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A High Financial IQ - A Foundation for Success

11/12/2010 6:45 AM -

What is your financial IQ? According to a recent New York Times article, it may not be as high as you think. Personal finance reporter Tara Siegel Bernard posits that Americans aren’t very money-savvy, yet are expected to make big financial decisions as early as their teens. Major expenses arise, such as student loans and car payments, before most people receive any formal instruction on financial matters.

“While no course in personal finance could have prevented many Americans from getting caught up in the housing bubble, it’s clear that most of us need help, preferably when we’re still in school,” Siegel Bernard said. “And I’m not just talking about learning to balance your checkbook. It’s understanding concepts like the time value of money, risk and reward, and, yes, the importance of savings.”

The good news is that financial education, especially as it relates to kids learning about money, has made significant strides in recent years. According to the most recent Survey of the States report from the Council for Economic Education, the number of states requiring an economics course to graduate high school has increased to 21 from 17 since the last survey in 2007; the number of states requiring a personal finance course to graduate high school stands and 13, up from seven; and five states now require that entrepreneurship be taught as part of a high school course (usually economics), up from three in 2007.

But in spite of these heartening statistics, financial literacy test scores have actually been declining nationwide. In Jump$tart Coalition’s 2008 biennial survey, given to 6,856 12th graders in 40 states, high school seniors correctly answered only 48.3 percent of the questions. This mean score is a decrease from those posted by the senior class of 2006, which correctly answered 52.4 percent of the questions.

The reason for the decline in these scores may have less to do with kids’ ability to absorb money lessons than with educators’ ability to convey them. In a 2009 survey conducted by Human Ecology experts at University of Wisconsin, it was found that only 37 percent of teachers have taken even a single personal finance course while in college; nearly the same number who are now teaching one in high school.

All of which begs the question: What can be done? If current state mandates cannot guarantee consistency in the quality of financial education offered, teachers, parents, and members of the community must work together to find other ways of fostering economic awareness, entrepreneurial traits and financial responsibility in our children.

Parents can explain their family’s financial situation and give kids responsibility early on to help promote confidence and a deeper understanding of the money cycle. Involving children in daily finances will help them gain an intuitive sense of basic economics—not to mention make daily routines with bills and balances more appealing.

Teachers can examine their current curriculum and appeal to school boards to offer personal finance classes if they don’t already. They can also foster a better understanding of math as it applies to money matters by incorporating related skills into everyday activities and highlighting their applicability.

Lastly, communities can encourage participation in activities such as Prepared 4 Life’s “Lemonade Day”, which afford youth the opportunity to set goals, develop a business plan, establish a budget, seek investors, provide customer service and give back to the community. Individuals, teams and schools can register to run a Lemonade Day stand in one of 17 cities across the country, with the next event scheduled for Sunday, May 11, 2011.

One of the three pillars of the Harris Foundation is Wealth, based on the premise that for individuals and communities to thrive, they must have the ability to handle finances. We are integrating elements of wealth in our existing programs and creating new ones. Here in Houston, our Dare to Dream program recently sponsored a lemonade stand at Burrus Elementary School. Students sold lemonade during their annual Fall Festival, practicing entrepreneurial skills, utilizing basic mathematics, and developing their teamwork and cooperation strategies.

The road to fiscal responsibility is a long one, but if we work together to pave theway for the next generation, our nation as a whole will benefit.

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