Start Financial Literacy Early

When did you write your first check or use your own credit card? For many, it's often after high-school graduation. And unlike other classes that help prepare you for college or life, high schools as a general rule don't offer basic financial management and investing classes.

"Young people need to leave high school with some type of skill level to start preparing themselves to curb spending and not get into debt," said Terry Egge, a community relations executive at ReliaStar Financial Corp. Egge directed the publication of a ReliaStar booklet designed to help teenagers learn about money management, called 10 "Awesome Facts about Money (and Life!)."

"It's critical for teen-agers to get a handle on finances," Egge said. "Not just to manage debt, but to learn about investing since they have all those years to earn interest."

In 1997, the Jump$tart Coalition for Personal Financial Literacy surveyed 1,509 high school seniors to rate their knowledge of personal-finance basics such as taxes, retirement, insurance, credit use, inflation and budgeting. Back then, participants averaged only 57 percent of correct answers - a failing grade by all standards.

In April, a follow-up survey was released that yielded even more dismal results. Students answered only 51.9 percent of correctly.

Some of the misconceptions seem like gimmes, like not knowing that the more you earn, the more you pay in taxes. And more than half of the students thought U.S. Savings Bonds yielded higher long-term returns than stocks.

There's a certain logic here. Since savings bonds are often gifts from grandparents, they're more recognizable to children than stocks and other securities. So it's not that far a leap to think they're the best performers. Why else would Grandma buy you one?

Why, indeed. "Money values are generally learned from your family. It's generational," Egge said. In other words, if you invest conservatively, amass great debt or regularly bounce checks, chances are that's what your children will do as adults.

It seems the entire nation has awakened to the need for financial literacy in recent years, with a massive swarm of books, Web sites, television shows and entire networks dedicated to financial media.

You'd think, as much as teen-agers watch TV, and with the plethora of investment-company advertising on the tube, that some of the most fundamental information would seep through to these young minds. Commercials featuring tennis star and teen beauty Anna Kournikova explaining P/E ratios are perfect for this demographic.

Still, financial lessons are tough to teach without hands-on lessons. In the Jump$tart Coalition survey, students who participated in a high-school stock market game scored slightly better than did students who completed a money-management course (55.1 percent vs. 51.4 percent).

"Knowledge of personal finance is not something students can develop by memorizing terms and phrases," said Lewis Mandell, dean of the University of Buffalo School of Management and researcher for both studies. "It's a skill that students learn when given the opportunity to apply concepts and practice as part of a thoughtfully designed curriculum."

"The stock market game and other economic education programs are so important, and there's currently not enough of them," Egge said, referring to the popular game in junior high and high schools where small groups of students try to achieve the highest return on a hypothetical $100,000 over a 10-week period.

"They help teach the real basics that young people must learn in this day and age and in this economy," Egge said. "They provide the basic foundation of how the economy runs in this country."

Only seven states in the United States now require high school life-skill courses on taxes, savings and investing - and that's half the number three years ago. The cutback seems shortsighted considering almost every high school teaches a health class. If teen-agers can learn to protect themselves against AIDs, they can certainly learn to protect themselves from excess debt and bankruptcy.

By Jennifer Openshaw