According to a recent study on financial literacy, American teens rank around average compared to the rest of the world. The article posted on NBCNews.com isn’t shocking in any way, especially when you compare the average American adult’s knowledge of personal finance. Of course personal finance isn’t taught in our education system either, so that is definitely impacting our results compared to other countries.
Ironically, this summer I’m teaching a personal finance class to middle school students. It’s an enrichment class, so the curriculum combines fun activities with “real-life” activities including budgeting. I found a great resource from 21st Century Math Projects called “The Game of Life” along with materials I’ve used in the past. Let me just mention that my group of students is definitely above average when it comes to personal finance, and here are two possible reasons why:
- Socio-economic status – the demographic of my class isn’t nearly as diversified as a typical classroom, especially when it comes to income level. These are enrichment classes, and guess where you find enrichment classes? In affluent areas, that’s where!
- Demographics – my student population is made up of mostly white and Asian students, again not very diversified.
How do I know they are above average? Well, I made the mistake of allowing them to choose their own careers and a career for their spouse. Many of them chose six figure salaries for themselves and their spouses (or at least for their spouse – those stinkers!) One student even looked up the income of Bill Gates and decided to become the founder of a multi-billion dollar company! You go, girl!
Since I’m using “The Game of Life” math project, many of the choices for housing are based upon median-income earners in states other than California, yet my students’ income wouldn’t qualify for median at all. I also made the mistake of giving them a flat tax rate of 17% which isn’t high enough compared to their salaries. When they calculated their budgets based on certain choices, they ended up with skewed budgets, paying only 11% of their income towards housing, and saving 70%! Some students even rationalized that even if they made $211,000, they’d move to another state to save money on housing (we live in California, so I explained that housing here is much more expensive.)
To remedy the disillusionment of being able to save so much of their income and spend so little on basic necessities, I had to implement “Reality Checks.” For example, if they chose the profession of surgeon, they probably have a student loan they’re paying off. Student loan debt has now been added to my student’s budget if they earn over $100,000 annually. I also had them look up actual homes for sale on Zillow.com to explain that the housing cost is dependent on the city in which they live. They also had to recalculate their net income based on a 34% tax rate. Many of them now have had to adjust their budgets to reflect a more realistic version. I want them to have fun with this project, but I also don’t want them to walk away with visions of grandeur.
As much fun as it is to see their expression when they get a “change of life” card (i.e. they get married or have children, etc.), I’m enjoying the choices they’re making with their budgets which are mostly very frugal!
Do you think personal finance should be part of the education curriculum?