Teach Your High Schoolers about Money NOW!

When Will They Ever Learn?

The financial literacy scores of the 2008 high school graduating class is actually lower than it was for seniors in 2006, 2004, 2002, and 2000. That's the key finding from a large biennial national survey released today by The Jump$tart Coalition for Personal Financial Literacy. In past years, the students had correctly answered over 50% of the questions, but this year, their average score was 48.3%.

Take a look at some of the specific findings:

• Only 48% knew that cardholders who only pay the minimum amount on their credit card bills  will pay more in interest that people who pay their balance in full.

• Only 40% knew they could lose their health insurance if their parents become unemployed.

• Only 36% think a house financed with a fixed-rate mortgage is a good hedge against a sudden increase in inflation, compared with 45 percent in 2006.

The extent to which they don't know the basics really shocked me. They totally flunked! Here are two fairly typical questions from the survey, which you can see in full, with the correct answers:

1. "Sara and Joshua just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?”

Percent
4.7                 a.) A checking account
16.8               b.) Stocks.*
37.3               c.) US savings bond
41.3               d.) A savings account

2. "If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to Federal law?"

Percent
17.3             a.) $500
16.9             b.) $1000
52.8             c.) Nothing
13.0             d.) $50*

Yikes! Kids really don't know the basics. If yours don't, now is the time to get on the case! Of course, setting a good example is the most important thing you can do, but if you haven't been talking with your children about money, it's high time that you did, no matter what their age. They love the stuff – at least all the kids in my life do – so getting into conversations about it should be no problem, assuming you carefully pick your moment.

The time to discuss how credit cards can end up costing a lot more than you think is not when your teen is in a snit because you won't spring for the trendy [ fill in the blank ] at the mall. Spend your "money time" together away from such temptations. For starters, it'd be great if you'd pull out some of your credit card bills, and explain what you did right . . . and wrong. Ditto with your savings accounts. Talk about the consequences you have had to face for some of your spending bloopers and less-than-ideal money management. (Kids love those stories.)

If you're not comfortable with that, how about looking at Jump$start's test together? It'll be real low-key, because the correct answers will be clearly identified. Whether you discuss them or not, your teen will be able to see what other high schoolers know and don't know. (It's nice when peer pressure can work for you, isn't it?)

If your teen is more likely to pay attention to something on a Web site, consider sharing "Sense & Dollars" with them. It's designed with a young, hip audience in mind, and offers lots of real-life examples. You don't have to mention that it was created by Maryland Public Television, do you?

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Comments

[DianeT]

I think the bigger problem is that far too many PARENTS don't know the answers to all those questions, so how can they educate their kids ?

The time to teach kids about money is long before they get to high school. It should start when they are much younger, EARNING an allowance and parents NOT giving in and forking over more money when the kid blows his allowance on some silly thing or other. Granted, managing credit can be a LOT trickier, but the basis of managing plain old money should be set long before they get their hands on plastic funny money. Too many parents can't control their credit.. and by the time their kids are teens, they've already seen that plastic buys you all the toys NOW - not when you AFFORD them.