Sunday, November 2, 2014

5 Warning Signs That Your College Going Teenager Is Financially Illiterate

As an educator going on 15 years of experience, most of those as a high school administrator, you may say I have a bias for "financially sharp" kids.  For one, I rarely encounter them around school, and hardly ever inside my (vice principal) office.  When I do find that gem of a kid that not only has book smarts, but also financial aptitude, I get to questioning like a police officer doing a background check:

What's your name?  How do you know about stocks?  How long have you been learning about the market?  


Hey, (name of student), I heard your response in Economics class about bank lending, who taught you that?

99% of the time, the response I get from these rare (1 in 500, I'd estimate) young adults is that they have learned about x, y, z, financial/investing concept from their parents.  That's a huge statement, I know.  But that's what has been my experience.  It makes sense, of course.  Kids spend most of their time at home with their parent(s)/guardian(s).  That is why it is imperative that parents of public school students, all parents for that matter, become lifelong financial literacy learners, so that they can impart the wisdom of most of these intuitive concepts onto their children.

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5 Warning Signs That Your College Going Teenager Is Financially Illiterate

The topic today is financially illiterate teens (whether or not they plan on attending college) and how parents can spot them.  Some of these "signs" you will have to fish for.  For example, number one below:

1) Give your teen the following scenario/math problem and ask them what is "wrong" with the problem.

Bank of the Westside is giving depositors 15% annual interest for a deposit of at least $10,000.  Joe deposits exactly $10,000.  He gets $1,500 after year one.

Believe it or not, this problem (answer was not provided) came directly out of a math classroom.  Most of the students got the "correct" answer.  Some, unfortunately, couldn't even compute .15 x 10,000 = 1,500.  But what value is there in getting the math right if you can't reason that the interest rate given by the bank for the deposit is as improbable as there being snow in hell?  So, if your teen daughter says, "There is nothing wrong with this problem," looks at you like you're crazy and walks away, she is financially illiterate.

2) Your teen daughter got a new job at the local burger joint and she has been bringing home a steady paycheck for a couple of months.  One Friday evening, you decide to go out as a family for dinner to your favorite Chinese restaurant.  When the bill arrives, she announces that she will pay for the tip  (I know, highly unlikely but just humor me for a second) as thanks for your unwavering support (now this scenario is completely unbelievable).  You tell her to pay 15% because the service was great.  The bill comes out to be $55.10, taxes included.  If she looks at you like what you said is in Chinese, then you have a financially illiterate child on your hands.  At minimum, she should know to take out her smart phone and multiply, .15 x 55.1. and give the waiter/waitress about 8 bucks and a quarter.  She gets an "A" if she can compute in her head, .10 x 55.1 = 5.51 and add a half of 5.51 to this amount or about 2.75 for a total of just over $8 and .25.  Simple math.  Simple math is fundamental to making "deals" in the real world.

3) You decide to have a yard sale to raise a little money.  Days before you prepare the items you are going to sell by placing little sticker price tags on all of them.  During the yard sale, you notice a guest is purchasing several items all at once and is being helped by your teen son.  The total for the items is $33.40.  The guest offers your son a $50 bill.  If your son yells, "Mom!," then your teen son is financially illiterate.  Making change without the help of a cash register (what your teen son will end up working in front of some day) will save you hundreds of dollars (by avoiding getting swindled) over your life as you deal with small vendors at places like swap meets, street fairs, sport venue concessions, and farmer's markets, for example.  He gets an "A" if you hear him say: "Okay, sir, 60 cents makes $34, plus 16 makes 50."

4)  It's late February.  Your teen son is upstairs in his room applying for financial aid online.  You've set him up for success by having filed your income taxes earlier in the month.  He's got your copy of the entire return available to look through.  He manages to enter his social security number correctly on the screen by looking at the first page of the tax return and finding his name next to his number.  (He doesn't yet have it memorized?)  He gets to the portion on parent income and gets stuck, even though there is plenty of help on the web and at the site itself.  He sees you pass by on your way downstairs and says, "Dad, can you come help me with this fafsa stuff?" demonstrating that he is not only financially illiterate (unable to read a tax return) but also not very resourceful.  I don't mean to be harsh but...what's the kid going to do when he's having to do this while away at college the following year?  Call you each time?  Please them once and once only.  After that, it is all on them.  Self-reliance is a key for success in this society.  He gets an "A" if he doesn't even bother you, dad.  He gets an "A+" if when you ask, "Were you able to find our Adjusted Gross Income on the tax return?" he replies, "Yes, you guys made $72,290 last year."

5) You're having a serious talk with your teen son.  He's failing several subjects with only a half semester to go.  You don't want him to get behind credits for graduation should he fail these classes.  Really, you still have aspirations for him to go to a two-year college at minimum.  As consequence for his bad school performance, you tell him you're taking away his skateboard until he gets his grades up.  He dang near has a heart attack when you touch his board.  An argument ensues and you ask, "How will you provide for yourself after high school without a high school diploma or at least a trade?" and he responds (not facetiously), "I'll just get a job, okay!" You, madam or sir, have the worst of all financially illiterate teens out without a concrete concept of what it takes to make ends meet, live independently, etc.  Not only will he need tutoring to pass his classes, but he will also need you to show him everything!  Show him your paycheck, the taxes that get taken out, the income you have left after taxes and how much of that goes to the rent/mortgage.  Show him the bank statement line item by line item, displaying all of your month's expenditures.  Tell him what your salary or hourly wages are and what type of hourly wage he can expect to get for his first job.  He should know what the minimum wage is for your state.  You have basically financially neglected this kid, and it's about time that you give him a crash course for his own sake!

I'll leave you with this:  Teenagers are very adaptable.  They learn quickly.  So, if your teen has failed any or all of the above "signs," there is still hope for them.  They may be ready for college, academically speaking, but will lack some of the important financial literacy skills needed to reduce their expenditures while there.

As high school administrators, we are tasked often with making behavioral miracles out of incorrigible teens.  Miracles happen more often than what is probably out there in terms of a stereotype.  Whatever the "problem" may be with a teen (financial literacy, behavior issues, e.g.) there are always solutions.  Be like those nicotine patches.  High dose at first, but then slowly wean yourself off.  If you're the high dose parent day in and day out...oh boy...don't get me started!

Until Next Time!  Comments/Suggestions?  Please Post.

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