Planned Bill would help educate young people Who pays for financial literacy?

WASHINGTON – The numbers are startling. More than half of high school seniors have debit cards, and nearly one-third have credit cards. One-third of college students have four credits cards when they graduate, and more than half of all graduates have piled up $5,000 in high-interest debt.

The number of 18- to 24-year-olds declaring bankruptcy has increased 96 percent in 10 years. And, surveys show, many of these young people are financially illiterate – they don’t understand such things as interest, minimum payments, credit reports or identity theft, and they may be paying off their school loans for years.

But the problem is not just with the young. One in 5 Americans think the most practical way to become rich is to win the lottery.

Sen. Patty Murray, D-Wash., remembers her kids started receiving credit card applications when they were 16. She said she repeatedly hears from people, young and old, who wished they knew more about financial matters.

Murray will introduce legislation this week that would authorize $1.2 billion in grants over five years to promote financial literacy education beginning in grade school and stretching into adulthood.

“It’s a perfect time to be doing this,” Murray said.

EDUCATION NEEDED

Ayanna Pasham, 17, a senior at Curtis High School in University Place, has a debit card and tries to keep track of her spending.

“I feel like I am mature enough and responsible, but money just disappears,” she said.

Jesus Pedraza, 19, wished he were prepared to handle his personal finances when he entered Tacoma Community College, even though he doesn’t have a credit card.

“I thought I was ready, but money is running out faster than I thought,” Pedraza said.

As part of its Human Development 101 class for freshman, Tacoma Community College devotes a section to personal finance, with students tracking their weekly spending and learning about credit cards, minimum payments, savings plans and investments. James Mendoza, who teaches the class, said he focuses on the nuts and bolts of finance.

“We don’t expect them to be Warren Buffett, George Soros or any of the big dogs,” Mendoza said. “But they need to understand whether a venti mocha is a need or a want.”

Over the past five years, 17 states added personal finance requirements to their curriculum. Washington state is not among them. Last year, President George W. Bush appointed the Advisory Council on Financial Literacy to work with the private and public sectors to promote financial education. The council is part of the Treasury Department. Its members range from the chairman of Charles Schwab to leaders of Junior Achievement USA.

Murray’s bill, co-sponsored by Sen. Thad Cochran, R-Miss., would provide grants to state education agencies that agreed to establish financial literacy standards and assess how well students were doing in elementary, middle and high school. Nonprofit organizations also would be eligible for grants. In addition, grants would be available to community and four-year colleges to offer financial literacy classes for students and for adults.

EXISTING PROGRAMS

No one is sure how many school districts in Washington offer or require financial literacy classes. Junior Achievement of Washington state operates programs in 85 school districts reaching about 130,000 children, said Daniel Moore, the president of the state group. About 4.5 million young people participate in Junior Achievement programs nationwide.

Besides classroom instruction by people with business experience, Junior Achievement in the state operates JA BizTown and JA Finance Park, where fifth- and eighth-graders learn how to operate banks and corporations and how to handle their personal finances. At JA Finance Park, eighth-graders play adults for a day, with $25,000 in the bank, two kids, a car loan and a home mortgage.

“Going in, they think $25,000 is a lot of money,” Moore said. “Coming out, they wonder how anyone could live on that.”

Other programs are also operating in the schools. Founded by a bankruptcy judge in New York, the Credit Abuse Resistance Education program sends bankruptcy judges around the country into high schools to talk about personal finances.

Pat Williams, a bankruptcy judge in Spokane, says that when she walks into a class of 25 or so 10th- or 11th-graders, it’s not hard for her to spot the five that will end up in bankruptcy in three years.

“They are dealing with so much, cell phones, car insurance, credit cards, debit cards,” she said. “It was stunning to them to learn there were late charges on a credit card bill.”

For six years, Pam Whalley, director of the Center for Economic Education at Western Washington University in Bellingham, has been crisscrossing the state training high school teachers how to teach financial literacy. She figures 750 students over three years will end up taking a class from a teacher she trains.

Ideally, Whalley said, it would be better if parents took time to teach their children about finances, but that doesn’t happen. “More parents talk to their kids about sex than about money,” she said.

One survey of high school students found they expected to earn an average of $143,000 a year and were confident they could handle the money, but few knew how to do a budget. College students know little about savings, insurance and retirement and are too easily lured to credit card deals, she said. “College kids will do anything for a T-shirt,” Whalley said.

In the middle of a recession, Whalley said, educating students about financial matters is critical.

“If you make a mistake during a recession, you have less to fall back on,” she said. “If you make a mistake when your job isn’t safe, you could lose your house or your car. When you have financial literacy, you have more control over your life.”

Les Blumenthal: 202-383-0008

blogs.thenewstribune.com/politics