Schools need a 4th R: Realizing Riches

What follows is a "My View" column that I wrote for the Cape Cod Times while I was in high school. I am posting it here as my response to Tennessee's decision to require financial literacy classes:

We are approaching a retirement crisis. The average baby boomer household has a net worth of about $100,000, less than one-sixth of what most experts agree is needed for retirement. According to a recent article by actor, economist and writer Ben Stein, retiring baby boomers are headed for a decline in their standard of living similar to the one that swept this country in the 1930s. With the Social Security system that was supposed to serve as a safety net in limbo, pundits are lining up to blame just about everyone for the boomers' dismal financial situation. Some blame the politicians. Others blame a materialistic consumer culture characterized by conspicuous consumption. But I think there's one institution that no one is talking about that deserves a giant share of the blame: schools.

Americans have made poor decisions with money (a savings rate of zero, compared with the average Chinese household's 40% savings rate), landing themselves in the precarious position they are now in. That's largely a result of financial illiteracy. Far from correcting this problem, the schools have ignored it, and kids still know nothing about money.A recent survey by Jump$tart, a financial literacy advocacy group, asked high school students which investment, on average, offered the best returns over periods of greater than 18 years. Some 46% said a U.S. savings bond; 33% said a savings account; and another 3% thought a checking account was the best place to put money long term. Only 17% of students knew that stocks represented the best investment over the long term. And we are trusting these people to make good decisions in planning for their future?

Schools have a responsibility to teach kids the basics of money management, and they're failing to do that. Hedge fund millionaire Jim Cramer's father taught him about the stock market when he was 6 years old. America's second richest man, Warren Buffett, worked in his father's brokerage office as a child and bought his first stock when he was 11.

Most working- and middle-class parents don't know enough about money to teach their kids. Public education has an opportunity to level the playing field with financial literacy education, and it's squandering it. Cape Cod Academy teaches all its students about the stock market in sixth grade. My school, like most other public schools, has no financial literacy program in place. The failure of the schools to teach kids about money has done more to perpetuate the status quo than any lobbyist in Washington could ever dream of doing.

So what should the schools be telling kids about money? They could start by telling them about how important it is to start now: that if every kid in America saved $1,000 per year between the ages of 15 and 20 and invested it in a stock market index fund, they could have a nest egg of over half a million dollars when they retire. But if they wait a few years, it'll be too late: If the same kid starts investing $1,000 per year from age 27 until 65, they'll end up with more than a hundred thousand dollars less, even though their total out-of-pocket investment is six times as great.

Kids should learn how to read credit card offers, what factors to consider when picking a mutual fund, and how to buy a car or home. They could use a book like David Bach's best-seller ''The Automatic Millionaire'' so they could learn basic personal finance and how to set up a system where they put some money aside every month without having to think about it.

But no kids are going to do that unless they are educated about how money works and the importance of starting early.

If you're a parent, call your school principal and ask why the school doesn't teach financial literacy.

If you're a teacher or principal, see about getting a financial literacy program in place at your school.

And if you're a teenager, start saving now, because eating Alpo in your golden years won't be any fun at all.
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