hope for a better economic future
by Amy L. Sherman
Apparently there is a tiny silver lining in the gray cloud of the Great Recession. Americans are finally starting to save. In summer 2009, the Commerce Department reported that the U.S. personal savings rate stood at 5.7 percent. To the uninitiated, the number may sound unimpressive. But just a short two years ago, the savings rate was at negative 1 percent, at the time, the lowest it had been in more than 70 years.
Not only are Americans saving more—they’re also spending less. In May, the Pew Research Center surveyed nearly 3,000 Americans. Sixty-two percent had cut back on household spending, and half reported that they’ve reduced the debt they held on car loans, mortgages, and credit cards. As a University of California–Berkeley economics professor told the New York Times (April 10, 2009), this all implies “a re-emergence of thrift as a value."
If that’s true, it’s good news indeed. Thanks to the “New Thrift” project of the Institute for American Values, funded by Templeton Foundation and run by the Institute president, David Blankenhorn, we’ve learned a lot in the past couple years about America’s historical commitment to thrift and the great good it brought society. With missionary zeal, Blankenhorn is trying to reinvigorate this forgotten virtue, publishing new books on thrift and calling for the reinstitution of National Thrift Week. That venerable tradition thrived from 1916 to 1966, starting each January 17th on the anniversary of Ben Franklin’s birthday. Thrift Week promoted the disciplines of paying bills promptly and having a savings account, and encouraged people to follow a budget, invest wisely, pursue home ownership, and share with others.
While the news from Pew is encouraging, it remains to be seen whether healthier consumer habits by American adults will stick beyond the current economic squeeze. Two reasons augur against it. First, financial illiteracy and irresponsibility run very deep. For example, some 43 percent of American families spend more than they earn each year, per Michael Bohinc’s article “Are You Financially Literate?” at ContractingBusiness.com (May 1, 2008). Credit card debt stands at a whopping $915 billion dollars, says Peter Gumball in “The $915 Billion Bomb in Consumers’ Wallets” at YahooFinance.com. Personal bankruptcy is increasingly common, per BankruptcyAction.com. Wealthy, middle class, and poor adults have all engaged in unhealthy financial practices (though the practices look a bit different for each group). Second, some contemporary economists think Blankenhorn is wrong to push thrift. They’re arguing that Americans need to spend their way out of the economic crisis, as can be seen in Blankenhorn’s Weekly Standard article “There Is No ‘Paradox of Thrift’” (June 15, 2009).
Encouraging Financial Literacy Among YouthIf today’s adults don’t change, real hope for America’s long-term economic future may rest with the next generation. An initial look into its financial knowledge and practices is sobering, though. In its most recent biennial examination of high school seniors’ financial literacy, the Jump$tart Coalition reported a dismal showing: the average test score was 47.5 percent, a solid F. Meanwhile, college kids imitate their parents’ bad habits. Half hold four or more credit cards, and according to a recent study by Sallie Mae, the average undergraduate carries $3,173 in credit card debt, as cited in Kathy Chu’s article “Average College Credit Card Debt Rises with Fees, Tuition,” USA Today (April 13, 2009).
Responding to all this, some 38 states now have personal finance standards built into their state education systems. But only 13 states actually require students to take a personal finance course to graduate. The Council for Economic Education worries, “these 13 states make up only 31 percent of the entire U.S. population, which means almost 70 percent of American K–12 students are not receiving the needed education in this important area.”
The Obama administration has jumped on the financial literacy bandwagon. Obama’s 2010 budget included $265 million in competitive grants to schools for “Effective Teaching and Learning for a Well-Rounded Education.” The program defines a “well-rounded education” as including economic and financial literacy.
Ele:Vating Urban YouthThe invigorated attention to training up the next generation in fiscal savvy is welcome, and as the previous section indicates, necessary. An innovative, privately funded initiative to increase economic and financial literacy among inner-city youth that’s been running since 2005 has demonstrated strong promise. Any new programs to nurture thrift and responsible money management should heed its lessons. Those lessons boil down to this: make it relevant, make it easy for teachers to implement, and make it fun.
