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Investing in Student Minds; State Pushes for Financial Education in All Schools

Posted on: Sunday, 5 February 2006, 15:00 CST

By PAUL GORES

In Dan Prothero's class at Wauwatosa West High School this semester, two dozen students are learning what might be considered fundamental life skills.

Among the topics: how credit works, how to start a checking account, how to buy a house, how to buy a car, how to prepare tax forms, how the stock market operates and what the Federal Reserve does.

Ryan Hamm says he is taking to heart what's being taught in Prothero's business and personal finance class. Hamm, a 17-year-old junior, thinks other students are, too.

"In a lot of other classes, they just get it done and forget about it after the test," Hamm said. "But this is something they realize they can use their entire life."

If a new effort by the state Department of Public Instruction takes hold, a lot more Wisconsin students will develop the kind of basic economic know-how being dispensed in Prothero's classroom.

And they won't have to cram for financial life beyond graduation with just a single course in high school.

A task force assembled by state schools Superintendent Elizabeth Burmaster has crafted, for the first time, standards for what students should be learning about money from elementary grades through high school. Burmaster is convinced that, although it will be up to individual school districts to decide whether to adopt and implement the standards after they're presented this spring, they will set the stage for badly needed "financial literacy" among the next generation of Wisconsin consumers.

"To have business literacy and personal financial literacy is so important in the world today that we need to start emphasizing this in elementary school," Burmaster said. "And it's not just for those kids who eventually want to go into business. It's important for every single child."

Starting them young

The model standards, which are in draft form now but should be sent in final form to school districts in May, call for pupils to begin learning how to responsibly handle money as early as kindergarten, and then continue learning about it throughout their school years.

Under the plan, economic lessons would be blended into course work (for instance, an English teacher might assign students to write about something they are trying to save money to buy) often enough that by the time children are in fourth grade, they can define a budget and know the difference between cash, checks and credit cards. By 12th grade, they'll be expected to know among many other consumer skills how to shop for insurance and be able to calculate the costs of debt.

Although some school districts, such as Wauwatosa's, already consider economic education important enough to require a semester of it in high school, many are lacking any program to help kids understand money.

A DPI study several years ago found that of 426 public school districts in Wisconsin, 91 required students to take a financial literacy course; 121 offered it as an elective; and 77 offered some financial instruction as part of other courses.

Those numbers probably have increased since then, as there has been more concern and publicity nationally about how unprepared students are to deal with financial issues when they get out of high school.

There certainly has been no shortage of news about people in trouble or headed toward trouble over money:

-- Wisconsin set a record for bankruptcy filings in 2005, as did the rest of the country.

-- People are saving less money. Last Monday, the U.S. Department of Commerce reported that the savings rate for American households slipped into negative territory last year, -0.5%. That means consumers spent all of their after-tax income, then borrowed or tapped money they previously had saved. The savings rate was 1.8% in 2004. The average savings rate between 1950 and 2000 was 8%.

-- The average outstanding balance on credit cards held by college undergraduates in 2004 was $2,169, according to the college loan provider Nellie Mae. Only 21% of undergrad card holders pay off their entire monthly balance.

-- A 2004 survey by the Jump$tart Coalition for Personal Financial Literacy revealed that, on average, Wisconsin 12th- graders could correctly answer only 55% of the questions on an exam about credit cards, taxes and other money matters slightly better than the national average of 52%.

Drag on national economy

The lack of financial knowledge by young people isn't a concern only in Wisconsin. For the last several years, the problem has been on the radar of public officials and businesses here and around the nation as a looming drag on economic growth. Just last week, the National Association of School Boards said it was launching a commission on financial literacy and investor education.

Both Gov. Jim Doyle and his predecessor, former Gov. Scott McCallum, appointed panels to look at the problem and find potential solutions.

Since 2001, the state Department of Financial Institutions and industry sponsors have been hosting the Wisconsin Institute of Financial and Economic Education, a summer program in which teachers learn about economic issues from experts. It has been well- attended, and the hope is that knowledge absorbed by teachers who participate will be passed along to their students.

Most agree something needs to be done to improve financial literacy, and DPI's development of standards that schools can incorporate into their curriculum is "a good first step," said Jim Morgan, a Wisconsin Manufacturers & Commerce executive who was co-chairman of Burmaster's task force.

"It's becoming more and more critical," Morgan said. "You see the headlines every day on bankruptcies and how much money people have in the bank and how they have failed to plan for their retirement."

A student in Prothero's business and personal finance class in Wauwatosa, senior Morgan Smith, 18, said the sooner in their school years that students begin learning how to be responsible with the money, the better.

"The generation before us didn't have these types of classes and maybe that's why a lot of them are in debt right now," Smith said.

While most agree students need personal finance training, there is debate about whether it should be required by the state for public schools.

State Sen. Luther Olsen, a Republican from Ripon, introduced a bill in 2003 calling for mandatory personal finance education. The bill, which drew opposition from the Wisconsin Association of School Boards and others who bristle at the notion of another mandatory education requirement by the state, died.

But Olsen, who served on Burmaster's task force, said there's a chance at some point in the future that personal finance education will be required for every school district.

"I have believed for a long time that we need to teach students personal finance," Olsen said. "We teach them how to get a job and make money, but we never teach them how to handle it. And what happens, it seems, is that young people get themselves in serious debt during or after college that it takes them many years to get out of."

After it issues the standards this spring, DPI likely will follow up with guides featuring specific lesson plans and activities districts can use to infuse financial education into the curriculum, Burmaster said.

The voluntary approach gives school boards local control over how to best fit personal finance lessons into their curriculum, and Burmaster said she thinks many school districts will welcome it.

"I don't think this is going to be a hard sell in local communities," Burmaster said. "They're the ones who have been asking for this."

Drawing from experts

In coming up with standards for what Wisconsin students should know about money, the task force drew on the knowledge and skills of the state Department of Financial Institutions, educators, legislators, money managers, financial institutions and other experts.

They also looked at places, such as the Appleton School District, which has high schools where students operate branches of a credit union, and children are expected to know by fourth grade what an entrepreneur is.

In Wauwatosa, Prothero said, students can satisfy the financial education requirement by taking one of three classes: business and personal finance, economics or independent living.

Students seem to see the value of such training.

"I hope to learn how to be able to manage my checking and financial costs so when I'm in college and by myself I'll be able to live well and not be in debt," said Burt Hamer, 17, a Wauwatosa West junior.

Prothero, who has been teaching for six years, said there's one question he has never been asked and never intends to be asked by students who take his business and personal finance course: "When am I going to use this in real life?"

"Everything about this course can be applied to life outside of high school," Prothero said.

Copyright 2006, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)

Source: Milwaukee Journal Sentinel

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