Financial Literacy popular with students
December 15, 2020
I flipped on the light switch, took a calming breath, and walked inside to see the neatly aligned rows of desks and a red gradebook on the teacher’s desk that read “J.D. Uebler – English Department.” The dull color of the white board held stories of thinking and learning that had occurred in this space over the years, and the worn carpet in the entryway added a flare of character. Another calming breath and a brief thought about the upcoming first days of school.
Disrupted from my ruminations, I fumbled around for the phone only to be greeted by a sterile voice welcoming me to NorthWood High School followed by an abrupt pivot to something about human resources: “Could you come in to fill out your W-4 for income withholdings? What would you like to do with your FSA? Should you want to participate, please consider our matching options to your 403(b). You’ll also need to review these indexes to select how you want your VEBA account invested,” making it seem as if I should have understood any of what she just said. I was spinning.
As each form came my way with appropriately highlighted sections to assign monetary values, write my initials, or check boxes making it clear that “by checking this box, I’ve read and understand…,” I made my guesses. Turns out, I gave the government a nice interest free loan by withholding too much income each pay period, and I lost money in my flexible spending account because how was I supposed to know the “use it or lose it” mantra at age 22? I did get the 403(b)-matching correct, whew! Taking a Financial Literacy course in high school would have dramatically shifted my first HR experience.
Learning to manage their money
In 2015, economics instructor Andy Dorrel launched Financial Literacy at Culver Academies. An elective course in The Ron Rubin School for the Entrepreneur’s curriculum, Dorrel set out to achieve a simple goal: provide students the knowledge and tools for sustainable and sound management of their personal finances.
From there, Scott Johnson ‘94, director of Marketing and Communications, honed the course to focus on achieving Financial Independence (FI) and to include the frequent use of Microsoft Excel. Driven by their passion for adding value to the student experience and the practical content, Dorrel and Johnson’s course exploded in popularity. This year, the Indiana boarding school will run five sections of the course (about 80 students) and, to-date, five different instructors have collaborated on the course.
Culver’s Financial Literacy course aims to provide students with the tools to attain FI. This means that you can cover your expenses with income from your invested capital, instead of from obligatory work – a lofty goal, no doubt, but achievable with knowledge and persistence. To help students understand the path to FI, the course design follows the sequence of knowing your why, maximizing income, minimizing expenses, wisely investing the difference, and tracking your money. In other words, students learn:
- to develop their first principles and a personal mission statement to act as guardrails for all financial goals and decisions
- Practical skills to ensure maximum income generation for their chosen profession
- Strategies for controlling expenses in major categories like taxes, housing, transportation, and insurance
- The risks and rewards of various investment strategies
- To use Excel to create balance sheets, cash flow statements, future value calculators, and a Financial Independence calculator.
When $500 turns into $1,800
Jacob, a first classman, uttered the words, “No, way – are you serious?” Looking up with a wounded face, he motioned me over to his table, but his loose eye-contact suggested that his question would be a reluctant inquiry. Looking around to make sure his peers’ attention was elsewhere, he whispered to me: “Mr. Uebler, I spent my entire summer income, $1,800, on buying video games and the ridiculous in-game add-ons.”
I nodded and motioned for him to finish the activity. With a groan, he re-engaged his Excel workbook. After more unrecognizable sounds coming from his direction, he called me over again. With embarrassment this time, he shared that he not only spent all his income from his summer job, but he also spent more hours in a virtual world than he did working at his job.
When he paused long enough to realize that his $500 gaming console cost him $1,800, Jacob learned about real cost. When he paused long enough to consider how those hours invested in gaming could have been invested in personal relationships, service, or physical fitness, Jacob learned about opportunity cost.
Of course, Jacob should just be a kid and do kid things – that's not the point. The moment where he realized he was making a choice with both his money and time and that those choices have consequences is the point.
While the pandemic has limited student spending on the staples of Culver living—coffee and pizza— I think all our audiences, primarily parents, would be encouraged to observe students realizing the impact of their spending habits. Students will still waste money, but the design of the class aims to at least help them pause before compounding poor spending habits.
