How we failed the Class of 2013

Our country has long prided itself on the idea that everyone gets a fair shot at the American dream. For the Class of 2013, this may not have been a reality. The quality of the education they received may have in large part been determined by the zip code they were born into, partially explaining why economic mobility in the United States is worse than most advanced economies throughout the world.

The inequality gap has also greatly widened for the world they are transitioning into. Inequality and mobility problems are complex and require a broad range of solutions. However, research correlates financial knowledge and wealth inequality, yet due to legislative failure in 46 states we have failed to adequately equip them with one common sense solution, a financial education.

So while they have attended school through a time when our public education system has had it’s funding gutted, European nations have made a dedicated effort to improve financial education. A matter of fact, financial literacy has now been added to the PISA.

There are a number of consequences of failing to provide a financial education, including our failure to equip students with basic knowledge to help them grapple with the postsecondary process.

Up to fifteen percent of students have chosen not to attend any kind of postsecondary program, even though they have been accepted into one. This is costly as high school graduates with associate’s degrees earn about 25 percent more than other high school graduates, and those with bachelor’s degrees earn over 50 percent more.

Clearly, a failure to understand the process, FASFA forms, and student debt contracts is a reason why. Ideas42 recently released a White Paper exploring reasons why, and providing behavioral finance suggestions worth exploring further.

“Many of the students most in need of financial aid are also some of the least likely to take advantage of the options available to them. Even though students with more grant aid and smaller loan burdens tend to persist at higher rates, one in four low-income students who qualify for Pell grants do not even apply for federal aid.”

So as the student debt bubble has grown to one trillion dollars, guidance departments are overwhelmed and understaffed with students who have never taken a basic personal finance course that introduces resources such as the CFPB’s Paying For College. Most students may not understand the maximum amount of student debt to take on, or that student debt is not dischargeable in bankruptcy. Yet we are expecting teenagers to make one of the most important financial decisions of their lives and have failed to provide them with the preparation they deserve to make wise and informed choices.

Dan Kadlec recently reported that Caroline Ratcliffe of the Urban Institute explained to the Federal Financial Literacy and Education Commission that educating students about student debt choices should be a priority, and added:

“But teaching financial literacy at younger ages is also critical. The earlier in life a person begins to build wealth, the more time those assets have to compound and become more valuable. So the key is to teach more people to make sound financial decisions earlier in life.”

The long-term impact of excessive student debt will impact many aspects of their lives in years to come. As the Federal Reserve recently reported, excessive student debt is coalescing into a financial anchor for current borrowers who want to move forward to purchase cars and homes.

We haven’t just failed preparing them for the postsecondary process, but to make practical financial choices. The FINRA survey released last week quantified many of the consequences of failing to provide students with an adequate financial education. What is particularly alarming is how little recent graduates save, as the consequences of inadequate emergency funds often lead to consumers using high interest credit products.

“Among those in the 18-29 age group, only 31 percent had set aside rainy day funds, while only 26 percent of those with annual incomes below $25,000 had such funds. As a result, many individuals and families would not be able to draw on personal financial resources if they were faced with an economic shock.”

Meanwhile banks are making a fortune from of our financial ignorance. The CFPB just reported that in 2011 the banking industry earned $12.6 billion in bank fees such as overdrafts and penalties.

For the Class of 2013, our legislative failure impacted the matriculation to postsecondary programs, their capability to comparison shop postsecondary financial offers, and understand the consequences of too much student debt. Most have never been exposed to the value of and knowhow to make basic personal finance choices such as starting an emergency savings account, investing for retirement, and building their credit scores early in their lives. 

So it looks like most from the Class of 2013 from 46 states will be learning these lessons from the school of hard knocks. Unfortunately, it will not be as easy to get up from the costly financial lessons they are about to learn as it used to be.

My closing letter to my students: I Passed Personal Finance, What's Next?

What happens after you pass Personal Finance? Does the knowledge you exhibited in your assessments and on your final examination guarantee you will live a financially sound life? Unfortunately it does not, because the financial choices you choose to make in the coming days, months, and years will be driven as much by your emotions as they will your knowledge.

So you passed Personal Finance, what's next? You have to bridge what you have learned to how you will apply it. To begin to do this you should first internalize that this course was not just another period in the day, but rather a series of tools and concepts that improved who you are and the choices you are capable of making.

Comparatively speaking, our overall test scores are competitive on a national level. Depending on which Personal Finance class you took, you have either passed a college level course or the first comprehensive semester long personal finance course of it's kind. You are capable of applying financial tools and concepts to your own goals that many adults do not even know exist. 

1. You are now the type of person who sets goals and makes wise and informed financial choices to reach your goals.

You understand the rewards and consequences of financial choices. You set financial goals for yourself and make choices to reach your goals. You will be motivated to make financially appropriate choices such as establishing three direct deposits once you get a job; a deposit into a dedicated emergency savings account, a deposit into a dedicated retirement account, and a deposit into your checking account...

2. You are now the type of person who knows how to put a financial plan into action.

People will recognize that you are studious and confident in the financial choices you make. You appear happy and secure to others... 

