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Saturday, April 19, 2014         

AKAMAI MONEY


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The sooner kids learn about finance, the better


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QUESTION: Why is it important now more than ever for young people to be financially literate?

ANSWER: Everything about the world that our young people will face has become exponentially more complicated — just balancing a checkbook and putting money in a savings account is not enough anymore. It borders on criminal that we expect our kids to navigate this world without knowledge of things we know they are going to have to deal with: 401(k)s, mortgages, mutual funds, bonds, leases, insurance, taxes and so on. Much of the standard school curriculum is being upgraded in response to this increasingly complex world, but financial literacy is often an afterthought. Students can analyze works of Shakespeare, find the vertex of a parabola, discuss the intricacies of photosynthesis and assess the end of the Cold War but are at a loss when it comes to working with a credit card. Something is wrong with that picture.

Q: What is a good age to begin teaching young people about finance?

A: As young as possible. Obviously, young children cannot be expected to pick mutual funds, but they can definitely be taught about spending money now versus saving it and spending it later. If children can get into the habit of delayed gratification and thinking about the future — and discover it can actually be beneficial — that, more than any personal finance course, will go a long way to making sure their financial futures are bright. The earlier that habit of thinking about the future can be ingrained, the better.

Q: Do you recommend parents give their children an allowance?

A: I definitely think an allowance is a good idea since it can be used as an opportunity to teach and talk about budgeting and saving. Studies have shown that if kids have actual money management practice when they are young, they are more likely to be financially savvy as adults. Parents have just as much responsibility as schools to ensure our children are financially literate. Maybe that means making personal finance courses more available for parents who want them as well, like we do with CPR or swimming courses, so that they are comfortable talking about finances with their child as they would be with driving, dating or not doing drugs.

Q: How can financial literacy lessons designed for children be adapted to young adults?

A: The basic idea, in my mind, behind financial literacy is deciding whether you want to use your money now or later. And, as children grow into young adults, all we do is add complexity and vocabulary to this basic idea. When they are younger, they have to decide whether to use their allowance for a toy now or save it in a piggy bank for a bigger toy later. As adults, we have to decide whether to use our salary for an HDTV now or save it in a certificate of deposit or mutual fund for a down payment or retirement later. The only new twist is we have the option to borrow money.

Q: How do you structure the Economics of Personal Finance class offered to Maryknoll juniors and seniors in a way that keeps them engaged?

A: I had a lot of help in constructing the curriculum: I solicited a lot of input from alumni, read books, searched the Internet and received welcome assistance from colleagues like Dick Rankin at 'Iolani, who also offers a personal finance course. I definitely wanted to make the class an experience rather than just a lecture series, though. So, for instance, students have to write a resume, find a hypothetical job, then use their hypothetical salary to budget for some real-life financial goals: marriage, children, mortgages and retirement — they even have to fill out actual tax forms. Students also have to research stocks and make presentations to the class. Based on these presentations, students then have to make recommendations on which stock to purchase using a small fund of actual money set aside by Maryknoll for this course. The course just started this year, so our portfolio has only three holdings — two are up and one is down. It's gratifying to know that the school believes in this course enough to both provide this kind of support and allow things to work themselves out.

Q: The class covers a wide rage of topics. What are some of the more important ones?

A: According to students, they thought having the opportunity to practice budgeting was important. They also felt learning about investing and credit — both short term in the form of credit cards and long term in the form of mortgages — was important. It was definitely nice to have that feedback since that matches the way I think about personal finance: Do we want the toy now or later, and how do we get there?

Interviewed by Alan Yonan Jr., ayonan@staradvertiser.com

 






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