Paying interest on a free t-shirt
“BMOC, it’s free!”
“What?” I thought to myself as I turned away from Dunn Meadow and toward the shouting voices. The allure of a free t-shirt, regardless of the printing, already diverted me from the path I was on to attending class. The t-shirt wasn’t really “free,” of course, as I also walked away with my first credit card – it was that easy. I can assure you that I did not wake up that morning deciding that this was the day I would sign up for my first revolving, unsecured loan.
Though it may not take the form of a free t-shirt advertisement, we know that our students in Financial Literacy will face similar bait with even more ease and access to pocketing a freshly minted credit card with an absurd line of credit to go with it.
Credit cards are the chainsaw of personal finance.
A credit card can be a useful tool but can also cause serious damage if not used carefully. To prepare our students for the choice of using a credit card – and it is a choice – we use the chainsaw metaphor. We design the credit card lessons to inform students of how credit card issuers make money, to position students to research the ways credit cards are useful tools, and to help them see the damaging consequences of minimum, late, or even lack of payments. With these design outcomes as a part of the curriculum, students who take Financial Literacy will still benefit from the credit card company’s incentive (e.g. a free t-shirt or points towards rewards), but they will also find themselves in control of using the credit card as a useful, convenient tool.
Recently, Greg Farrall ’88 of Farrall Wealth Management in Valparaiso, Indiana, met with students over Zoom to talk to them about entry-level steps into investing. Greg’s simple approach of “Spend a third,” “Save a third,” and “Give a third” resonated with students as they discussed the content of his presentation.
Dorrel recommended inviting Culver summer parent Ryan Doyle from Capital Group in Indianapolis to share a few of his investing insights with the students. Though our students hear repeatedly the advantage of time, which allows compound interest to do its work, they connected with Ryan’s urging to invest “when you have it” instead of waiting for “the right time” even if the investment is only the minimum required amount. Audrey, a senior from Illinois, shared in a thank-you note to one of our speakers that “your specific advice about still investing money even if it is a small amount each month and thinking of those investments as strictly long-term assets was helpful for my thinking in college and when I get my first job” – new coach, same message.
APR, net income, gross income, diversification, liquidity, asset, liability, risk, dividend, future value, 403(b), 401(k), unsecured loan, premium, mortgage, income withholding. How would your high-school-self fare with reading an article that contained combinations of these terms? Not surprisingly, most students have little understanding of most, if not all, of these terms – how would they given their lack of life experience?
Because financially oriented topics and news are rooted in unfamiliar terms, high-schoolers, and Americans in general, are set up to be poor consumers of this content. Through the funds of The Ron Rubin School for the Entrepreneur, all students in our Financial Literacy class receive full digital access to the Wall Street Journal with a simple focus for students to succeed in their consumption of financially oriented news articles. Students read handfuls of selected articles to apply the concepts they have learned in class.
The most recent article focused on the CARES Act and its inclusion of different deferred payment programs. Students accessed this article because they understood how payroll withholdings function, how subsidized and unsubsidized student loans function, and how mortgage principal and interest payments function. A productive, responsible citizen is one who is informed. We believe the goal for being successful consumers of financial news adds significant value to the ways our students formulate their own opinions about financial topics.
While Culver’s Financial Literacy course will continue to evolve, the fact that students leave a pattern of feedback along the lines of “I’m so glad I took this class because I actually will use it” suggests the experience adds value. It also proves that boarding schools and college prep schools do, in fact, teach practical life skills. It is our goal that students in Financial Literacy will develop the capacity to begin their careers with sound financial understandings and habits and can be a resource to their young peers.
We hear from parents all the time that they wish they would have had the option to take this class in high school. Surely, my confidence would have been different with HR all those years ago had I taken a Financial Literacy course, or maybe I would have decided to wait a few years before getting my first chainsaw…I mean, credit card.
J.D. Uebler will teach four sections of Financial Literacy class at Culver Academies. He has been a member of the Humanities Department since 2010, and this is his first year as an instructor in The Ron Rubin School for the Entrepreneur.