Personal Finance

Personal Finance: Teaching financial literacy so it sticks

April 16, 2014 

NB_PamelaYip1

Pamela Yip

EVANS CAGLAGE

Since April is Financial Literacy Month, I have been inundated with emails about efforts to raise our nation’s financial literacy, particularly among young people.

The question is: What’s the best way to teach financial literacy?

First and foremost, let me say that financial education starts at home. Parents, you are your kids’ best role models for becoming good stewards of financial resources. Your kids are watching how you handle money, and they will follow in your footsteps.

“The role of the parent is an extremely important one,” said Laura Ewing, chief executive of the Texas Council on Economic Education. “They need to model wise consumer behavior for their children by talking through how they decide what to buy. They need to ask their children to discuss what their wants and needs are and ways to earn money for these.”

Children need to distinguish between wants and needs, and which should be provided for first, she said.

“Parents can help the children set up a budget and ask guiding questions before they make purchases,” Ewing said. “Their children should keep a check-type register or accounting system of money earned/received and spent. Children and parents should set up savings accounts at an early age and put money in that account on a regular basis.”

Use each day to incorporate life’s lessons in how you manage your personal finances, said Amber Danford, vice president of marketing at Texas Trust Credit Union.

“Even if you don’t talk about financial literacy or financial education at home, you’re still teaching them about how you think what money does for you just through actions and how you talk or don’t talk about money in your household,” she said.

Schools also have a responsibility to prepare their students to enter the adult world ready to manage the salaries they will earn, use credit responsibly and save for emergencies and retirement.

“We found that what works is using an active learning method and really engaging the students through simulations, through activities, that are delivered in the classroom by a well-trained teacher,” said Mary Blanusa, vice president of government affairs and partnership projects at the Council for Economic Education.

“Teachers must know how to teach the concepts in a way that engages students. It’s not just telling them about how to write a check but helping them engage in activities that will develop their decision-making skills so that they can look at different options and make an informed decision.”

One popular format for teaching is the game show.

Texas Trust, for example, developed Money Magic Assembly, in which a stage is set up to look like a game show set. Student teams compete to earn prizes by answering questions related to the “Magic of Saving,” “Magic of Credit” and “Magic of Budgeting.”

Another tool that impressed me was the Capital One/Junior Achievement Finance Park program.

It begins with four to five weeks of intensive in-classroom financial education lessons developed by Junior Achievement.

Students then have the opportunity to put their newly learned money management skills to the test and be a grown-up for a day in a mock city. Students are assigned a fictional life situation with a fictional income so they can experience the real-life challenges of making budgeting decisions for themselves and their family.

Financial literacy is sorely needed in this country, not only for young people but their parents as well. Many don’t work off of a budget and struggle to save. Most adults haven’t reviewed their credit score or their credit report, if they even know what those are.

“Everybody has to have entry points and access points when it comes to education,” said Todd Mark, who teaches financial literacy classes and webinars at Consumer Credit Counseling Service of Greater Dallas. “Whereas budgeting may be important for one and credit scores and credit improvement is important for another, somebody else may be in the midst of a crisis and they have different needs.”

There can’t be any stigma attached to taking a financial education class.

“Anything that makes them feel bad or feel guilty or ashamed about a life event they’re going through, that’s not the goal,” said Mark, vice president of education at Consumer Credit Counseling Service. “The whole idea is moving forward positively, and it has to have future focus. There’s no controlling the past. You can only control your future.”

Pamela Yip is a personal finance columnist for the Dallas Morning News.

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