Will your high school grad understand dollars and cents?
The rules are simple. Each teenager gets $25,000 to invest, but once they buy a stock, they can’t sell.
The unconventional class activity was dreamed up by Rob Kane, a business teacher at Newton North High School. The cash is fake and the rule barring students from selling is meant to teach the importance of long-term investment and diversification.
“It becomes very intense as students get further into it,” said Kane. Who’s to blame them when the prize for the highest percentage return is a school sweat shirt or a free lunch?
Similar lessons might be in the future for public schools across Massachusetts. Governor Charlie Baker signed a new law last month instructing state education officials to establish financial literacy standards for students in kindergarten through Grade 12.
The goal of the standards is to train students in decision-making skills that will help them become financially self-supporting adults. Topics will include understanding loans, credit card debt, renting or buying a home, saving for college, investing, and more.
“Since the financial crisis, this issue has become more ripe,” said Newton’s superintendent, David Fleishman. “One of the reasons we had the crisis was because people were borrowing money without understanding what that meant.”
The law is the most recent update in a 14-year-long effort to improve Massachusetts students’ financial skills. Since 2005, state legislators have introduced more than 20 bills attempting to teach financial literacy in schools, according to a 2017 report by Champlain College’s Center for Financial Literacy. At the time the report was published, no bills had passed.
The report presented the state with a failing grade on its efforts to produce financially literate high school graduates in 2017. The same dismal grade was given in 2013 and 2015.
The new law requires the state Department of Elementary and Secondary Education to establish financial literacy standards before the start of the 2019-2020 school year.
Newton North High School already offers eight electives that teach financial literacy, including personal finance and financial planning. But one of the main challenges of the law will be fitting requirements into students’ schedules, Fleishman said.
Kane estimates only 350 of the 2,300 students at Newton North are enrolled in business classes and said teachers often approach him in the halls to tell him the classes should be mandatory.
But the only changes Fleishman expects for now is integration of financial topics into other courses, such as calculating interest over periods of time in algebra class. More would entail an overhaul of graduation requirements and the hiring of teachers.
At Amesbury High School, north of Boston, financial literacy courses also fall under the broad umbrella of unrequired electives, but that could soon change.
“I expect economics or personal finance to become a requirement within the social studies framework in the next two to three years,” said Elizabeth McAndrews, Amesbury High School principal.
The economics course at Amesbury High, taught by Jared Brandwein, has proven to be particularly popular. The 2018-2019 school year shows the highest enrollment yet, boasting 56 students across two sections. Every year the course has been taught, the class demographic has been primarily male, with this year’s enrollment including 40 male and 16 female students.
Brandwein is “able to connect with the kids and help them see the relevance of economics in their lives,” said McAndrews.
Several educators and financial experts interviewed see a serious need for increased financial literacy standards across the state.
“[Students] don’t realize that down the road there’s real consequences to the decisions they make now,” said Angela Blanchard, vice president of retail banking at Colonial Federal Savings Bank in Quincy. “Your access to credit becomes real limited.”
Blanchard realized the poor state of financial literacy in Massachusetts when she volunteered at a “Credit for Life Fair” at Quincy High School last year. The fair is essentially a live-action version of “The Game of Life,” where students are assigned a profession and make financial decisions based on their salary.
Blanchard said students lack understanding of the costs of adulthood. In her eyes, there were two kinds of kids: the ones who splurged on every luxury, only to have no money for rent, and the ones who nixed essentials like furniture or automobile costs “just to get through with two cents left.”
Christine Coakley, a volunteer at a 2018 Duxbury “Credit for Life Fair,” said kids left the event wanting to switch their future major, apply to more cost-effective colleges, and open up retirement accounts.
The new law is a step in the right direction, said Kane, who sees the shock on students’ faces when he has them make a budget.
“You see the students give that big wow,” said Kane, the Newton North teacher. “Like, ‘I might need to live with my parents longer than I thought to pay off my student loans.’”
Is your child on the path to financial fitness?
Children ages 4 through 7:
Should know the different types of coins and bills. They also should begin to understand concepts such as spending, saving, donating, borrowing, and earning money from a job. This is a good time to start giving them a small allowance to manage. They should also learn to differentiate between needs and wants. You can help them by thinking out loud when you make decisions at the grocery store. Cookies or fruit? Soda or milk? This is the time to teach the habits of financial fitness.
ACTIVITY: Children this age can learn how to divvy up earnings by decorating and labeling three jars — one for saving, one for spending, and one for sharing. Have your child write down what they are saving for and hang it above the jars. Make sure the jars are clear so they can see their money grow.
Children ages 7 through 13:
Should learn the basics of credit cards, loans, and budgeting. Talk about the consequences of late payments and interest. Children in this age range should think about saving up for unexpected events, like a cracked screen on a dropped smartphone. Children are often on social media at this age. Sit down and have a conversation about keeping private information to themselves, as well as the financial dangers of identity theft.
ACTIVITY: Children this age might be mature enough to earn money. Have them make a list of their skills and interests. See if there are any places where their passions intersect with what they are good at and how that could be lucrative. Does he make the best cookies in town? Help him start a baking business where he sells gift-wrapped cookies to neighbors. Does she have a way with animals? Encourage her to pet sit for the neighbors.
Teens age 14 through 18:
Should have a strong handle on budgeting. Other important areas of knowledge are compound interest, credit scores, investing, planning for retirement, filing a tax return, analyzing future expected costs with inflation, and charitable giving. Many 18-year-olds are preparing to go to college and should understand the rising annual cost of tuition and extra expenses, such as housing and food. Even if teens are not paying for big-ticket items like cars and college themselves, they should understand where that money is going.
ACTIVITY: With a driver’s license in hand or on the horizon, let your teen hypothetically pick out a new car and an old car. Have them do research and calculate the monthly costs for each in a spreadsheet. That includes insurance, gas, and repairs. This can help them understand the concept of getting the best value for their money, as well as the costs associated with driving.
SOURCES: Robin Kahn, Fit Money; Robert Kane, Newton North High School; Consumer Financial Protection Bureau