Teaching Teens to Manage Money: It Takes a Nation to Raise a Financially Literate Generation

A former public accountant and financial manager, Kristine van der Hoeven translated her love for numbers into a career in education. Now a high school business teacher, she’s taught for nine years at public schools in the state of Washington and is currently Career & Technical Education Director at Mercer Island High School. In this guest post, Kristine shares her thoughts on how to make financial literacy resonate with young people, and the roles family, schools, and the private and the public sectors can play in building a more financially responsible next generation.

After an 11-year career in public accounting, financial management, and motherhood, I decided to pursue another path: I started teaching high school.  During the nine years I’ve been in the classroom, I have taught students from a wide variety of socio-economic and ethnic backgrounds. Despite their differences, these students have something in common– they are eager to learn about money. Yet, they are still high school teens with many competing interests, and in order to make a real impact, I must get their grab their attention, offer them incentives and try to involve parents in this very personal topic.

Teaching the concept of delayed gratification is more important than ever, given the ease at which students can act on impulse to buy online, play a quick game on their cell-phone in class, or post something that they later regret on a social media site.  The first thing I teach my personal finance students is about the Stanford marshmallow test, a well-known psychological study conducted in the ’70s that demonstrated the correlation between delayed gratification and long-term success. We also look at more recent studies on willpower and positive life outcomes. Once students are motivated to be the kids who have the will to wait, we examine their personal, financial and academic behaviors. As we all know, bad habits are hard to break and it takes more than a study to change behavior.  Students, like adults, need an incentive to delay the immediate satisfaction of a burger, a new pair of shoes, or a movie.

“Who wants to become a millionaire?” asked a recent guest speaker in my high school accounting class. Hands shot up in the air. “How many of you eat out, buy online music, or get a latte a few times a week?” he asked the class. Again, most hands were raised. These questions captured the attention of the class’ 30 teens for the next half hour while our guest showed how they could become millionaires by foregoing burritos, iced mochas and the latest tunes. Using the common high school algebra concept of exponential growth, he proved that investing $200 a month for 10 years, starting at the age of 20, could yield them $1 million by the age of 60.  He contrasted this scenario with another, in which students wait to invest until they are 40, but double their savings period from 10 years to 20 − saving until the age of 60. The students were all surprised to learn that starting later but saving longer would result in much less savings − less than $100,000 in this case.

We then looked at how credit card debt works the same way, but with individuals having to pay interest on their credit card expenses if they do not pay their bills in full − which can quickly lead to thousands of dollars of debt. These simple, but powerful messages turn an abstract concept − compounding interest − into something tangible. They also offer a substantial incentive for students to earn, save, and invest early, and to use credit responsibly.

There are many such activities to help increase students’ financial literacy. But, without the help and support of parents, students will likely not internalize these concepts and put them into action.  And, I’ve found that not all parents are open to sharing personal financial details with their kids. Recently, I proposed a project in my accounting class in which students would be their parents’ accountants for a month. Students were asked to record all financial transactions and create a personal income statement and balance sheet. More than half of the students told me that their parents were not okay with sharing their own financial situation with them. While teaching budgeting, I encouraged students, who rely on regular monetary hand-outs for purchases, to instead ask their parents for an allowance. This provided a safe way to practice real-life budgeting, without lasting consequences. While many parents were happy to oblige, others chose to continue doling out money as their kids needed it. Parents are a critical piece of the financial literacy puzzle. At the recent PwC-KWHS Seminar for High School Educators on Business and Financial Responsibility I attended with 120 other teachers at Wharton | San Francisco, the West Coast campus of the Wharton School of the University of Pennsylvania, PwC CFO Carol Sawdye shared an interesting and telling statistic: parents’ influence on students’ financial acumen is 1.5 times more powerful than school-based financial education.

On a broader societal level, there are other challenges. At the conference, we learned that minority and low-income students have both lower financial literacy and reduced access to financial institutions. Keith Weigelt, Wharton professor of management, was dismayed by 2010 census data, showing a gap of over $100,000 in median household wealth between whites and blacks.  He decided to develop and implement Building Bridges – an investing curriculum in inner-city urban schools in Philadelphia.  In one powerful slide, he used the Rule of 72 to demonstrate that it would take 72 years to double money in a typical savings account that earns 1% interest, while only nine years to double that same money in a low-cost mutual fund earning 8%. By arming both students and their parents with this type of knowledge, and providing access to financial institutions, he aims to increase the wealth and financial security in low-income neighborhoods. The program has enjoyed success in its first years, and hopefully it can be replicated in other urban areas across the country.

The good news is that personal finance is one of the most engaging subjects I teach. For my students, it is personally relevant, current, and necessary for their success in life.  They care about their financial futures and often wonder how they would otherwise learn “all of this important stuff.” Financial literacy is getting increased and much-deserved attention from private companies, universities, schools, even credit unions, many of which are producing an abundance of free curricula for teachers to take back to the classroom. Some of my go-to sites for interactive, quality resources are:

• PwC’s Earn Your Future Financial Literacy Lessons
• Knowledge @ Wharton High School
• Practical Money Skills for Life
• Family Economics and Financial Education from University of Arizona
• Council for Economic Education

Students are always more engaged when I utilize guest speakers, active learning materials, and lessons that are applicable to their own lives.  Since I have been out of the private sector for a number of years, I rely on high quality professional development, like the PwC-KWHS financial literacy seminars, which are part of PwC’s Earn Your Future youth education commitment. At these conferences, thought leaders who share my dedication to improving the financial literacy of our nation’s youth, provide valuable research, resources, and technology on financial practices, leadership, entrepreneurship, and education – all of which I take back to the classroom to help change our financial landscape, one student at a time.