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HSFPP Weekly Update # 184—Optimistic Teens May Need Financial Reality Check

Message from Flashman: This week’s story In the New$... is a commentary from a recent survey funded by Schwab on the financial literacy (or, more often, financial illiteracy) of today’s teenagers, along with suggestions for parents to help educate their teens on financial matters.

As part of next week’s video lesson, I hope to be able to tell you when you can order the revised HSFPP materials online from NEFE, as well as more on the parent newsletter. I’m trying to find out when the first issue of the newsletter will be available and whether parents can sign up to receive it directly via e-mail or need to go to NEFE’s parent Web site. (I’m not yet sure of the process to be followed.)

 

In-Service Training This Summer on Revised HSFPP Material:

We will be doing day-long trainings this summer in Daviess, Perry, and Warren Counties.

You can register online at the following sites.
http://www.ca.uky.edu/fcs/HSFP/registration.htm

We are in the process of setting dates for additional in-service trainings across the state this summer. We will let you know via e-mail when we add them.

 

Suggested Activities for Educators:

I’ve written a letter to parents (see draft below), which you can adapt, explaining what your class or 4-H club is doing to address financial literacy. We also want to let parents know that next year’s new version of the HSFPP will include a newsletter for parents so they can get involved in helping educate their teens on various aspects of financial literacy. This will also show how your class or club is preparing young adults for the real world.

Letter to Parents:

As you may know, financial illiteracy is a problem for those of high school age. We are addressing this problem with the High School Financial Planning Program, which is sponsored by the National Endowment for Financial Education (NEFE). Each student receives a 120-page workbook, which remains an excellent resource for students even after they have graduated high school. The book covers subjects such as setting financial goals, budgeting, credit, investing, and insurance. The revised curriculum will include a new unit on financial institutions and how to protect yourself from identity theft, as well as a parent newsletter. [Title of class or club] is preparing your teenagers for the real world. If parents want to receive the newsletter to help them educate their teens on financial matters, please have them e-mail me at ________________ or give me a call at _________. When the first newsletter is available I’ll let you know.

Included with this letter is a copy of the newly-released survey, “Insights into Money Attitudes, Behaviors and Concerns of Teens.”

Also (not part of letter):

The following Web page provides part of the answer to Discussion Question # 3 (below):

http://www.kheaa.com/prog_keesfaqs.html#how%20much%20for%20GPA

“Do I need to have a minimum GPA in college or technical school to keep the scholarship?

“Yes. To keep the maximum award for the second year, an eligible student must complete his or her award period with a cumulative 2.5 GPA. Following this adjustment period, a student must achieve and maintain at least a 3.0 cumulative GPA to keep the maximum scholarship. If the student has below a 3.0 but at least 2.5 GPA for a subsequent award period, the award will be reduced by 50% for the next academic year. If the cumulative GPA falls below a 2.5, the student will lose the award for at least the next award period. A student may, however, regain eligibility later by reestablishing at least a 2.5 cumulative GPA.”

 

Web Site Pick of the Week:

Please include this Schwab Survey of teens with your letter to parents:
www.aboutschwab.com/teensurvey2007.pdf

 

In the New$… Optimistic Teens May Need Financial Reality Check

by Erin Burch, freshman finance major at the University of Kentucky

Being financially stable right out of college has become an expectation, rather than something we expect to earn over time. I know that, in high school, my friends and I always assumed that, if we went to college, we would automatically be set up for life. In my first year of college, however, I’m learning the hard reality, not just about money, but also about grades and studying. Many teenagers don’t realize the difference between high school and college. High school was always easy for me, as I was able to earn anywhere from a 3.8 to a 4.0 GPA all four years. I studied, at most, a few hours the night before an exam and got a high A most of the time. Unfortunately, my study skills weren’t developed enough in high school, as I learned after my first college exam. Luckily, from my dad, I’ve gotten a determined personality, so I worked as hard as I could my first college semester and ended up with a 3.25. But I have found the kind of expectations I had typical of high schoolers preparing for college.

