Teaching Kids How Not to Go Broke

By Susan Davis

At the back of Terry Anderson's economics classroom at Island High are lists of terms, such as "cash flow," "horizontal merger," "depreciation" and "limited partnership." At the front stands Gary Jaekel, a financial consultant with San Leandro-based Primerica Financial Services.
Jaekel looks out over the heads of the dozen students who have been learning about macroeconomics and smiles. "Schools don't teach students how to handle their own money anymore," he says. "But it's important information. Unless you change your behavior, 54 percent of you will be dead broke by the age of 65. Forty-one percent of you will still be working. Only 4 percent of you will be able to retire."
Jaekel's dire warning is just the warm-up act for a two-unit economics mini course that was put together by the Alameda Education Foundation, the Alameda Chamber of Commerce and the East Bay Chapter of the California Association of CPAs and introduced to two of Alameda's five high schools in spring 2006. Called the "personal financial education" curriculum, the two-hour course covers the basics of savings, investment, credit and debt management.
"I'm on a crusade to see that personal financial education is taught in every high school in the United States," Jaekel says. "I think that if we educate students about the costs and terms of debt-while also teaching them how to invest money wisely-they'll be able to make better choices." Adds Walter Schleuter of the CACPA, "Our current financial situation is appalling. Something has to be done about it."
Jaekel and Schleuter's curriculum comes from the National Endowment for Financial Education, a nonprofit organization dedicated to helping Americans learn about sound financial planning. NEFE provides a free curriculum and workbooks to any public high school in the country that wants to use them.
Such nonprofit, extracurricular help may be the only way that high school students can get good personal finance guidance these days. As of 2002, 80 percent of all American parents believed that their children would receive financial education in school. But according to a national survey done by the National Council on Economic Education, in 2002 only 31 states included financial education in their educational standards. Only 17 of those 31 states required schools to actually implement the standards of those states and only four (Idaho, Illinois, Kentucky and New York) required students to complete a course on personal finance before graduating. (As of 2002, California required only that students be taught-and tested-in economics. In May 2006, however, Assemblyman Roger Niello authored and introduced AB 2787, which would require the state to develop standards for personal financial education and students to answer questions about personal finance on their high school exit exams.)
"It takes the private sector to step up and coordinate the materials and the teachers," Jaekel says. In fact, Jaekel's passion for the subject is so great that he originally sent letters to every school district in Northern California, asking to be allowed to teach at the high schools. Most of them either turned him down or didn't reply, an indicator, perhaps, of administrators' jammed schedules as much as their lack of interest in finances. But in Alameda, Sean McPhetridge, who directs the school district's secondary education programs, welcomed the idea as long, he says, as the two men could organize it. Their interest just happened to coincide with that of the Alameda Education Foundation, which coordinated contacts among the high schools and the chamber-as well as recruited volunteer teachers-and Jaekel was able to make Alameda a test case for his vision.
"We like to be the connection people in the community," says Vicki Sedlack, who coordinates the program for AEF. "By that I mean we like to help get people together to help the schools. In the future we're helping to find other, similar projects to get local business people more involved with the district, too."
Jaekel's presentation at Island High in the spring covered savings and investments; he returned the next day to talk about credit. During the savings sessions, he talked about basic principles-like how important it is to put money in savings each time you get paid. But he also introduced specific notions-like the "rule of 72" for compound interest, which asserts that if you divide the interest rate of an investment by 72, you'll get the number of years it will take for the investment to double. Moreover, he explains, becoming a millionaire really isn't that hard-as long as you sock away $200 a month, religiously, starting the day you graduate high school.
"The idea is to take control of your finances early on," Jaekel tells his class. "What most people do is buy things they don't need with money they don't have to impress people they don't know. But if you want to be rich, you have to behave frugally. You have to watch every penny."