Bankers Go Back to School to Teach Kids About Money

By Dawn Handschuh, Personal Finance Writer Archive

Many teens own credit cards even before they graduate high school, yet financial literacy is not a normal part of most schools' core curriculum. Many young adults end up learning about credit and personal finance the hard way — by suffering the consequences of bad money management habits.

According to a 2005 Nellie Mae report, 56% of college seniors carry four or more cards. And 71% of college students reported using their credit cards for food as often as they did for textbooks.¹

Teens spend $180 billion annually, says the American Bankers Association, yet 90% of young people have never taken a class in personal finance.² Teens can get into debt easily because, as surveys show, they don't always understand how credit-card finance charges work, for example, or the role of credit bureaus.

According to a 2008 survey of personal finance literacy by Jump$mart Coalition for Personal Financial Literacy, high school seniors, on average, correctly answered only 15 of 31 questions in a finance quiz.³

• Only 17% of students knew that stocks would generate the greatest long-term growth, while 37% believed that U.S. government savings bonds would and 41% believed that a savings account would.³ A separate Jump$mart survey of college students showed that an even greater percentage (62%) believed that U.S. government savings bond generated the highest growth.⁴
• Just 48% of students knew that credit card users who pay only the minimum amount each month will pay more in finance charges than someone who pays off the balance in full.³
• 21% of high school students used their own credit card. 20% of respondents to a Nellie Mae college student survey said they got their first credit card before graduating high school.¹

Recognizing that bankers are uniquely qualified to teach students about financial literacy, the American Bankers Association Education Foundation (ABAEF) sponsors two national programs that put bankers in the classroom. Teach Children to Save Day (April 29, 2008) and Get Smart About Credit Day (October 16, 2008) both engage children and teens with interactive lesson plans, visual materials and PowerPoint case studies. Bankers make presentations at their local elementary, middle and high schools.

"The general knowledge level of basic savings concepts is very low among most kids," said Steve Martin, chairman of the ABAEF board and a vice president at Canandaigua (NY) National Bank & Trust. "Maybe they'll get an allowance or receive money on their birthdays, but the general mentality is to spend it rather than save it. Our role as bankers is to let them know they have other options."

Martin said that a dozen branch managers and lenders from Canandaigua National Bank & Trust would be visiting 16 different elementary and middle schools in the greater Rochester area for Teach Children to Save Day.

The bankers begin their presentation by helping children identify their goals. (The answer most frequently given by children is "a bicycle," followed by athletic equipment, a vacation or clothes.) Each child receives a $1 coin and learns about the Looney Tunes Savings Club, which offers young children a chance to learn about saving money through a specially designed savings program with a minimum $1 deposit.

The Get Smart About Credit program spans two days and is geared toward high school students.

"High school students can be tempted by affinity credit cards because they want that connection with their favorite clothing store or a sports team because it's 'cool' or they get rewards or points, but they don't understand the full consequence of not paying bills on time," Martin noted.

Martin recalled a recent economics summit he attended. In the room, he said, there were 200 groups who were committed to educating youth and adult learners about financial literacy.

"When I was growing up, the only groups doing this were bankers and occasionally Junior Achievement. The banking community had lost its focus. The ABA has reclaimed its leadership role by providing bankers the chance to teach our young people about financial literacy. We have a responsibility to do so. We may not see an immediate return on investment, but someday, those kids will grow up, and we want them to be responsible borrowers."

Footnotes

¹ "Undergraduate Students and Credit Cards in 2004: An Analysis of Usage Rates and Trends," Nellie Mae, May 2005
² "The Importance of Saving, Straight From the Banker's Mouth," ABAEF, 2008 press release
³ "2008 Survey of Personal Financial Literacy Among High School Students," Jump$mart Coalition for Personal Financial Literacy; percentages have been rounded to the nearest whole number
⁴ "2008 Survey of Personal Financial Literacy Among High School Students," Jump$mart Coalition for Personal Financial Literacy; percentages have been rounded to the nearest whole number