By Gail MarksJarvis
Remember the hit book, “All I Really Need to Know I Learned in Kindergarten”?
Well, I met the sixth-graders who could write “All I Really Need to Know About Money I Learned in Sixth Grade.”
These children have mastered the money lessons that, if adopted widely by adults, would put families on solid footing and keep millions from digging themselves into a dark hole of debt.
The students from Chicago public and parochial schools recently competed in something like a science fair, only with projects on money rather than science. The final competition was at the Chicago Federal Reserve, where I was among judges for Talk With Our Kids About Money, a money fair designed by the Canadian Foundation for Economic Education.
The children were asked to do something most aren’t asked to do: to think thoroughly about money, do research, and present findings to judges, just like you may recall from science fairs during your school days. As I understand it, many teachers were skeptical. But they saw what regular students were able to do and became believers.
The students applied concepts that would make financial planners proud. Here are some samples:
-If you want to eventually go to a prom, it’s going to cost $455 on the cheap or $2,707 without skimping, so start saving far in advance, said Carina Lozano and Alejandra Perez of Lee Elementary School. Don’t simply decide you want to go to the prom and spend money you don’t have. Instead, add up what prom will cost: dress, shoes, tux, corsage, food, makeup, hair, car. Then, calculate what you will need to save, how long it will take to save that amount, where the savings will come from, and, if you can’t save enough, change expectations instead of using credit cards or borrowing money. For example, instead of buying the dream dress, you could rent a dress, noted Nyla Newbern and Makeya Bradley, of Hefferan Elementary School.
-You might love dogs, but you don’t simply buy one and figure out how to take care of it later, Kaylee Pezan and Melanie Rivas of St. Bartholomew School, said. Dogs aren’t free, so before buying or adopting, add up the cost of the license, neutering, deworming, shots, food, collar, leash, and treats, and make sure you or your parents can handle it. Their calculation: $2,903 the first year and $1,375 after that.
The students aren’t guessing whether they or their families can afford a purchase. Before even reaching junior high, they have mastered a key money concept: Wishful thinking, rather than thinking through how to pay for a spending goal, can dig people into a hole that will leave them without the money essential for other desires and needs. They have learned to add up and analyze every cost associated with a decision, and think of it as a money choice even though at first it seems as simple as: “I love dogs, so I think I’ll get one.”
In effect, they have learned to budget and save to meet a goal. It’s a matter of simple math, disciplined thinking rather than emotion, and adjusting expectations to fit their ability to pay. In other words, if you can’t afford a dog, don’t get one.
Will these students be able to apply this thinking to other purchases later in life? I think so.
And this thinking would have served people well prior to the Great Recession. Back then, too many people forgot to figure out how their paychecks would cover escalating mortgage payments. Some have told me that when a lender agreed to give them a mortgage, that was proof they’d be able to pay off a loan.
A recent survey by the National Foundation for Credit Counseling shows one in three U.S. households fail to pay off credit cards each month, and 23 percent of people polled said they need an expert to get them out of their money problems.
The sixth-graders from the money fair would have been able to tell these adults how to avoid money problems in the first place.
Since the recession, there’s been much debate about whether students can be taught what’s called “financial literacy.” University of Chicago economist and “Nudge” co-author Richard Thaler contends research shows students forget their money lessons. But many of the studies focus on traditional memorization and test-taking. When a sixth-grader explains passionately how to go to the prom without spending $1,000 like her cousin, it sounds like the money lesson will stick.
ABOUT THE WRITER
Gail MarksJarvis is a personal finance columnist for the Chicago Tribune and author of “Saving for Retirement Without Living Like a Pauper or Winning the Lottery.”