Led by Street Schools Network, Powell Center for Economic Literacy, and Sagamore Institute, the Ele:Vateproject (Economic Literacy Education: Vital Asset for Transformation and Empowerment) is developing curriculum, training teachers, and implementing creative, interactive Web technologies to nurture good financial habits among K–12 students. Based on pre- and post-tests, the program has raised financial literacy scores among participating students by 26 percent on average.
From 2006 to 2008, the project focused especially on after-school programs and a few “street schools,” small, private schools for mostly low-income, minority kids who are not making it in regular schools. Sagamore Institute led a demonstration project in five cities (East Palo Alto, Indianapolis, Memphis, Miami, and Richmond) that included more than 1,100 youth. Each participating school or nonprofit instituted Economis—an online virtual economy created by Central Ohio Youth for Christ—and an accompanying age-appropriate curriculum of short lessons and games. Participating students receive personal debit cards synced with virtual online bank accounts. They earn currency for participating in positive activities such as tutoring, homework completion, or community service. A weekly paycheck—complete with FICA and other taxes deducted—is directly deposited into their accounts. Then they manage their resources: they can save, invest in CDs, build a stock portfolio, buy products online, or give to charity. Economis and its accompanying curriculum build life skills such as delayed gratification, budgeting, and saving.
“Before I learned the program, I used to spend money like crazy, like there was no tomorrow,” admits Cameron Blevins, a sixth grader at Elijah House Academy in Richmond. “When I learned the program, I learned that you really do need money for other things, not just things you want. Because ‘no’ is an answer.”
LaShanda Rorie, an Economis implementer in Indianapolis, reports that her high school youth find the program relevant. Following the lesson on the benefits of banking over using check-cashing stores, one teen girl came up to Rorie and said, “Thank you, I needed this.”
At the Harambee Christian School in Columbus, the incentives provided by Economis have encouraged big changes. Ninety-five percent of the kids now turn in homework consistently. Students also earn points for good behavior in class. With far fewer disruptions, third-grade teacher Jim Flaherty estimates he has gained an average of 2.5 hours of instructional time each week. Principal Alex Steinman credits the program—plus some other curricular changes the school has implemented, as well as its dedicated teachers—for Harambee’s impressive academic success. Some 88 percent of Harambee’s students are low-income. Its neighboring schools serve a similar demographic. But while students in those schools typically perform at around the 20th percentile on the Metropolitan Achievement Test, students at Harambee routinely achieve above the 50th percentile (i.e., they score higher than about half of all students who take the test). “The virtual economic system at our school motivates and educates our students,” Steinman affirms.
The program has now expanded to additional schools in the Street Schools Network (SSN) and has incorporated“Infusionomics,” an effort to weave economic literacy principles throughout the mainstream curriculum. Coaches from SSN assist teachers in incorporating “keystone economic principles” (such as scarcity, opportunity costs, and “there ain’t no such thing as a free lunch”) into math, science, social studies, and language arts classes. Powell Center director Jennifer Cornell leads the effort and reports that infusing the economic concepts into multiple subjects deepens students’ comprehension and helps them see the principles as “relevant to their everyday world.” Moreover, Cornell reports, Infusionomics is contributing to behavioral changes among students, as youth begin making better choices as they understand opportunity costs and the notion of long-term consequences.
Participating teachers say there is extra work in sowing the economic principles into their core subjects, but the approach works because they don’t have to find extra instructional time for adding an economics class. “It’s really difficult to manage the course of a week,” explains Anita MacBain, principal at Logan Hope School in Philadelphia. “How do we add something in when we already have English, math, science, history, Bible, art, and gym? With Infusionomics, I can take it and ‘web’ it through the different curriculums.”