3. You are now the type of person who people identify as being financially savvy. 

Embracing and internalizing the previously outlined steps as a part of who you are matters, and is relevant to almost every aspect of your life. Let me explain... 

Imagine throwing a pebble deep into the center of a crystal clear pond. The result is ripples that wave one after another throughout the pond, deep from the center, slowly to the periphery.

Whether you want to hear it or not, your choice to both prepare for your final examination and apply what you have learned in this class to your everyday lives is much like the pebble hitting the pond. Your future financial choices will send a wave deep into every aspect of your life and the lives of others.

Your first wave will begin just after high school with your post-education choices and subsequent college debt. While at the same time, you will be testing your discipline with a credit card and future car debt.

Before you know it, you will be a young professional deciding whether to fill your bartenders’ pockets with your discretionary income or fill your own future pockets by adequately investing for retirement.

Sooner than you may imagine, it will shape your family’s quality of life and your subsequent peace of mind.

Eventually, it will guide your opportunity to reach financial freedom at a young enough age to enjoy retirement as others struggle to live on a fixed income, working well into their seventies.

In the periphery, lies the legacy for your future children, and your ability to prepare them for a world full of financial trickery and hidden wealth.

Just as the ripples in the pond get bigger and bigger, so will your financial responsibilities. Being financially responsible is not the result of a high school or college course, nor is it the result of being disciplined and conscience of your choices. It has to be both, and your financial education has to be ongoing.

Now as you have envisioned what you can expect as you move forward, I want you to imagine the waves of choices you will be faced with in a different lens. For a moment, envision shouldering a responsibility much greater than your own financial future. For this moment - - internalize your responsibility as a next generation American.

Our country desperately needs waves of economic change that will transform where we are and the direction we are heading. Our country needs a generation full of financially astute and responsible leadership that will guide us out of consumer and government debt massive enough to change the United States as we know it.

My challenge for you is to understand how to responsibly manage the waves of financial challenges that you will face throughout your life, while making waves for your country that will better the lives of the generations to come.

Let what you have learned in this course be the pebble that creates the first wave of change that we all need.

My Senior Baccalaureate Speech

I love our kids, community, and where I teach. So I was especially honored to deliver this year's Senior Baccalaureate speech. Here is the speech I delivered earlier this Sunday at Church...

Good afternoon class of 2013. It is a great honor to speak to you today.

You have experienced numerous ceremonies celebrating your academic achievements. These achievements have created more paths for you to choose from. You have experienced athletic ceremonies celebrating your “on the field” accomplishments. These achievements recognize lifelong memories nobody can ever take away from you. You have received character awards, celebrating your moral quality. These are traits that should guide you for a lifetime.

Before looking forward, I want to take a moment to look back and celebrate one more achievement.

Early last spring I was suffering from a painful ulcer. At times the pain was excruciating, and one particular day at school the pain was almost too much to bear. You would think that managing a classroom of students in visible agony would be tough, you would think the kids would see an opportunity to do what they wanted. Not our kids - - I lost count on how many times I was asked “Mr. Page, are you okay?” Many of you were in one of my classes that year. Your perfect behavior and genuine care that day were not an illustration of compliance but rather genuine compassion.

This is just one personal anecdote, and each of you can provide your own to best represent what we believe to be an achievement worth celebrating today. This achievement is not a State Report Card indicator nor does it derive from a bubble test. It’s far more important and it comes from within you.

You are a group of loving and compassionate students that will make the world a better place, and that is an achievement worth celebrating.

Your parents and your teachers want what is best for you. We want you to dream, set goals to reach your dreams, and provide you with the support you need to live your dreams.

As you have gotten older, the role your parents and teachers have taken in your lives have evolved. Early in your lives most of your choices were made for you, and as you got older you became empowered to make choices on your own. Whether you knew it or not, your parents and teachers were still there serving as bumpers softening the blow of bad choices, and serve as megaphones echoing to the world your good choices.

In only a matter of days you will embark on your own journey through life. Throughout your journey you will make choices, some trivial, some not. The results of each of the choices you make will now be independently amplified; not just in consequence or reward, but the life-long paths they may open or close for you. So I am honored to have the opportunity today to give you three pieces of advice to help you guide your journey.

First, have Faith…

Throughout your journey you will be faced with tough choices and ethical dilemmas. Nobody is infallible, but you can try to be. In other words, don’t get lost in your journey. Turn to the Lord for your moral compass, particularly when choices are toughest.

Second, prioritize your family…

We are a hypercompetitive result oriented society. You will experience this as a post-secondary student, an employee, or a future business owner. For some it is just as easy to get lost in the competition as it is for others to give up competing all together. I think both can be equally bad if you have a family. Have balance in your life, make choices that make your future families journey joyous and memorable, and put them in a position to make their lives better.

Third, control your personal finances, do not let them control you…

I hate the title of my class – “Personal Finance”. It doesn’t begin to scratch the surface of the impact your personal finances can make on your life. Let’s put your future personal finances into the context of your life’s journey.

