, CEO, who got the idea for the project after participating in a NeighborWorks America peer-to-peer visit with West Elmwood Housing Development Corp. in Providence, RI.  “A lot of these traits are formed at an early age. Elementary school is not too young to start to learn about money and the way the system works in this country.”

Nash relies on the AmeriCorps VISTA program for curriculum development, as well as the operation of Project ASPIRE. Kate Casey, this year’s VISTA at NeighborWorks Waco, says the project originally started in the eighth grade, but the largest number of participating classes in 2014 are fifth graders. “The earlier the better,” says Casey. “This year, we’ve had a little more than 100 students participating, and we’re expanding this month to a fourth school that will bring the total to 200. Our long-term goal is to extend from third grade through the freshman year of high school, supplemented by a ‘life after high school’ class just before graduation, so that we send them out to the world with a solid foundation of financial literacy.”

Casey, who studied economics in university and “jumped” at the chance to work on ASPIRE, says she’s been pleasantly surprised at how interested the younger students are. “The key is to focus on money, not math,” she laughs, adding that it’s important to keep the classes small (no more than 15 students), and to nurture personal, mentoring relationships with them. “Most kids aren’t interested in ‘math.’ But there are tons of ads out there trying to convince them to spend their money. We take them on field trips to the local banks, we run a holiday store that dispenses ‘NeighborWorks dollars’ they can redeem for gifts, etc. In a fun way, we teach them about savings, banking, credit, loans, and tie it all into reading, because Waco also has a terrible literacy deficit.”

This year, Casey is introducing a pre- and post-program test to measure changes in learning over  the six- to 10-week duration of the classes, and hopes to see the 3-4 point gap between boys’ and girls’ scores close.

But does it work?

Measurement is important.  A new paper by three business school professors in Management Science presents a discouraging assessment of attempts to better teach people how to handle money issues. The authors’ conclusions are clear: Those who receive financial education do not perform noticeably better when it comes to saving more, for example, or avoiding ruinous debt. Even more depressing, the results of efforts aimed at low-income people are particularly weak. Those who need the help most seem to benefit the least.

So what can we do about it? Professor John G. Lynch Jr. of the University of Colorado, one of the authors of the study, advocates “just-in-time education.” Because learning decays quickly, it’s best to provide assistance just before a decision is made. High school seniors, for example, should receive help when first looking for financial aid and considering student loans.
“That’s exactly why we began Money Rocks,” agrees Johnson. “We don’t teach 12- to 14-year-olds about financial aid and student loans, for example. We try to provide curricula that is applicable and engaging at that moment in time, but also leaves room to grow. I believe that with the right approach, personal money management should be a requirement in high school. If all high schools were required to do a one-day Money Rocks course, that would be a start.”

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