A person would have to be marooned on a desert island to be unaware that America is experiencing an economic slump. Predictions are that things will continue to decline as the impact of subprime mortgage foreclosure ripples across the country. While a recession makes everyday life a little tougher for most of us, I think the greater concern is the underlying financial illiteracy that caused so many people to risk their homes with these potentially disastrous loans.
Kids aren't born knowing how to handle money, but they certainly absorb early on their parents' attitudes toward it. To most kids, ATMs, credit cards and checkbooks seem like magical sources of free money. I remember my little sister asking my parents to just "Write a check!" whenever they said they couldn't buy something.
My friend Beverlee experienced something similar with her son Gavi on a recent family vacation.
"We stopped in Newport, R.I., which is lovely and cute and not suffering any sort of recession. One of the many expensive shops had a mammoth tusk for sale, a bargain at $29,000 or something like that. Gavi wanted it. Of course we said no, not even thinking for a second that he might be serious. But later on, he asked how much space we had on our Visa. He asked why we couldn't put the tusk on Visa. I finally realized something, and explained that after you pay for something on a credit card, you then have to give that amount of money to the credit card company."
It was a light bulb moment for Gavi, who, until that time, thought that the purchase just went onto the credit card and vanished. Unfortunately, too many adults behave as though that is true.
According to a 2007 survey of American credit-card holders, over half of the respondents said they had learned "not much" or "nothing at all" about finance at school. Researchers from the State University of New York found that upon graduation, less than half the teens they surveyed in 2006 were able to correctly answer questions about basic financial facts.
I remember taking both economics and personal finance in high school. Georgia is one of the few states to mandate that these subjects be required to graduate today.
While I think that education is part of the solution, I believe that financial literacy is primarily rooted in learning good habits. And like all good habits, they're best learned well before adulthood - or even high school.
I'll admit that I have not been the best financial manger in history. Despite taking classes on the subject, I only understand the most basic of economic concepts. For example, don't ask me anything about the stock market unless you're craving a deep belly laugh at my expense.
They say it's never too late to learn, though, and I hope to learn right along with my children as we add a grade-appropriate economics course to our homeschool curriculum this year.
Our first unit study teaches how a business works and culminates in a bake sale that will coordinate with the yard sale we'll have this fall. The second unit will teach my fifth-grader, Zach, how to manage a bank account.
One exercise requires us to give him our stack of utility bills so that he can use his "checkbook" to pay them. Filling out those Xeroxed checks from the workbook should give him quite the reality check on the monthly costs in maintaining a home and a family. I think he will be very surprised to see where the majority of our family's income goes.
Zach already understands a little about banking, as his allowance is direct-deposited into his own account each payday. He knows how to check his balance online, and knows that when he purchases something, money disappears. The bank no longer seems like a magical place to him.
You might call me a mean Mama for dousing my son in such reality, but that's OK. I'm scared of the world my children will inherit if we don't get a grip on this. The reality of life is that there isn't anything magical about money. It's hard to earn, easy to spend and increasingly harder to save it. That is why we must, as families and consequently, society, start teaching our children better.