Financial Education for Fifth Graders
I've finally overcome my fear of speaking in public (though speaking in front of 1000 people at next month's World Domination Summit may bring that fear back) and have actually found that I enjoy talking to various groups about money. I think the key is not to over-prepare.
In early May, for instance, I made a presentation for Adelante Mujeres, a group working to strengthen the local latina community. I spoke to about 25 immigrant women about budgeting, and listened to their financial concerns. (Their top worry? How to send their kids to college!) This was my first personal finance presentation in Spanish, and I loved it.
And last week, my young friend Ethan sent me email asking if I could speak to him and his classmates about personal finance. On Wednesday, I visited Memorial Elementary School in rural McMinnville to answer (and to ask) questions about money. It was a blast.
Mr. Widmer's Class
Ethan's teacher, Mr. Widmer, has recently become interested in personal finance. He's read books like Rich Dad, Poor Dad and The Total Money Makeover and has been applying their lessons to his own life. He's also been trying to teach some of these personal finance concepts to his class of fifth-graders.
For instance, the day before I spoke to his kids, the class did a debt simulation. From what I understand, here's how it worked:
- Mr. Widmer had small candies for “sale”. They were priced at one candy for 20 Pride Paws. (Throughout the year, the kids have been earning Pride Paws for good behavior. They're sort of like the school currency and normally are redeemed for pencils, etc.)
- If a student didn't have enough Pride Paws to buy a piece of candy, she could write an IOU.
- Students could take as much candy as they wanted, as long as they paid with Pride Paws or IOUs.
- Not all of the children had the same number of Pride Paws. Some had many to start with (and were effectively rich) and some only had a few (and were effectively poor).
- As the day progressed, Mr. Widmer asked the kids to pay for their candy. If they didn't have the Pride Paws to do so, he “re-possessed” things, such as their chairs or clipboards.
Those are the basics, though I'm certain I'm missing lots of detail.
What's interesting is that my young friend Ethan turned himself into a one-percenter. “I realized everyone was desperate,” he told me. He still had some Pride Paws left over, so he began trading them for things. He started by trading for pencils and erasers, but then he traded the pencils and erasers for toys. And even for $1.65. He parlayed his extra Pride Paws into a small fortune.
Questions FROM Me
When I visited Mr. Widmer's class, I had half an hour to chat with the kids about money. I thought about preparing something, but as I mentioned earlier, I'm finding I do much better if I just go with the flow. I started by asking the kids some questions about their own financial lives.
First, I asked the class of 25 students how many of them received an allowance. About two-thirds of the class raised their hands.
Next, I asked how much their parents paid them. The going rate seems to be about $4-5 per week, though some kids are paid monthly. Colton, for instance, gets $20 per month, but there are conditions attached to it. “If I punch my brother or something, I get a dollar less,” he told me. Sounds reasonable.
And what are the kids saving for? Well, most of them are saving for college. Some kids have other long-term goals. For instance, Bella told me, “I'm saving for a car. My parents said I should save for a car before I save for college.” One girl told me she had saved money for a year so that she could buy her father's old iPad from him.
Finally, I asked the kids if any of them had found ways to make extra money. I was surprised at how many said “yes”. Parker volunteered that he and his friend have started a lawn-mowing business. “We made business cards and put them in mailboxes around the neighborhood,” he said. “People call us and pay us five or ten dollars to mow their yard.” I love it!
Questions FOR Me
After I asked questions, it was their turn to pose questions to me. (On Friday, I shared the question Hannah asked me: “How much money do you have?“)
Some of the kids had prepared questions, and many were the same sorts of questions I get from adults at other events: How did you get out of debt? What books do you recommend? What's the best way to save money?
One student asked me what I consider the most difficult question in all of personal finance. Nobody has a good answer to this: “If you're in debt, how do you save money?” The obvious answer is to spend less than you earn and then use the extra money to pay off your debt and begin saving. That's what I did, and that's what many of you have done, as well.
What makes this question so difficult, though, are the extra factors that come into play. Like poverty. What if you're poor and in debt. Then what? How do you save money if you don't have any to start with and you're digging deeper in the hole. This is a problem that's plagued people for centuries, and the only answer seems to be: You still have to find a way to spend less than you earn. If your income is low, that means there's only one thing you can do: Make more money.
Laura furthered the conversation by telling us about her own situation. “My family doesn't have much money,” she said. “Both of my sisters need braces and we're probably going to have to go into debt for them. What should we do?” I didn't have an answer for her.
My favorite question of the day came from a quiet girl named Ashely. She came up to me after class and said, “Can I ask you a question?
“Sure,” I said.
“Is it okay to save for just no reason?”
“Of course!” I said.
“Good,” she said. “Because I have $100 or $200 saved and I don't know what I'm going to do with it.”
The Bottom Line
I don't think my visit to Mr. Widmer's fifth-grade class will produce any future millionaires. But I hope that the brief question-and-answer session at least gave them some food for thought.
At one point during our discussion, I tried to explain how interest on credit cards works. “Imagine you buy a piece of candy for twenty Pride Paws,” I said. “You don't have twenty Pride Paws today, but you promise to pay that much later. Well, when you pay interest, you have to pay more than twenty Pride Paws. Maybe for each day you take to pay, you might owe two extra Pride Paws. So, if you take five days to pay, you might owe thirty Pride Paws instead of twenty, all for the same piece of candy.”
If even a few of them grasped that concept, I did my job.
Meanwhile, I think Mr. Widmer is to be commended. It's outstanding that he's teaching fifth-graders fundamental personal finance concepts. That's a tough job. I'm not sure I could do it. But the kids really seemed to be enjoying the subject, and I'm willing to bet that they'll all be better money managers in the future because their teacher spent a few hours getting them to think about how money works.