Mention “budgeting” or “compound interest” to the average person, and you’ll get a blank stare or awkward silence. Why? Because the basic concepts of money management are not embedded in our daily lives, and thus, people don’t recognize their importance. As a Certified Public Accountant, this is troublesome to me. Budgeting should be as much a part of daily life as putting on shoes.
Students should know basic concepts such as budgeting and investing long before they graduate high school. Yet studies show that Americans, in general, and high school students, in particular, lack the basic tools to successfully maintain their households and plan the future of their dreams. In a 2008 national survey gauging financial knowledge, Virginia high school seniors scored an average of 48 percent — a failing grade. Many college graduates leave academia with more than $20,000 in combined student loan and credit card debt.
Forty-three percent of American families spend more than they earn, and the number of U.S. consumer bankruptcy filings in 2010 was nearly 1.53 million — the highest number of filings since 2005. A 2010 Harris poll revealed 54 percent of American families could not save any of their income in the past year and asked their children to take out college loans. Yet, these same families worried about uninsured medical costs, unemployment and retirement. How is this possible? It can happen only by incurring debt and neglecting simple budgeting concepts.
Based on these statistics, this country’s financial future seems bleak. And parents may not be the ideal money management teachers. If children do not learn these concepts at home, the classroom must assume this responsibility. Financial literacy is as much a life skill as reading. We need to teach our students that understanding budget concepts is as easy as putting on our shoes.
Perhaps government should be investing money to educate students early rather than taking care of its population of under-savers in later years. The ideal way to teach these basic concepts is through programs created to assist high school teachers in delivering them through a proven framework: courses designed or approved by the Virginia Board of Education (VBOE).
On Feb. 19, 2009, the VBOE unanimously approved a one-credit course in economics and personal finance as a requirement for high school graduation to ensure the future fiscal responsibility of Virginia’s students. The VBOE is currently in the process of developing an online course that high schools can offer to meet this requirement. However, the financial literacy requirement has encountered hurdles, including legislation in the 2010 General Assembly session that successfully pushed back implementation of all new graduation requirements by one year. Originally planned for 2010, the course in economics and personal finance is now slated to begin in the 2011 school year. As the above statistics show, further delaying implementation of this financial literacy course is simply irresponsible.
Gov. Bob McDonnell wrote an open letter on Jan. 12, 2011, applauding the efforts made through public and private partnerships in the commonwealth to fund the tools needed to ensure that teachers are well-prepared to teach this one-credit course. I, too, am in complete support of this essential course, and I appreciate legislators’ actions so far during the 2011 General Assembly session to protect its timely implementation.
If our kids are not taught these basic budgeting concepts, there may be no hope for them to understand our local or federal budget. In other words, they may not be prepared to understand the decisions of lawmakers, and thus, our future may be in the hands of a population with an inability to make effective choices. Our students need to be taught that a budget really is simply a matter of anticipating cash in versus cash out. Like the simple concept of budgeting, making the decision to begin this class now is really as easy as putting shoes on. If we don’t, there will be a long, painful road ahead of us.
Lisa Germano, CPA, J.D., is president and general counsel of Actuarial Benefits & Design Co., a provider of technical and administrative services to sponsors of retirement programs in Midlothian.Tweet
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