New efforts focus on children's financial literacy
As the winter break ends and students flood back into classrooms, there's renewed attention on getting kids financially fit. From state legislatures to credit counseling agencies, kids and money topics are popping up. "Kids are never too young to...
As the winter break ends and students flood back into classrooms, there's renewed attention on getting kids financially fit.
From state legislatures to credit counseling agencies, kids and money topics are popping up.
"Kids are never too young to start learning the value of a dollar," said Jeanette Pavini, a parent and a consumer writer with the website Coupons.com. "Schools aren't really teaching (financial subjects), so parents need to take it upon themselves."
In fact, many parents wish their kids were better-schooled in money management. Some say it should be mandatory.
In a recent survey, about 66 percent of parents who held at least $1,000 in credit card debt said kids should be required to take a class on how to use credit cards. The survey, by Consumer Education Services Inc., a Raleigh, N.C.-based debt counseling agency, found that only 5 percent of those parents had ever had such a class themselves.
Starting this year, several initiatives are under way to promote financial literacy among students and families. Here's a look:
Cash for counseling
One nonprofit credit counseling agency is dangling a financial incentive to families: an average $275 in cash. That's the amount a family of four can earn if it sticks to a three-year program of financial counseling.
ClearPoint Credit Counseling Solutions, a nonprofit counseling agency with branches in 11 states, quietly launched its program two months ago. So far, it has signed up a handful of families and is seeking more.
Its "Family Financial Fitness" program is open to families with kids in grades K-8.
To qualify, a family must include at least one child and one parent (or legal guardian). It could be a single mom with one child or a two-parent home where at least one parent participates. There's no limit on the number of kids in the family.
The program is aimed at helping parents reach their financial goals, as well as helping them teach their kids lifelong money management skills.
Managing money "is a life skill that'll be used throughout a person's life," said Keith Combs, ClearPoint's Pacific regional director in Sacramento, Calif. The program is funded through a financial literacy grant from Chase Card Services.
The family counseling can be done in person or by phone, as long as every child in the family participates in the conversations.
In the first session, Combs said, family members work with a ClearPoint counselor to establish their financial goal: sticking to a budget, eliminating credit card debt, getting on top of mortgage payments, starting college savings, etc.
Families earn $25 for enrolling, plus another $25 for each one-hour session they attend, typically once every six months for three years.
Each parent receives an additional $25 for completing "Credit Where Credit Is Due," an at-home workbook on the basics of what affects our credit scores.
In addition, each child receives a $25 incentive for enrolling in "The Centsables" program, which features six superheroes who tout good money habits. Every child receives a packet of money-themed activity books. (For more details, go to www.centsables.com .)
The cash incentives are paid by check, and Combs said there are no strings attached. "We hope they'd spend it wisely or put it away for their children so they can learn the importance of saving," he said.
Every six months, the family gets a free financial checkup, using their household bills, bank statements and income to chart their progress.
"The idea is to see where they are with the goals they've set for themselves," said Combs.
California state Sen. Ted Lieu is reviving his bill, SB 696, to require that personal finance instruction be included in junior high and high school economics classes. Lieu, a former assemblyman who had three financial literacy bills vetoed by former Gov. Arnold Schwarzenegger, said he's optimistic that the current governor, Jerry Brown, will be more receptive. Lieu said half a dozen states, including Utah, West Virginia and South Carolina, already mandate the teaching of financial literacy in schools.
Given California's budget constraints, the bill would "encourage," rather than require, schools to include instruction in personal finance topics, such as budgeting, savings, credit and identity theft.
Lieu's bill states that "illiteracy" of basic financial topics has contributed to California's and the country's economic malaise.
Said Lieu: "I still believe that if we'd had better financial literacy among our citizenry, the financial crisis of the last decade would have been mitigated."
Testing their smarts
In March, federal officials will launch their annual "Financial Capability Challenge," a contest sponsored by the U.S. Treasury and the Department of Education to test the financial know-how of the nation's high school students.
The online exam, which runs from March 12 to April 13, is open to any public, parochial or home-schooled classroom. Last year, 84,300 students nationwide took the test, scoring an average 69 percent.
California had 13 students with perfect scores, including one in teacher Chad Posner's economics classes at Mira Loma High School. Nearly half of Posner's 84 students scored in the nation's top 10 percent last year, earning national recognition and, for at least a few, some scholarship money from the Charles Schwab foundation.
Money tips for youngsters
Teaching kids about money can start at home at any age, says Coupons.
com consumer writer Jeanette Pavini. Here are some of her tips:
- Let them buy special toys or treats using their own money. "It's OK, in this economy, to not give your kids an allowance. But if you are able to, even a small amount, it can establish good habits for the kids," Pavini said.
- Kids should not be paid for everything they do. Some chores, like setting the table or making their bed, are just part of being a family. But extra tasks, like washing the family car or raking leaves, can earn extra dollars.
If an allowance isn't doable, let them help you save. If they pick less-pricey breakfast cereals, for instance, try giving them a small percentage of the grocery bill savings. K-8:
- Teach them about a savings account. "Make it fun: 'When you save this much, I'll match it 25 or 50 cents on the dollar.' It's like a pretend 401(k) match."
- With older kids, some families use the savings to buy a few shares of stock in companies their kids like, such as Nintendo or Coca-Cola.
- Enlist their help in saving strategies: less costly brands, coupon deals, etc. Let them take clothes or toys to a kids' consignment shop, where they can get a credit to purchase something "new."
"Teach them they can give themselves a raise by cutting back." Look at grocery store receipts together to see how much you saved each shopping trip, for instance. Every time, put that amount into a savings account, which can be used to help fund a family event or vacation. High school and college:
Introduce credit cards and the perils of overspending. Show them your credit card statement: what's on it, how much interest you're paying. If teens want your help buying a laptop or car, charge them interest, so they understand the concept of paying by credit. After college, Pavini said, her father loaned her $2,000 to buy a car and charged interest. "It ended up being around $300, which was a lot, but it taught me the value of a dollar."
With her son, a 21-year-old college student, Pavini is putting a set amount into his bank account monthly so he can adjust his spending to last the month. She hopes it'll increase his "awareness of money." Pavini said her son already uses "Grocery IQ" to find grocery shopping deals, Mint.com to track his spending, and sites like Restaurant.com to find online deals for dinner dates with his girlfriend.
- "Find the things that are flexible - groceries, personal care, gas, entertainment - and figure out a way to pay the least," Pavini said. "Those are the places where you can really make a difference in your budget."