According to Charles Schwab’s 2007 “Teens and Money” survey findings, most teens surveyed believed that they would lead a financially successful life. “Highly motivated by money, eight in 10 teens agree that ‘it’s important to me to have a lot of money in my life,’ and nearly three-quarters (73 percent) believe they’ll be earning ‘plenty of money’ when they’re out on their own.” The average salary that teens assumed they would earn with the job that interested them most was $145,500. The average national wage, however, is approximately $40,000; and, according to the U.S. Census Bureau, in 2004-2005 the average income in the state of Kentucky was around $37,000. And a beginner’s income in most professions will be considerably lower. If you pay attention to surveys, you find that Kentucky lags behind most states in many ways, educationally, financially, and in health. We need to prepare ourselves better for life.

Television and other media often portray celebrities who were plucked off the street, or who lived stereotypical rags-to-riches stories, so it is no wonder that many teens expect easy financial success. We would do well to see how hard many famous people have worked and for how long before achieving success. Jay Leno, for instance, toiled away in small comedy clubs for years; and UK’s new basketball coach, Billy Gillispie, works just about around the clock. And these are talented individuals; not everybody has that level of talent. Success usually doesn’t happen quickly, and, besides, celebrities might not be typical success stories. Most of us would do well to find role models closer at hand, ordinary people who have achieved success professionally, financially, and in life; unlike celebrities, these will most likely be people we can ask how they did it.

Schwab’s findings also revealed that, while 63% of teens “say they are knowledgeable about money management, including budgeting, saving and investing,” they don’t actually know as much as they think they do. Nearly a third of all teenagers have already been in debt. The teenage years are when we begin to develop habits for life, for good or for bad. Getting into debt even before college is not inviting a promising future. One thing that Kentucky teens can do to prevent unwanted debt is to come to college prepared, with a good work ethic, therefore allowing you to keep the KEES money you earn during high school for all four years of college. According to the KHEAA official Web site, “To keep the maximum award for the second year, an eligible student must complete his or her award period with a cumulative 2.5 GPA. Following this adjustment period, a student must achieve and maintain at least a 3.0 cumulative GPA to keep the maximum scholarship.” By working hard academically in college, your start to your financial future will be a step in the right direction. 

Teens want more money coaching from their parents:

• 64% of teens report that they would prefer to learn the basics of money management through experience instead of in class.
• Only 30% of teens believe that their parents/guardians are concerned that they are learning smart money management at a basic level.
• “Only 14% of teens report that they are involved in the process of paying household bills or helping to manage the household finances.”
• “While nine in ten teens (87%) report that their parents/guardians talk to them about money; almost a quarter of teens (22%) believe it is disrespectful for them to ask their parents or guardians about their finances.”
• Only 24% were taught by their parents/guardians to use a credit card responsibly and only 13% know what a 401(k) plan is.
• “Only a third of teens (34%) understand why their parents/guardians make the financial decisions they do.”
• Despite overwhelming interest (89%) in learning how to make their money grow, only 20% report that “my parents/guardians have taught me how to invest money wisely to make it grow.”
• “Last year almost half (46%) of teens reported that their parents or guardians talked to them about money weekly or more. That’s down 18% this year to 39%.”

 

Sources: (1) “Optimistic Teens May Need Financial Reality Check, Schwab Survey Shows,” CNNMoney.com, 3/27/07. http://money.cnn.com/news/newsfeeds/articles/prnewswire/SFTU08327032007-1.htm

(2) “Charles Schwab Teens & Money 2007 Survey Findings: Insights into Money Attitudes, Behaviors and Concerns of Teens,” http://www.aboutschwab.com/teensurvey2007.pdf

(3) “Income 2005 – Two-Year-Average Median Household Income by State: 2003-2005,” http://www.census.gov/hhes/www/income/income05/statemhi2.html

 

Discussion Questions:

1.) What are some ways that you can stay out of debt as a teenager?

 

2.) Is the average income that teens expect to earn ($145,500) a realistic goal? Why or why not?

 

3.) Do you think you can obtain a KEES scholarship? If you get one, do you think you will be able to maintain the grades that are needed to keep it? What grades are necessary to get a KEES scholarship and to keep it?

 

4.) What study habits can you practice now that will help you in college?

 

Kentucky High School Financial Planning Program
http://www.ca.uky.edu/fcs/hsfp
The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.
If you are not already on our listserv:
The video lessons are available only to members of our listserv and will not be posted to the HSFPP Web site because of the timeliness of the information. If you would like to receive our video lessons, which are sent to our listserv biweekly, on alternate weeks from these updates, please sign up at the following page of our Web site: http://www.ca.uky.edu/fcs/HSFP/response.htm.