by Kimberly Roy, Manager HSFPP
Before working for NEFE I coordinated financial education for nonprofits throughout metro Denver. In that role, I heard from both clients and nonprofit professionals that financial education wasn’t appropriate for low-income families. I heard that saving for tomorrow meant nothing when families couldn’t pay bills today and that budgeting was a joke because every penny was accounted for before it was received.
And I heard that low-income adults didn’t want to attend classes, convinced they would be blamed for being poor because they didn’t know how to budget (condescending and rarely true) or that they would be urged to invest dollars they didn’t have in stocks they didn’t understand to make money for the future despite the food they couldn’t afford in the present. The common message was: Why would low-income families waste their time?
Most personal finance educators, however, know that the root of financial education goes much deeper than learning how to invest and how to write a basic budget.
Through my work with HSFPP I have met teachers and community educators who “get it.” I haven’t had to explain why financial education is important for everyone, especially those with limited resources. But at a 2016 Colorado Jump$tart Teacher Training event, some teachers expressed the idea that their students wouldn’t benefit from financial education because their school district has a majority of families on free- and reduced-lunch plans. They explained that financial education wasn’t for their students who come from families that don’t have the money to do anything more than live day by day.
Here are three financial education concepts that all students need, regardless of their life circumstances:
1) Understanding Why You Make Decisions
Inherent in every financial decision we make is an underlying values system that is as unique as our fingerprints. Our money values and beliefs are influenced by our own life circumstances, the adults we learn from growing up and our own personalities. Understanding why we make the decisions we do and how our decisions differ from others’ decisions is vital for any financial education program, regardless of students’ socioeconomic backgrounds.
2) Recognizing Opportunity Costs
If students are only taught one financial education concept it should be opportunity cost. As Dr. Julie Heath explained at the 2015 Jump$tart National Educator Conference, opportunity cost boils down to the basic idea that if you choose option A, then you cannot have option B. For example, if I spend money on coffee today, I cannot spend that money on a car tomorrow. But this extends beyond dollars and cents.
Economics is the art of making decisions in a world of scarce resources (the desire for resources being greater than the availability). The resource might be dollars, but it also might be time, food, water, etc. So if you spend time playing video games, the cost might be time that could have been spent studying. If you use your flour making a cake, the cost might be flour you could have used to make pancakes or biscuits.
We make decisions every day that have immediate costs and potential future costs. Teaching students to recognize the costs of their decisions helps them to better align their decisions with their values and future aspirations and to make mindful decisions as they use their resources.
3) Making a Plan
Learning how to make, monitor and adjust a plan (including having a contingency plan) is a transferable life skill that not only helps students make mindful money management decisions, but also helps them maximize their possibilities beyond the realm of personal finance.
At NEFE we strive to provide sufficient financial knowledge so that individuals can make intentional financial decisions based on their values and life circumstances. Intentional decisions are facilitated by thoughtful planning and adjusting the plan as circumstances and values change.
For example, budgets are one type of financial plan — estimates of future costs and resources. As a future estimate, they rarely are exact and often are updated as the future becomes the present and estimates become exact figures. Budgets are flexible and a way to plan for your anticipated future.
An education and/or career plan is another example of a financial plan that all teens and young adults can benefit from. Just like a budget, these plans are not set in stone and should be updated and amended as life circumstances unfold and priorities change.
Planning can be for short-term or long-term goals but always should be adjusted as life unfolds. The important thing is for students to have a plan, which requires them to think through the contingencies as well as whether or not their expectations are realistic and obtainable.