Teaching school kids about money - what are the real life examples of math, budgeting, finance?

Question

Yesterday when renting a car I was listening on the radio to a discussion about introducing classes about money for kids aged 11-14. Here is an article on that topic: Financial education to become compulsory in schools

I was wondering what would be the good questions for them - something that will clearly show the importance of math, budgeting, finance, accounting, and common sense. Here are two examples from real-life:

1. Fuel

You rented a car for a weekend (real life example from yesterday) and the initial tank was half full. As you were driving around the seaside after 227 miles you decided to fuel up and spent £25 (17.37 litres of diesel). The dial was now is 6/16 position but you had peace of mind you make it back home. At home the total mileage was 336 miles. You know that:

• from your home to the rental agency there is another 12 miles
• fuel consumption is in region 40-45mpg (UK gallon = 4.54609 litres)

How much fuel is required in order to return vehicle at the same tank level?

2. eBay

You decided to buy item with free P&P. As you happen to live in the neighbourhood and this is only a short walk you decide to collect in person. Sales tax in your state is 6.00% while on eBay there is same flat price for every state: http://en.wikipedia.org/wiki/Sales_taxes_in_the_United_States

What is the highest amount of savings you can get by collecting in person (no postage cost) and negotiating discount (highest_sales_tax - 6.00%)?

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• How would you approach teaching kids the importance of maths, finance and money?
• What are the other real life examples?

Answer 1

I am a numbers guy, the math is great. Instead of "jane was twice her son's age when he married, and is now 1.5 times his age....." questions in math class, I think the math problems should mostly have dollar/pound signs in front of them.

In general, I like the idea of relating to the kids' situations as much as possible. When my daughter (14) makes a purchase, I'd ask her to be aware of how many hours she had to work to make the money she plans to spend. Was it worth 4 hours babysitting to buy an iPad case? Was it worth 2 to buy lunch that we could have made you at home?

(Note, the 'convert price to hours worked' is a concept that works great when teaching budgeting to anyone, not just kids.)

The math of tax and discounts for comparison shopping works great as well so long as they understand value. A $400 sweatshirt at 50% off isn't really a bargain, in my opinion.

Next, the math of balancing a checkbook should be high on the list. Accounting for the checks that didn't clear but are outstanding is beyond many people, amazing enough.

For the sport fan, there are unlimited math problem one can create for game scores, stats for the season, etc. Young boys who will fall asleep during a stats class will pay attention if instead of abstract numbers, you add 'goals' 'home runs' etc, after the numbers.

(Note - this question is probably outside the scope of the board, no right or wrong answer. But I love it as a question in general, and if not here, I hope it finds a good home.)

Answer 2

If these are children that may be employed, in a few years, it may well be worth walking them through some basics of the deductions around employment, some basic taxes, uses of banks, and give them enough of a basis in how the economy of the world works. For example, if you get a job and get paid $10/hour, that may sound good but how much do various things eat at that so your take-home pay may be much lower? While this does presume that the kids will get jobs somewhere along the way and have to deal with this, it is worth making this part of the education system on some level rather than shocking them otherwise.

Rather than focusing on calculations, I'd be more tempted to consider various scenarios like how do you use a bank, what makes insurance worth having(Life, health, car, and any others may be worth teaching on some level), and how does the government and taxes fit into things.

While I may be swinging more for the practical, it is worth considering if these kids will be away in college or university in a few years, how will they handle being away from the parents that may supply the money to meet all the financial needs?

Answer 3

My education on this topic at this age range was a little more free-form. We were given a weeklong project in the 6th grade, which I remember pretty clearly:

Fast forward 6 years (we were 12). You are about to be kicked out of your parents' house with the clothes on your back, $1,000 cash in your pocket, your high school diploma, and a "best of luck" from your parents. That's it. Your mission is to not be homeless, starving and still wearing only the clothes on your back in 3 months.

To do this, you will find an apartment, a job (you must meet the qualifications fresh out of high school with only your diploma; no college, no experience), and a means of transportation. Then, you'll build a budget that includes your rent, estimated utilities, gasoline (calculated based on today's prices, best-guess fuel mileage of the car, and 250% of the best-guess one-way distance between home and job), food (complete nutrition is not a must, but 2000cal/day is), toiletries, clothing, and anything else you want or need to spend your paycheck or nest egg on. Remember that the laundromat isn't free, and neither is buying the washer/dryer yourself. Remember most apartments aren't furnished but do have kitchen appliances, and you can't say you found anything on the side of the road.

The end product of your work will be a narrative report of the first month of your new life, a budget for the full 3 months, plus a "continuing" budget for a typical month thereafter to prove you're not just lasting out the 3 months, and all supporting evidence for your numbers, from newspaper clippings to in-store mailers (the Internet and e-commerce were just catching on at the time, Craigslist and eBay didn't exist yet, and not everyone had home Internet to begin with).

Extra Credit: Make your budget work with all applicable income and sales taxes.

Extra Extra Credit: Have more than your original $1000 in the bank at the end of the 3 months, after the taxes in the Extra Credit.

This is a pretty serious project for a 12-year-old. Not only were we looking through the classified ads and deciphering all the common abbreviations, we were were taking trips to the grocery store with shopping lists, the local Wal-Mart or Target, the mall, even Goodwill. Some students had photos of their local gas station's prices, to which someone pointed out that their new apartment would be on the other side of town where gas was more expensive (smart kid).

Some students just couldn't make it work (usually the mistakes were to be expected of middle-class middle-schoolers, like finding a job babysitting and stretching that out full-time, only working one job, buying everything new from clothes to furniture, thinking you absolutely need convenience items you can do without, and/or trying to buy the same upscale car your dad takes to work), though most students were able to provide at least a plausible before-tax budget. A few made the extra credit work, which was a lot of extra credit, because not only were you filling out a 1040EZ for your estimated income taxes, you were also figuring FICA and Social Security taxes which even some adults don't know the rates for, and remember, no Internet. Given that the extra-extra credit required you to come out ahead after taxes (good luck), I can't remember that anyone got that far.

The meta-lesson that we all learned? Life without a college education is rough.