Financial Literacy: Not Just for Adults

by JA Worldwide

When Professors Olivia Mitchell and Annamaria Lusardi developed a simple, three-question personal-finance test, they never expected to find such high levels of global financial illiteracy. But when asked the three questions — about simple interest, the effect of inflation, and the safety of mutual funds — most respondents, regardless of age, level of education, gender, or geographic location, got at least one wrong. The professors’ takeaway: Start financial education young, with a focused curriculum and qualified instructors.

Mitchell and Lusardi aren’t alone in calling for increased attention on teaching financial literacy. The Organization for Economic Cooperation and Development’s Program for International Student Assessment (PISA) advocates recognizing financial literacy as an essential skill for participation in today’s economy. In a 2012 report, Unicef advocated for youth financial instruction: “Promoting financial education and a positive financial culture in children and youth is essential to ensuring a financially literate population capable of making informed decisions.” And Forbes magazine executive editor Brett Nelson called teenage financial illiteracy a travesty.

The ramifications of financial illiteracy are hard to ignore: Fully one-third of wealth inequality can be attributed to a gap in financial information. People with lower financial literacy are significantly more likely to use high-cost methods of borrowing and are far less prepared to deal with financial emergencies. High-school students who do not receive financial education have lower savings later in life. Likewise, a 2014 USA Today study found that college students who did not receive any financial education in high school were less responsible with credit cards than those who did.

“That teenagers are allowed to drive, vote and parent, all while not knowing the difference between an asset and a liability, is nothing short of a travesty. Yet that’s what we have–and we are all paying for it.” –Brett Nelson, Forbes Executive Editor

Six Steps to Financial Literacy

Given the benefits of financial literacy, especially for young people, where can they begin learning the skills they need for lifelong economic success? Thanks to a worldwide partnership with HSBC, JA More than Money offers a financial-literacy curriculum to students as early as third grade. Taught as an after-school program led by qualified volunteers, students take six steps to financial literacy, some of which may surprise you. It’s not all about balancing a checkbook.

#1: Learn to manage a bank account.

Students learn money-management skills and gain an understanding of the role and importance of money in their lives. Students are then ready to go with their parents or guardians to open a savings account at their local bank, many of which offer special accounts for young people and/or require only a $5 opening deposit. Even at 1% interest, as young people watch their $50 birthday money turn into $50.50 a year later, they make the connection: money saved or invested grows and multiplies.

#2: Develop a positive work ethic.

Working with their volunteer mentor, students identify jobs they can perform or small businesses they can launch to earn money. Instead of work being drudgery, students focus on the joy of work. Start a dog-walking business? Mow the neighbor’s lawn? Pick up and deliver library books and movies to neighborhood homes? Sell six varieties of lemonade at a roadside stand? These are activities that allow even younger children to earn money, while bringing tremendous satisfaction.

#3: Explore business opportunities.

When students explore business opportunities, they aren’t just talking in general about ways to make money. Instead, they match their interests and personal skills to possible business opportunities. What type of businesses truly interests them? How can they build the skills to pursue those small businesses and begin creating income? Those are questions that even 40-somethings struggle with, but students are excited to learn that they already possess — or can build — job skills. Students even learn about market research to help them determine whether their business ideas are viable.

#4: Start, build, and maintain a business.

Not everyone wants or needs to own a business. But entrepreneurial skills make employees better at their jobs. So, in Step 4, students are introduced to the basic steps of starting and operating a small business. Using this information, they develop a business plan (even at the elementary-school level!). And why not? If a student loves dogs, has experience exercising them, wants to start a dog-walking business, and has his or her parents’ permission, why not write a business plan to determine expenses (cleanup bags and dog treats), constraints (a maximum of medium dog or two small ones at a time, based on strength and body weight), competition (doggie day care; other dog walkers), support (who’s the backup, in case of illness or school responsibilities), marketing (fliers delivered to each house in the neighborhood), and rates (enough to undercut the competition but not so much as to appear unreliable).

#5: Practice smart saving and spending.

With either money in their pockets or the potential to make it, students practice saving and spending as business teams. They learn about making intelligent consumer decisions and come to understand the ramifications of overspending. And they find out how to save even more: can they put away ten percent of the gifts, allowances, or income they receive? What about twenty percent? Fifty? It sure adds up, whether they’re saving for an iPad or for college.

#6: Identify deceptive advertising.

During the final session, students learn to recognize deceptive advertising and the importance of ethical business practices. So, as both consumers and business owners, they learn the ramifications of deceptive or fraudulent marketing: it’s either a way to be parted from their own money, or a way to torpedo their business and reputation.

Adjusting for Regional Differences

The JA More than Money program gives every child — from Boston to Brunei — a six-step process to secure their financial futures. But what about cultural and aspirational differences between Boston and Brunei?

• When a Singapore school did not allow corporate volunteers to teach the program, JA Singapore leveraged the 40-hour parent-volunteering requirement for higher student-registration priority and was able to sign up and train more than enough parents to teach the program.
• JA Ireland recognized the importance of corporate employees’ volunteering, so they engaged the local HSBC CEO to teach a JA More than Money session, and then provided students a tour of the local HSBC office. When employees saw the CEO spending time with students, they understood that financial education is a priority for HSBC.
• In the United Arab Emirates (UAE), which has a multi-national, multi-lingual business population, INJAZ UAE taught JA More than Money through pairs of volunteers: one Arabic-speaking volunteer, and one English-speaking. This kept potential volunteers from feeling excluded because of language barriers.
• JA Nigeria gave students small piggy banks as part of JA More than Money and encouraged them to put a small amount away each day from their lunch allowances. In this way, students experienced a growing savings account both immediately and tangibly.

Replicating JA More than Money

JA More than Money is available through schools all over the world. If it isn’t offered at your school, find the JA location in your area and ask whether HSBC volunteers can be mobilized to offer the program. Short of that, consider teaching financial literacy at home. After all, a 2015 Junior Achievement USA study showed that teens are eager to learn money management from their parents. Using your own knowledge, books from the library, and what you learn through Internet searches, you can start with Step 1 about a bank account, and then take your youngsters through the remaining five steps. Or how about practicing these six steps in your own life, whether you’re rethinking your banking needs to earn higher interest rates, creating a plan for a part-time business to build extra income, or enforcing savvy spending on yourself? Nothing teaches better than role modeling.

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