Mary Sturgeon, a fifth-grade teacher at Vinton Elementary School in Lafayette, Ind., knows many of her students' families are facing hard times. Parents have been laid off, and some are having trouble finding new jobs. A student recently moved to a new neighborhood in the same district after her parents lost their house to foreclosure. "Our community has been very affected by the financial downturn," says Sturgeon.

All of this inspires Sturgeon to throw her heart and soul into teaching her kids about financial literacy as part of her fifth-grade social studies curriculum. For a few weeks every year, she launches a mini-economy project robust enough to make United States Treasury Secretary Timothy Geithner proud. Her students apply for jobs such as attendance taker and blackboard cleaner, get paid in play dollars, learn how to calculate taxes, and explore the concept of compound interest when they save with — or borrow from — the National Bank of Vinton Elementary. They divide up into three "factories" and, using Play-Doh as their raw material, churn out shirts, baskets of apples, hammers, or cup-and-saucer sets. Then, to experience the laws of supply and demand, they sell the goods to one another. At the end of the unit, Sturgeon auctions off a collection of trinkets — books, hats, elegant markers — and her students use the play money they've amassed to bid on them.

The economic lessons she's teaching her students, she says, are more vital now than ever before. "For a lot of my students, material things came easy," says Sturgeon. That era, it seems, is over, and Sturgeon wants to be sure her kids have the knowledge they'll need to survive and even thrive in the coming years.

The Teachable Moment

While the Great Recession drags on, children from all walks of life — from those attending poor schools in the Rust Belt to affluent schools in Fairfield County, Conn., — are seeing the impact of the financial downturn writ large. Real estate prices have plunged. Homes are in foreclosure. Jobs have been lost or cut back, or are increasingly uncertain. Savings, including most college funds, have cratered. Financial well-being, which many kids have taken for granted in their short lives, is no longer assured. Some, like the students of Village Academy High School in Pomona, Calif., created a powerful YouTube video, "Is Anybody Listening?," in which they described the toll the country's financial woes had taken on them, their families, their inner lives, and their dreams for higher education. (It turns out President Barack Obama was listening. He visited the school in March of 2009 and promised to revamp policies to help right the economy.) For many kids, though, anxieties about the economy go unspoken.

Which doesn't mean teachers should ignore them. "It is a teachable moment," says Robert Duvall, former president of the Council for Economic Education. And schools disregard it at their peril. "Most of our current economic problems — the subprime meltdown and the hedge fund implosion, for instance — show you the high cost of financial illiteracy. We've failed at teaching people the basics. And now we are paying the price," says Duvall. Since the stock market took a dive last September, his group, which trains teachers to provide personal finance and economics instruction and supplies free K–12 lesson plans to teachers and schools, has been deluged by calls from educators hoping to find a way to make the younger generation more sophisticated about debt, mortgages, investing, and savings.

Start the Dialogue

A new study suggests that teachers have their work cut out for them. In the spring of 2008, researchers at the University of Arizona surveyed 2,000 college freshmen to probe their attitudes about money, financial-literacy education, and their own personal monetary habits. They found that nearly 73 percent of those students had resorted to at least one risky financial behavior, such as maxing out credit-card limits or not paying bills on time. More alarming still: Nearly one in five of those surveyed had used some extreme strategy for meeting day-to-day financial needs, such as taking out a payday loan or using one credit card to pay another. Soyeon Shim, director of the John and Doris Norton School of Family and Consumer Sciences at the University of Arizona and the study's principal investigator, says she hopes to follow this cohort for 20 years. "We want to measure the impact of financial literacy on their life outcomes. Our question is this: Where do they learn their positive habits? And how can we maximize what they learn so that they can have a satisfying and happy life?" She's convinced that providing explicit financial-literacy instruction will yield long-term benefits. And interest in learning to do more with less has rarely been higher. Even in the short time the study has been underway, Shim says, the changing financial outlook has altered the way her subjects are managing money.

Some states are already teaching at least components of financial literacy. Seventeen states require high schoolers to take an economics class (up from 13 in 1998). Twenty-eight states have some personal-finance knowledge woven into their standards (up from 14 in 1998). Seven states mandate that students take a personal-finance class as a requirement for graduation. Three more states — Virginia, New Jersey, and Arizona — will be making personal finance a graduation requirement in the 2009–10 school year.

And financial literacy, points out Harlan Day, executive director of the Indiana Council for Economic Education, doesn't have to be a stand-alone class. "Teachers have come up with ways to teach economic concepts in geography, history, even through literature."

Many experts say instruction should begin in the home before children are even old enough for school. Laura Levine, executive director of the Jump$tart Coalition for Personal Financial Literacy, which advocates for more finance classes in schools, says parents are the first and best teachers. "Like all tricky issues — drugs, sexuality, and money — parents need to talk to their kids early and often," she says. But where to start?

"The very youngest kids should know a few basic concepts, like the fact that money has value, why people should save, and the difference between wants and needs," says Levine. At that age, good lessons about finance come when parents take a child to the store and comparison shop as a way to discuss price and value. Early education teachers, she says, can focus on budgeting and planning, supply and demand, as well as savings and compound interest. At-risk students, she says, should get beefed-up instruction on careers and entrepreneurship — and be taught that income is an important part of the equation. In high school, lessons should touch upon savings, investing, credit, insurance, and identity theft.

Reality Check

In the 10 years that Sheila Miller has been teaching personal-finance literacy, an elective for 11th and 12th graders at Newfound Regional High School in Bristol, N.H., she's cleared up a lot of misconceptions about money. "This generation, they are used to having a lot," she says. Until they get their first jobs, her students often crave designer purses or expensive electronics — without a clue of how much money it takes to buy those luxury goods. The ones who get after-school jobs tend to be more grounded — they quickly learn what an iPod costs, and that they need to mentally subtract the cost of gas from their weekly net earnings. But Miller says even the ones with part-time jobs struggle when it comes to thinking long-term about their financial well-being. "A lot of times I hear, 'I'm not going to pay for car insurance.' Although it is not required in my state, I have to explain to them why they should at least have liability," she says.

