myFICO Kids – Making financial awareness, protection & health a part of the entire family.
In light of Financial Literacy Awareness month, myFICO published a few posts identifying state standards on the topics of saving and investing for all age levels. This is the third and final post in the three-part series on how parents can help teach their children the importance of saving and investing at all age levels.
Let’s take a look at what a high school graduate is capable of learning and what parents can do to help.
National Standards for Saving & Investing
It’s important for parents to know what the national standards are in financial education so they know what they should or should not be teaching their children. There are national standards in financial literacy as determined by the Council for Economic Education and, according to their website, those who complete high school should know the state standards for 4th and 8th grade, and also know the following about saving and investing:
- Individuals choose between immediate spending and saving for future consumption.
- Inflation reduces the value of money including savings. The real interest rate is calculated as the nominal interest rate minus the rate of inflation.
- Real interest rates are typically positive because people expect to be compensated for deferring the use of savings from the present into the future.
- The nominal interest rate tells savers how the dollar value of their savings or investments will grow.
- Money received in the future can be compared to money held today by discounting the future value based on the rate of interest.
- Government agencies regulate and supervise financial institutions of the nation’s banking and financial systems.
Jump$tart, a non-profit organization that’s partnered with approximately 150 national organizations, also has a set of national standards in personal finance education. By the time children finish high school they should be competent on the following concepts surrounding saving and investing:
- Discuss how saving contributes to financial well-being.
- e.g. Describe the advantages and disadvantages of saving for short-, medium-, and long-term goals
- Explain how investing builds wealth and helps meet financial goals
- e.g. Use a calculator to figure out the end value of an invested lump sum and figure the lump sum needed in order to reach a specific investment goal, given a rate of return and the number of years.
- Evaluate investment alternatives
- e.g. Calculate investment growth given different amounts, times, rates of return, and frequency of compounding.
- Describe how to buy and sell investments
- e.g. Compare the investment objectives and historical rates of return in two mutual fund prospectuses.
- Explain how taxes affect the rate of return on investments
- e.g. Contrast the benefits of a traditional IRA vs. a Roth IRA.
- Investigate how agencies that regulate financial markets protect investors
*For the complete list of these standards please visit each of the individual websites.
Right now only 17 states require a high school course in personal finance, only 22 states require a high school course in economics, and only five states require a stand-alone course in personal finance for high school graduation. If you happen to live in the states that aren’t implementing those valuable financial courses, your teen could be missing out on valuable lessons that lead to a successful financial future.
High School Saving & Investing Resources
When subjects aren’t being covered in school due to budget cuts, staff, or other conflicting items, it’s up to you, the parent, to step up and make sure your child is getting the proper education they need. For example, only 56% of teens plan to save some of their income, down from 89% in 2011. Explaining the importance of saving early and the value of compounding interest will greatly set your teen up for success.
Here are 8 resources about saving and investing parents can go over with their teen before they enter the real world (summer is the perfect time to introduce these lessons). Keep in mind when looking through these resources that some of them are designed in a very specific manner (or for a group) in order to comply with state standards. As a parent helping to further your child’s education, you can overlook a lot of things that don’t make sense to you because you aren’t required to follow certain time frames or standards.
Resources on Saving, Spending & Borrowing
- Introduction to Earning Interest –This is a lengthier lesson plan for 9th-10th graders that will require the parent to go over the terms and the supplied examples, in order, with their child. Some parents won’t feel it’s necessary to lead this portion, but that depends on how disciplined your child is. The parent will need the teacher (parent) worksheet, the assessment answer key, and the “Now You Try” answer sheet. The student will need the “Now You Try” worksheet and the “Introduction to Earning Interest” worksheet. All resources are free to download and/or print. For those with teens in their final years of high school, you can download each of the advanced materials at Saveandinvest.org.
- Where to Stash your Cash –This is a short lesson, but I like it because it’s straight and to the point. Have your teen review the different types of savings and investing strategies on the form and then call around to local banks to compare rates and fees. This will familiarize your teen with their local options and give them a life-lesson in shopping around for the best option. This is free to download or print.
- Intro to Credit Cards –This lesson plan can be used by both parents and teachers and will introduce the student to the basics of credit, debt, how to avoid debt and fees, and how credit cards work. This resource is free to download, comes with examples and an accompanying quiz to test their knowledge. After the students have gone through this lesson, have them go over the “First Time Credit Card Owner” lesson to prepare them for their first credit card so they don’t get into debt from late fees and other charges.
Resources on Investing & Stock Market
- Guide to Investing - This lesson will introduce the teen to early concepts related to investing such as the how the market works, the difference between a bull and bear market, how stocks and bonds work, how to choose a stock, and covers different investments. These resources are free to download and/or print.
- Rule of 72 –This is a math formula that helps consumers understand how many years they need to save a certain amount of money to reach their savings goal when dealing with compound interest. You will get a detailed explanation of the Rule of 72 and a table that shows an example of different investment rates. You may calculate your own scenarios here, or you can print out a worksheet that includes different investing scenarios.
- Building Wealth Over the Long Term –This is a lesson from Discover’s Pathway to Success program. It covers compound interest, investment diversification and risks and rewards. Included in this lesson is a set of slides, 3 activities, and discussion questions. This lesson is laid out to meet education standards so, although this lesson looks very lengthy, a lot of the included information is redundant and explanatory. This resource is free for parents or teachers to download and/or print and will take about 90 minutes.
- Kapitall Investment –This is one of the best investing platforms I’ve found for learning the stock market. It’s not a lesson plan, but instead a real-life education platform. It works and functions just like the stock market would, but they allow you to create “fake” accounts where you play around in a hypothetical environment. Users can research stocks and funds, share investing ideas, and build virtual brokerage portfolios. I wouldn’t consider introducing this to anyone younger than 16 or 17. This platform is also for those with real money invested in the stock market.
For parents with younger children, you may be interested in our blog posts for those in K-4th and 5th-8th grade. We outlined the concepts children of those age groups are able to understand, as we did above, with various activity examples.
Kari Luckett writes about financial topics for CompareCards.com and is the content strategist for CompareCards.com. Kari is the lead writer for myFICO Kids, a column focusing on teaching children about smart financial habits.