By Kelley Holland
You know your teens can be illogical, unreasonable, and occasionally malodorous, but isn’t it at least reasonable to assume they know the basics about money?
Apparently not. Surveys show that teens are failing at financial literacy. And while financial institutions like PricewaterhouseCoopers are investing significant resources in changing that, the problem is persisting.
From those in a position to know best — personal finance and business education teachers — here are some of the most gaping holes in teens’ money knowledge.
1. Bank account basics
“My students had no idea how to figure out online banking,” said Keith Newman, a personal finance teacher at Bodine High School for International Affairs in Philadelphia. Part of the problem, he said, is that there are no high-quality, up-to-date teaching tools to help students learn about bank accounts, so he is hoping to take his students to a bank to open accounts and learn banking nuts and bolts.
Students’ “parents just hand them money, and they just burn through it,” said Newman. His students are far from wealthy, but he says many of their parents are wary of financial institutions and prefer to do everything with cash. “I have students who have fathers who take care of their daughters very well, giving them $15 or $20 every day.”
Kim Zocco, a business education teacher at Archbishop Edward A. McCarthy HIgh School in Southwest Ranches, Fla., has many students from families at the other end of the economic spectrum, but says that just creates another problem. “Their parents take care of everything for them. They are oblivious because they can just have and get,” she said.
3. The power of compounding
Maggie Wohltmann, a business education teacher at Teaneck High School in New Jersey, likes to explain to her students that they all have the potential to be millionaires someday — but the odds of reaching that goal increase sharply if they save early. She demonstrates what can happen if someone puts away a reasonable amount every month. Her goal, she said, is “getting across that it’s the 22-to-32 age range, before you have the house or the family, that’s when it’s key to really invest the money.”
4. Keeping credit reports clean
Many teens are stunned to learn that financial behavior over an extended period will affect their ability to borrow money or even obtain a credit card. “It’s really eye opening,” said Wohltmann. “Ten years is a long time to these students.”
5. Rainy day savings
Whether teens come from affluent households or more modest ones, the idea of putting money away in case something happens is often novel, teachers say. “Savings shock them,” said Newman.
Zocco and Wohltmann drive home the importance of a financial cushion with a role-playing exercise. They pair up their students, have them form “households,” and assign them real world jobs. The students have to live within their means and deal with financial setbacks the teachers dole out: Their car may break down, they may suddenly have twins, and so on.
“In the end, they’re pretty shocked at what they’re left with” after taxes, and “what they need to save,” said Zocco.There is another life lesson as well. The teens see first hand that money issues can be really, really stressful. “The students bicker in their households like couples do — and these are pretend things,” said Wohltmann.