Refine Personal Financial Literacy During High School
Posted on October 1, 2008
This is the last in a three part series about using the Magic Money Game to teach Personal Financial Literacy. In the first two parts I discussed ways to engage elementary and middle school students in learning exercises designed to teach good money management skills. Now, we come to the hard part…high school. This is when children often think they know everything, but are able to do very little. Friends are more important than parents or teachers and peer pressure often leads to poor decision making.Financially speaking, the transition to young adulthood is much easier for those who have established the basic fundamentals of money management while still in elementary and middle school. Unfortunately, few children receive any guidance during these years. Talking about money is taboo in many households. Some parents are reluctant to discuss finances because they feel children don’t need to be concerned with money while they’re still in school. Others avoid the subject entirely because of embarrassment over the financial messes they’ve made of their own lives. And, still others know so little about money management they don’t know where to begin.
The Magic Money Game is a great way to maintain an ongoing dialogue about money that can continue with teenagers throughout high school. It’s too late to start if you wait until they leave the protective custody of parents and enter college or the workplace. Then they become gullible prey for savvy financial predators.
Unfortunately, high school is a time when students reach the age they can drop out and not continue their education. Even those who graduate leave home to attend college or enter the workplace. Whatever their choice after leaving school, knowing how to manage money, how to set financial goals, and how to create and execute plans to reach them is a vital part of building a successful life. Regrettably, today’s educational system focuses more on teaching students how to get a job and work for someone than on teaching them how to invest and secure their own futures. I recently spoke with a parent who has been playing the Magic Money Game with his children for the past couple of years. He said they now know more about money management in middle school than he knew when he graduated high school.
Children, who have been introduced to the concept of “earning” money, saving, investing, planning and accepted limitations on frivolous spending, are hungry to know more. They have a much better understanding of the importance of money management. Playing the Magic Money Game with small amounts of money is a great way to whet their appetites and get them excited about learning additional techniques when they reach high school.
The Magic Money Game treats school as a child’s job. Done correctly and consistently, it helps prepare them for the real world. Paying them to attend school rather than just doling out allowances lets them feel rewarded for their effort. Paying for vacation days and holidays is consistent with a job, but so is not paying them if they don’t attend school. A number of subtle lessons can be embedded in this part of the game.
Student’s needs are greater in high school than in elementary and middle school, so another pay increase from what they were receiving in the lower grades should accompany their promotion to high school. A pay increase should also be accompanied by an increase in responsibility. They can use part of their money to cover expenses such as school lunches, transportation, school supplies, etc. It’s imperative that once a financial responsibility has been transferred to a student that it not be subsidized. If some of the students waste their money on other things and come up short, let them do without until their next payday. This may be hard to do, but it’s an important part of the learning process. It’s also important to continue the habit of saving, but by high school, students can be introduced to additional forms of investing.
Whatever amount students are paid, they should continue to divide the money into long and short term savings and mad money. They need the freedom to be frivolous with a little of the money (That’s youth!). A recommended mix is 20% to long term savings, 40% to short term savings and 40% to mad money. Any students, who take on part time jobs, should be encouraged to pool those earnings with their school earnings and allocate them the same way.
In high school, the Magic Money Game can be used to teach all of the basic elements of personal financial literacy using practical application, not theory. It can be used to teach teenagers the difference between good debt and bad debt. They can learn to balance bank statements, keep up with credit and debit card receipts, prepare budgets, and the value of long-term saving and investing. They can learn to become more productive adults instead of prey for predatory lenders. The possibilities are endless.
The space limitations of this column make it impossible to go into all the details about how the Magic Money Game can be used to improve personal financial literacy. That’s why I suggested that the state fund a pilot program to develop a full curriculum and implement it on a trial basis. One thing is certain, young people who know how to manage their money will be more likely to become productive members of society than those who enter the workplace as financial illiterates. The question is, with a mandate from the legislature, will the educational system focus more on outcome or hypothesis; on product or process?
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It’s obvious we need to do a better job teaching people about money. I’ve done some work with Junior Achievement. They have a lot of programs in this area. Here’s their site, for anyone who is interested http://www.ja.org.