Schools Need More Junior Achievement Type Programs
Posted on June 29, 2007
For years I have railed about the failure of our schools to teach budgeting, credit, investing and other money management techniques that students will need when they become adults. A few weeks ago, the volunteer organization Junior Achievement asked me to present a program on personal finance to a class of sixth graders. JA solicits members of the business community to volunteer their time to go into the schools and teach classes on economics, business and ethics with the goal of helping students gain a better understanding of the Free Enterprise System.
Due to the limited time provided by the school, I was asked to condense ten weekly hour long lessons into a single three and a half hour session. I reviewed the leader’s guide and student workbooks, and based on my experience with high school students, I thought, “This is way over the head of a sixth grader.” Boy was I surprised!
Among the lessons were ones on personal budgeting, family finances, paying bills and using credit wisely. I decided to teach these lessons using an exercise that involved eight students. I had the remainder of the class circle around us so they could watch. I appointed one student to be a banker, one to be an employer, three to be merchants and three to be employees. I provided the banker and employer with a roll of quarters each and set up each merchant to sell a different kind of snack food. One would sell his items for $.50 each, another for $1.00 each and the third for $2.00 each. I explained that the three employees would each be paid $1.00 per week by the employer.
The exercise began with each of the employees receiving four quarters from the employer representing their first week’s pay. I then guided them on three different ways to handle their money. I had the first employee deposit one of her quarters with the banker who placed it into a cup labeled savings. Then she went to the merchant selling the $.50 snack, bought one and kept her other quarter. The second employee was directed to spend her entire pay. She decided to buy one of the $1.00 items. The third employee was instructed to go to the bank, borrow a dollar and then purchase one of the $2.00 snacks. We then discussed the fact that the employee who saved and didn’t spend all of her money had less product at this point than either of the other two and the one who borrowed a dollar appeared to have the most.
Then the employees were sent back to the employer to receive another week’s pay. Again, the first employee put a quarter in savings, but with the quarter she hadn’t spent the previous week, she had enough to purchase one of the $1.00 snacks. This week, the second employee bought two of the $.50 snacks, but as the third employee started to buy one of the $1.00 snacks, I stopped him and explained that he would have to give the banker one of his quarters as a payment on the money he had borrowed the prior week.
We continued this exercise for four weeks. The first employee kept saving a quarter each week, the second spent her entire dollar and the third only had three quarters to spend because he had to keep paying the bank on his loan. At the end of a month, I had the banker add a quarter to the first employee’s savings as interest on her money. At the same time, I him add a quarter to what the third employee amount due representing interest the bank charged on his loan. Then we compared the value of what each employee had.
The first, who appeared to have the least after the first week, had product and money totaling $4.25. The second employee, who spent her entire earnings each week, had been able to purchase product totaling $4.00, but had no money. The third employee who appeared to have the most in the beginning ended up with only $3.75 in product and money when the balance of his debt was subtracted. I asked the class if they could see the difference between the effects of saving versus borrowing. Heads nodded all around.
Then I asked if they believed it was possible to drive a Chevrolet or a Cadillac for the same money. “No way!” several responded. I had them to join me at the front of the room where I used the overhead projector to display a chart from page 33 of my book Weekend Millionaire Mindset. The chart showed an amortization schedule of a sixty month loan to purchase a $22,000 Chevrolet beside an investment account in which the same payment amount was deposited for sixty months. At the end of five years, both had paid the same amount from their paycheck, but the one who borrowed money had a five year old Chevrolet and no money while the one who saved had over $34,000 and could pay cash for a new Cadillac. “Wow!” the kids exclaimed. One little girl even came up to me and said, “Mr. Summey, I’m going to go home and tell my mom and dad about this.”
Here’s a tip! The discussion that followed this exercise proved to me that these sixth graders could be taught personal economics. Not only had the lesson registered with the class, but they were hungry for more such education. Since our schools don’t teach consumer economics, I think we should applaud Junior Achievement for its effort and give it both our financial and volunteer help. Check them out!
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