Participating administrators also like the program because it fits with their aim of being “holistic” schools. “We’re not just educating kids in reading, writing, and arithmetic,” says Heidi Cate of the residential Lighthouse Academy in Grand Rapids, “but trying to help them understand everything that it takes to maintain their own lives—from laundry to balancing a checkbook to renting an apartment.” At Rockville, Illinois’ Lydia Academy, principal Mandy Ross works with tough Latino teens who have been kicked out of the Chicago public schools for truancy, drug use, or gang involvement. What attracted her to Infusionomics was the way the concepts spoke to daily realities and helped youth learn better decision-making processes. What she and teacher Travis Satterlee, both licensed social workers, saw in Infusionomics was “a lot of life skills that the kids need.”
Regina Babb from Forest Park High School in Atlanta says she was “a little leery” about Infusionomics at first because she didn’t know whether the teens would be able to relate to the concepts. But then she started hearing the students use the vocabulary; it “would just pop up” at different times. Once in a science class, a group of students had failed to bring in needed supplies. A better-prepared group, Babb says, “started considering sharing [their] resources, and they were discussing supply, demand, and scarcity. And just talking about, ‘We have what you want. How badly do you want it?’”
The emphasis on economics has led not just to new ways of talking by students, but to many creative, hands-on learning projects as well. At Potters House elementary school in Grand Rapids, Michigan, for example, first grade teacher Beth Vander Kolk engages her kids in entrepreneurial ventures that incorporate lessons in math, language arts, and science. The students have run a major plant sale for the community and conducted an art auction that raised over $1,200 for charity. “The kids’ parents have told me that their children talk with them about earning, saving, and making choices,” Vander Kolk reports. “These first graders see themselves as entrepreneurs and investors/risk-takers.” Now outsiders view the youngsters in a new light, too, she says. “The community is looking at them not as needy kids but as kids stepping up to risk, save, and produce.”
Children at Brinkley Heights School in northeast Memphis were running a pancake breakfast business when I visited there in April. Teacher Jennifer Combs coached the kids in understanding the business’ start-up costs and the potential risks of investment, but the children themselves selected the products, cooked up the goods, and ran the cash register. Brinkley Heights principal Tim Cox loves Economis and Infusionomics because they are so hands-on. “It’s great to explain to kids what they need to be doing and the choices they need to be making,” he says. “But it’s much better if you actually have a learning lab, something for them to actually participate in.”
Cox chose to implement Economis and Infusionomics because his school is trying to help students escape generational poverty. “When I heard how the kids would be able to start learning basic economic and financial literacy skills, I just thought it was a great idea. It was exactly what we needed to be doing because I’ve seen families falling into the same things over and over. We were looking for ways to break the cycle.”
During my visit, Cox and I drove about the neighborhood. Within two miles of the school, there are thirteen payday lenders, six car title loan stores, three rent-to-own stores, and four pawnshops. Just up the street from the school sits Mo’ Money Tax Services, which entices low-income parents with immediate tax returns,, but charges them exorbitant interest rates. “Close to 100 percent of our parents are negatively impacted by predatory lending practices,” Cox says.
Changing Culture from the Bottom Up?The Midwestern foundation underwriting Ele:Vate has a long-standing commitment to economic education, but its involvement with the street schools is a relatively new emphasis. “We believe access to economic knowledge is an inherent necessity for a strong society,” explains one trustee. Now the Ele:Vate partnership has extended the foundation’s reach, enabling it to “identify underserved populations that lack that knowledge.”
Through Ele:Vate, more than a thousand youth in that underserved population are learning the habits of thrift, budgeting, and saving. Their practice of such behavior in the program’s virtual economy is spilling over into their lives in the real world. As one parent put it to me, money from the tooth fairy is no longer burning a hole in her son’s pocket—it’s in his piggy bank. Another mom couldn’t have been prouder of her fourth-grade daughter, who saved up for four months for a special purchase in the Economis store. Travis Satterlee boasted to me of how his two oldest students from Lydia Academy scored in the top 90th percentile on the National Financial Capability Challenge, a financial literacy exam from the U.S. Treasury Department.
Maybe the kids from the ’hood have something to teach the rest of us.
Dr. Amy Sherman is a senior fellow at Sagamore Institute and author of five books, including Restorers of Hope. She also serves as a senior fellow for the International Justice Mission and on the Advisory Board of the Christian Community Development Association.
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