Public schools now are paying a lot of attention to teaching our children about finance as well they should. We live in an economy that sees people without jobs and homes. Bankruptcy is a way of life and there is almost as much attention paid to reestablishing credit as establishing credit.
Credit and Debt are issues that students need to understand; and, the sooner the better. The school system is measuring fourth, eighth and twelfth grades on various financial issues.
In the area of Credit and Debt there are four “Standards” or “Keys” that students are evaluated on. By sharing these with you, you can check ands see if your child is up to par. In this article we will be looking at grade four “Standards.”
In Standard One the student is expected to “identify the costs and benefits of various types of credit.” For a fourth grader this would include comparing buying with cash and credit; explaining why financial institutions lend money and why credit cards are a form of borrowing.
Standard Two involves asking the student to explain the purpose of a credit record and to explain borrowers’ rights.
This would encompass showing a scenario where using a credit card would make sense and perhaps considering “wants” versus “needs” and the danger of using credit for both.
Standard Three is a matter of avoiding credit problems or correcting credit problems. Easy, don’t overspend. This seems like such an easy concept to teach but it is very difficult. Actually it gets backs to needs and wants. After all when you are nine-years-old needs and wants are not very far apart.
In the fourth grade there is no “Fourth Standard” since it is for this concept “Summarizing major consumer credit laws; that is a little dicey for a child of that age.
When my wife and I was raising our boys we hit upon a program that seemed to work pretty well about teaching credit however should you choose to employ it I warn you in advance that it is difficult to enforce.
Each week we would give a son their allowance and they did have to do “chores. They got 75 percent in cash and they got 25 percent in credit. The trick was that the 25 percent could be used to trade in for three times cash. As an example then if the allowance was four dollars, they would get three one dollar bills and a sheet of paper for one dollar but they could trade it in for three additional dollars as needed. As a matter of teaching good skills if they did not use the credit they actually got the three dollars extra. However whatever part of the credit they used had to come out of the next allowance. The final piece to the puzzle was they could do the same thing for three weeks before they had to pay the piper.
Of course at the end of three weeks, initially at least, they were in debt nine dollars or three weeks worth of credit. Ultimately they made it work for them learning to save until something they really wanted came along and we got even smarter enhancing the savings when they occurred.
Credit can ruin a person’s life. It is important that we teach our children prudent use of it.
“Credit and Debt,” Article, “Fourth Grade Additional Expectations,” Jump$tart Coalition for Personal Financial Literacy, Charles Schwab