1. You need to set a destination and have a financial plan to get there. Throughout your journey you will be faced with a multitude of choices. Know where you want to go, control your personal finances, and stay the course. If your spending choices are different than your goals, pretty soon your personal finances will control your journey and strip much of the joy that comes with it.

2. You need to be safe throughout your journey. Make sure you set up a direct deposit into three places: a dedicated emergency savings account, retirement, and checking as soon as you get a job. Making it automatic to put money aside for emergencies will usually shield you from relying on high interest credit if you get into a jam. Equally as important is investing for retirement right away. Starting early will give you the peace of mind throughout your journey that there will be a point in your life that you are financially free. Finally, make sure you always have insurance products that protect your way of life.

3. You need to enjoy your journey. Reflect on the values and experiences that matter most to you in your life and spend your money consistent with those. If you enjoy traveling, set savings goals to travel regularly. If you enjoy nice clothes, set savings goals and wear nice clothes. Money cannot buy happiness, but it can buy the things and experiences that make us happy.

Class of 2013, you are a special group of adults who in matter of days will be in charge of your own your own dreams, happiness, and journey. So have Faith, prioritize your family, and control your personal finances. Before you know it your personal responsibility will evolve into your own family responsibility. So choose your path wisely and make it a point to enjoy every step on the path in your journey.

5 classroom tips to nudge financial knowledge to behavior

My friend Dan Kadlec pointed out in this recent piece that "A growing body of research suggests that money reminders tweeted, texted, emailed or otherwise delivered through social media fall on receptive eyes." Kadlec also noted "A study led by Barbara O’Neill at the Rutgers Co-operative Extension found that Twitter and Facebook messages to adults raised awareness about money issues even if they didn’t always lead to behavioral change."

AmericaSaves are believers as well. This month they heavily promoted their "Pledge to Save" text messaging service. So let's incorporate these techniques into our pedagogy.

1. Remind101 is a safe way for teachers to text message students and stay in touch with parents, and it's free! For the past couple of weeks I have sent a daily text message encouraging my students to set a savings goals, set up a savings account, and regularly contribute to a savings account (ideally through a direct deposit).

2. Calendar reminders in their phones should be incorporated whenever possible. As an example, all of us should check our credit reports once a year for free at annualcreditreport.com. Have the students set a yearly reminder to do so beginning on their 18th birthdays. Another example is to set reminders for key FASFA tasks on important dates as you introduce the students to the student aid process.

3. Parent checklists with resources for students and parents to explore together at home are a great way to share leading edge resources like the CFPB's Paying For College.

4. Classroom Twitter accounts can be used to send encouraging texts to save, links to valuable resources, and financial tips that are relevant to students now. If you would like a few ideas, here is my classroom Twitter account. We also have our own website and Pinterest page.

5. Student Twitter and other social media accounts can be utilized as resources to connect students with where to turn when they have questions after they graduate. For example, when we were working through the consumer protection unit, I encouraged students to follow the FTC, CFPB, and Ohio Attorney General. This, of course, was after the students utilized the resources on the government websites to deepen their understanding of the content.

President's Advisory Council on Financial Capability Report Released

I have the honor of serving on the Working Committee (Money As You Learn) for the President's Advisory Council on Financial Capability. The project provides optional resources that integrate important personal finance concepts into mathematics and English language arts classes. It is up to the classroom teachers to determine what text(s) from our list is best for their students, and I believe the classroom teacher is clearly the best positioned professional to make that determination.

Here is the first paragraph about Money As You Learn from the report on page 26.

"The President’s Advisory Council on Financial Capability calls for a new initiative – Money as You Learn -- to integrate important aspects personal finance into English language arts and mathematics teaching as well as into other classes and afterschool programs, in order to reach more students throughout their schooling. This approach can strengthen learning of those subjects as well as expose all students to knowledge and skills they need to become financially capable young adults. At the same time, the Council continues to urge states and school districts to also provide high quality personal finance classes for their students."

The particular information pertaining to the integration of personal finance concepts into English language arts and mathematics classes is on pages 13, and 26-31.

Click here to read the report. Click here to visit the President's Advisory Council on Financial Capability Resource Center.

My 30 favorite financial education games

Andrew Miller and I worked together on the recent post for Edutopia "Games to Teach Financial Literacy".

The purpose of the post was to highlight 3 prized of my 30 favorite game and scenario based learning programs. These games were hyperlinked at the conclusion of the Edutopia post.

Click here to explore the different games and simulations.

There are four primary reasons I believe games and simulations are effective learning strategies to integrate into each unit of instruction.

• Makes financial education engaging, fun, and interactive.*
• Links education more directly to action-taking by embedding offers and opportunities for real-world actions in games.* 
• Serves as ideal activities on days prior to holidays or breaks that are often more challenging to engage students in traditional lessons.
• Kids play them on their own time, and on their own free will. 

*Click here for the research that supports my opinion. 

Total compensation calculator

My students have a tough time wrapping their minds around the value of health care, vacation days, employer retirement contributions, etc. All of us know this is an important compensation consideration when comparing job opportunities. I just stumbled across a really good financial calculator I am going to incorporate in one of my lessons on careers and incomes.

Click here to explore the financial calculator.