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Sunday, May 12, 2013
The Roanoke Times article “Kids at work” (April 28) and editorial “Classify economics as a foreign language” (April 29) discuss methods of teaching middle-schoolers about finance in ways that will improve the decisions they make later in life. Wise budgeting of one’s income becomes more and more important as time goes on.
The editorial laments that high school seniors are lacking in their understanding of economics, even after classroom instruction and having lived through five stressful years in the U.S. economy. Economics centers on finding the best use of available resources, whether for nation, household or company. We are all affected by how well those decisions get made. In the final analysis, a nation’s growth is limited by its population, capital and ideas. All of us are served by quality education.
BizTown, with its mock-up of storefronts in Mapleton, Minn., is the creation of local schools working with Junior Achievement to improve financial education. BizTown has schoolchildren learning about management skills in the world of work as CEO of a company, owner of a restaurant or sales associate. Along the way, students gain insights into incomes earned in various employments, how labor markets work, and job interviews and the hiring process.
Recently, I experienced, as a volunteer, a similar effort of JA in Fairfax County. Theirs is called Finance Park, with the focus on household budgeting instead of the job world. The storefronts represent Verizon, Volkswagen, CVS, Wells Fargo — names like those that appear in our typical budget. All eighth-graders in the Fairfax County Schools will cycle through the program. They prepare in their traditional classrooms for their full day at Finance Park to have a clear understanding of what the visit will expect of them. The students I observed spent the entire day there with the assigned task of completing a budget. Each girl or boy was given a persona or life situation, annual household income, age and status (whether single, married, single with children or married with children).
The game was then played by each student. The overarching question: How do I best meet all the needs and desires of my household with the amount of income available? By shopping in each store for goods or services, the student learned about the complexity of providing for all members of the household. Food, housing, utilities and transportation had to be budgeted along with insurance, taxes and medical costs. Cable systems, cellphones and computers had to be priced and sorted out. Also, bad luck or good luck was taken into account, as unanticipated expenses or income are drawn — like Chance cards in a Monopoly game — and need to be provided for in the budget.
The day’s game ended only when the student submitted a balanced budget, with some required provision for saving along with spending. A “reasonableness” standard was applied, with minimums and maximums imposed for each of the 16 spending categories, and saving required to be at least 1 percent of household income. These rules reinforce the idea that spending for one item involves the cost of giving up another item. Choices must be made, within given income boundaries, and saving must become a habit in early adulthood.
Why is successful budgeting so important? As employer-paid benefits and defined-benefit pensions wither away, individuals must take greater responsibility to provide for their own futures, including retirement. Recent data reveal that the average U.S. household is saving and accumulating too little to afford a well-financed retirement. In these times, careful budgeting and saving for investment become all the more important.
These efforts of Junior Achievement in concert with public school systems will seem to have a lasting impact on students — time will tell. I saw students in Fairfax so engrossed they nearly forgot lunchtime. Throughout the day, they put into effect what they had learned in the classroom about managing money. They learned in some detail the workings of financial institutions and the time value of money — home mortgages, car loans, the need to save early in life rather than starting later. These financial calculations are, after all, vital to all of us.
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