The most common myth she runs up against is how much a $10-an-hour wage buys in this day and age. "Many of my students have an idea that they can get out of school, get a $10-an-hour job, and actually live on their own, in an apartment with a car and a fancy cell phone. I tell them that even with one or two roommates, having your own apartment on that kind of salary can be really difficult." This year, as the For Sale signs proliferated in her community and news of foreclosures trickled in, the conversation in her class about budgets, good debt versus bad debt, mortgages, and income got increasingly serious.

Miller says that by talking about it now — when her students are 17 — she's hoping she can save them some of the pain their parents are experiencing. She knows her message is getting through. "I'll see a student who has been out of school for a while, and that student will say, 'The course you taught me was the most useful thing I learned in school!' That feels pretty good!" she says with a laugh. Although enrollment in her class has been increasing steadily, she's been pushing to give all kids an opportunity to take it. Next year, she'll get her wish. District officials have made her class a graduation requirement. "I'm sorry that it's taken an economic downturn to give kids this opportunity," she says. But she's sure the class will provide lessons worth learning.

How to Talk to Kids About Money

It's not always easy to start the conversation. Here are some pointers from Jump$tart's Laura Levine and Janet Bodnar, editor of Kiplinger's Personal Finance and author of Raising Money Smart Kids.

Pre-K and Kindergarten

The chief lesson at this age is that money has value. Let them put coins in a piggy bank, play "store," or sort your change into pennies, nickels, dimes, and quarters. Remember: Children at this age don't do abstract. It's hard to explain to a preschooler that a dime is more valuable than a nickel. (Bigger seems better.) You can begin the important discussion about the difference between wants and needs, but don't expect too much. You can talk about saving, but don't expect them to participate. Planning ahead is usually a developing skill at this age. Keep it simple.

Early Elementary School

This is a good age to begin an allowance so children can toy with concepts like saving and budgeting. As part of the school curriculum, children will be learning to identify currency, name monetary value, and make change. It's a good idea to practice this with a child whenever it is practical. Now is the time for a child to observe adults talking about comparison shopping and learning, at least by osmosis, this essential lesson: Every day is not a treat day. There is a time to spend and a time to be budget conscious. Continue the discussion about wants and needs and how to delay gratification.

Later Elementary School

It's time for a field trip to the bank. You are going to have to do a lot of explaining: There is not much about banking that is intuitive. No, the back room of a bank is not filled with bags and bags of money. No, you don't get the same $10 back that you deposit. Introduce the concept of compound interest — both for savings and for loans — and how you can make money work for you. Also, suggest the concept of charitable donations, too, perhaps by raising money for a favorite cause. If you are saving for a car or a vacation, give them periodic updates on how your own savings plan is working out.

Middle School

This is the age where kids are targeted by The Great American Marketing Machine. Teachers: Help parents fight back. Middle schoolers ask for many things, some of them quite costly. At this age, they need to hear that some purchases — like a designer purse or the latest cell phone — are beyond the reach of family budgets or (horrors!) outside what you think is appropriate for a pre-teen. You'll hear that "everyone has it!" This is not true. Make it clear that no 12-year-old needs a $170 phone. The $39 phone will do just fine. Start talking about the importance of saving — for a trip to an amusement park, for a particular item of clothing, and, at least partially, for college.

High School

Start talking to kids about good debt and bad debt, and warn them about the dangers of credit card interest. Some parents get their kids credit cards around now to "learn how to use credit responsibly." Others call that a terrible mistake. Whatever the social climate, it is time to talk about how long it will take — and how much you will actually pay — if you only pay the minimum balance on a bill. Also, introduce kids to the stock market. They're old enough to understand that owning stock means being part owner — and sharing in the profits — of a company whose products or services they use. It is useful to know about other investment and savings tools, too, such as Roth IRAs, 401ks, bonds, and CDs.

Web and Book Resources for Teachers

Money coach Lynnette Khalfani-Cox offers her top financial-education resources for encouraging money-savvy kids.

Resources on the Web

Council for Economic Education

American Association of Family and Consumer Sciences

The Jump$tart Coalition for Personal Financial Literacy teaches 12 financial principles all kids should know.

The National Endowment for Financial Education has a variety of resources and games to teach young people financial skills. NEFE also has a group of energetic volunteers who visit — free of charge — schools nationwide to introduce young teenagers to a range of financial-literacy topics, including budgeting, credit management, and financial goal-setting.

The United States Mint offers parents and educators free materials and information on personal-finance education, ranging from lesson plans and newsletters to interactive challenges that help kids learn about money and how it's made.

Money Savvy Generation teaches kids how to responsibly handle — throughout their lifetime — the four important uses for money: how to save, spend, invest, and donate it wisely.

Hands on Banking, a program sponsored by Wells Fargo, teaches money skills for kids, teens, young adults, and adults. The colorful curriculum is free and available in English and Spanish. It's designed for both self-paced, individual learning and classroom use, as it comes complete with instructor guides.

Book Resources

Alexander, Who Used to Be Rich Last Sunday
by Judith Viorst and Ray Cruz

If You Made a Million
by David M. Schwartz and Steven Kellogg

Pigs Go to Market: Fun With Math and Shopping
by Amy Axelrod and Sharon McGinley-Nally

The Millionaire Kids Club Series
by Susan Beacham and Lynnette Khalfani Cox


This article was originally published in a 2009 issue of Instructor magazine.