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By Susan Caba
Adam Dent bent over his green, blue and yellow budget worksheets—occasionally
tapping a pencil against his braces—as he worked the numbers to
cover health insurance, a car payment, mortgage and all the other
expenses of a single man with a 6-year-old and annual gross income
of $33,500.
A daunting task for an eighth-grader, but Adam was up to the job.
“I tried to stay cheap on entertainment,” he said, perusing his
list of expenses. He splurged a little on a car, but managed to
sock away $284—more than 10 percent of his monthly take-home—in
savings.
Adam’s eighth grade class, from Hixson Middle School in Webster
Groves, took part in a four-hour personal finance exercise at
Junior Achievement’s Finance Park in Chesterfield, the culmination
of a four-week social studies and math study segment on economics.
The Junior Achievement program, begun two years ago, and initially
offered only to area fifth and eighth graders, is part of a national
trend to teach young people the practical aspects of money management.
“The need is absolutely great,” says Dan Thornton, vice president
and economic advisor at the Federal Reserve Bank of St. Louis.
“All we have to do is look at the personal bankruptcy rates in
this country, at the statistics that say the national savings
rate is negative—these point to a society that, in general, doesn’t
practice good personal financial management. I think it’s because
people don’t understand finance very well.
“Unless you get these principles at an early age, it’s easy to
be intimidated. These skills are important in order to be more
in charge of your finances and to live a successful financial
life.”
Thornton is a member of the Missouri Council on Economic Education,
which is working hard to develop a curriculum for high school
teachers of personal finance. “We are very involved in teaching
the teachers,” Thornton says. “We are having a big push to develop
some effective teacher training, so that we get people in the
classroom who understand finances.”
Rick Franke, president of Junior Achievement of Mississippi Valley
Inc., says the hands-on financial training is important because
it immerses young people into realistic life and business scenarios
that require them to solve problems.
The experience also brings principles of business, economics and
personal finance to the classroom, he adds. The students’ success
in using the principles in their own lives helps prepare them
to be successful in whatever careers or businesses they pursue
after graduation.
State educators have recognized the value of this kind of teaching.
In Missouri, the State Board of Education is requiring that all
Missouri high school students, starting with the class of 2011,
complete a one-semester course in personal finance. They would
be taught how to understand a loan agreement, research mutual
funds and interpret credit card finance charges.
“We teach kids a lot of the skills they need to earn an income,”
says Mary Suiter, director of the Center for Entrepreneurship
and Education at UMSL. “But we seldom teach them the skills to
manage the money. So then we hear these urban myths—that aren’t
so far off the truth—about a college student who says, ‘How can
I be out of money, I still have checks left?’”
Instruction
in personal finance is ever more important, says Suiter, for example
to handle changes in retirement policy. “People have to begin
taking more responsibility for their own retirement, and they
need more skills to do that.” She notes that half the people who
file for bankruptcy are under the age of 25.
The new state requirement, says both Suiter and Thornton, is just
a start. Ideally, personal finance skills should be taught starting
in elementary school. The Junior Achievement program does begin
earlier than middle school. In two years, it has proved so popular
that the elementary school program is now offered to fifth and
sixth graders, and the secondary program was expanded to cover
grades eight through twelve.
The idea is to give kids a dose of financial reality and improve
their financial literacy.
Each student is assigned a job, an income and a family identity
including marital status and number of children, then asked to
work out a budget that includes taxes, housing, utilities, savings,
food, entertainment, healthcare and several other categories of
spending. They are also provided with guidelines for spending—between
18 to 24 percent of net monthly income for housing, for example,
or 16 to 20 percent for groceries and food. After determining
a budget, the students “pay” their bills and balance their checkbooks.
Some, like Adam, took the assignment in stride. Others were unpleasantly
jolted by the numbers. Two girls sitting at one desk were working
together.
“I’m in the hole!” wailed one.
“Well, you’ll have to refigure,” said the other.
“What? You mean you can’t be in the hole?” said the first girl,
with an expression that was equal parts astonishment and anguish.
Then there was Joyanna Mooney. Wearing a flounced skirt and a
fashionable mini-backpack, Joyanna had her own pragmatic approach
to financial difficulties. Looking over her budget and noting
that her income didn’t cover her mortgage, she came up with a
quick, though less-than-logical, solution.
“I’m getting a divorce, so he can pay child support,” she announced.
“I’m poor, he’s rich—I get half his income.”
Several large St. Louis-area firms sponsor the programs at the
39,000-square-foot Dennis and Judy Jones Free Enterprise Center.
The program can accommodate about 150 students a day. In the 2005-2006
school year, 4,000 students will go through the Finance Park program
and 6,000 are scheduled to complete the Enterprise Park program.
Fifth and sixth graders “live” in the Donald O. Schnuck Enterprise
Village, a mini-municipality with 19 public and private enterprises,
where they manage their personal and business affairs to create
a successful community and finish the day by making a choice whether
to save or spend their income.
The eighth through twelfth graders work in the A.G. Edwards Finance
Park, divided into 13 business areas including a bank, retail
stores, healthcare and maintenance facilities and utility offices.
The students learn economic terms, consider the costs and benefits
of using credit, experience the benefits—and occasional loses—of
certain types of investments, and calculate the costs of Social
Security and Medicare contributions.
Adam, who was given an identity that included a child, said the
most difficult aspect for him was figuring out which health insurance
option was best to provide coverage for the child. Not only was
it expensive, he said—it was somewhat confusing because the various
options “were all sort of the same.”
In his real life, Adam said, his father encourages him to keep
a logbook of everything he spends: “I’m really surprised to see
how much I spend each month,” he added.
One of his classmates, Jeremy Hubenschmidt, said the Junior Achievement
exercise was an eye-opener. As a man with a child and a gross
income of just over $23,000, he expected to have a little more
discretionary income.
“I was going to splurge on a car,” he said, “but I couldn’t afford
it.”
With his real allowance, he added, “I just save up until I can
pay for what I want.”
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Students
from Kirkwood High School take part in a personal finance
exercise at Junior Achievement’s Finance Park. 
