Reader Responses September 25, 2017

SURVEY SAYS: Basic Financial Education in K-12 Schools

It seems that many adults are struggling with basic finances—budgeting, paying off debt and saving.

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I have seen many suggestions that basic financial education should start when children are in school.

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Last week, I asked NewsDash readers, “Do you think basic financial education should be taught in K-12 schools, and if so, starting at what grade?”

Not surprisingly, the majority of respondents (95.8%) do think basic financial education should be taught in K-12 schools. However, 2.8% said it should not and 1.4% had no opinion.

Asked what grade basic financial education should start, the majority of readers (55.7%) selected elementary grades (K-5). Twenty percent said Grade 6, 2.9% said Grad 7, 7.1% chose Grade 8, 8.6% selected Grade 9, 2.9% said Grade 10, and Grades 11 and 12 were each chosen by 1.4% of respondents.

There were many comments by readers about the importance of starting financial education early, even before children start school. Some noted that parents should also teach these skills, while others noted that if children learn in school, they may be able to help their parents. A few readers even gave ideas for how to teach children basic financial concepts. Editor’s Choice goes to the reader who said: “Just like English, Math, Science and Social Studies requirements, there should be mandatory classes (to graduate) for home economics.”

Thanks to everyone who participated in the survey!

Verbatim

Teaching basic financial education should start at the parent’s knee. Lesson 1: When you’re a child, save 50% of allowance, jobs, etc. Lesson 2: Always pay yourself 1st. If they follow those lessons, when their adults they will not get in over their heads.

I think that financial education is a life skill along with cooking, sewing, home maintenance and car maintenance.

Several states now require personal finance education in K-12. Notables are Texas, Idaho and Georgia. FINRA has a study on this. I am reviewing to see how my state can incorporate this along with the already required semester on Economics. See also WSJ opinion column March 3, 2017.

You can’t start early enough.

In addition to basic financial education being taught in the classroom, I also believe that parents have the responsibility to pass along sound money management skills and habits.

The Boy Scouts have a Personal Finance Merit Badge which I’ve taught- the younger boys understand it quite differently than the older ones do so I would suggest a class like this should be taught multiple times with different focal points.

Start early! Kids are smart and will absorb basic lessons at a very young age. Sadly many won’t get the lessons at home – so incorporate at school. Lessons can be taught in math, in social studies, and they can learn to make a budget worksheet in computer lab.

Even the youngest of child can be taught financial education. Don’t have to start a first grader learning about stocks/mutual funds, but rather the concept of saving, maybe the concept of interest.

Financial education should be part of the curriculum at every grade level. Having a budget that involves paying yourself first through saving and living below your means, building up to basic investing.

I had a hard time choosing an age. Ultimately I said Grade 9, which is when high school starts in my area. That said, I think it makes sense to start talking about financial ed in broad terms as early as elementary school.

Most kids don’t know what ‘balancing a checkbook’ means since it’s all done online. They need to understand how to pay bills, balance their bank account, save for retirement, insurance, etc.

By 10th grade, when kids are 16 and likely to have a job and driving, they should be able to manage a checking account, understand how loans work, the impact of credit, and how to create and stick with a budget which includes short- and long-term savings. These are basic skills EVERYONE should have and shouldn’t have to learn through trial and error.

Need to train teachers first

Elementary schools now allow students to buy lunch on “credit” through a pre-paid account. I think little things like that hurt financial literacy. I made my kids go to lunch with money to learn about the value of items they’re buying, budgeting, counting change, etc.

Not everything needs to be taught in school. I love teaching my daughters about finances, and abdicating yet one more thing to the schools that parents should be teaching (sex ed!) just doesn’t feel right.

We were required to take a general business class in 9th grade where we learned about budgets, mortgages, writing checks/keeping a ledger, inflation, stocks, bonds, etc. It was useful information that may not be discussed at home. Parents usually shield their kids from family finances and don’t know much about financial markets. I think kids who have some financial education are more likely save, set financial goals etc. and hopefully become interested is seeking further information. If you want to pique a child’s interest in something, you have to expose them to it first.

This should be mandatory in all schools (public and private). I wish it had been taught when I was in school!!!

I did a multi-week session with 7th graders for Junior Achievement one year. It was a great structure and a meaningful event for the students as they began to realize what it takes to run a household. I don’t think it is that difficult to structure and might even be part of basic math, budgeting, along with those dreadful word problems! Wherever it’s taught, it’s important and teaching the children can help the parents too.

For younger grades, the children should be able to equate saving with rewards. This would not need to be done with money, but other items such as bottle caps or straws. They could be shown how even more bottle caps and straws would be added by an outside source (interest). At the end of period of time, the child would count how many items he/she put in and how many items were “earned” as interest. A small prize would be given to each child depending on the earned interest amount.

I believe that financial education is a basic part of math. In addition, it also teaches the benefits of waiting, versus instant gratification.

Our school system teaches basic financial education in 12th grade, but it is too late. Many of these kids already have jobs, but spending all their money; not saving any for later or something special. It should be taught sooner at a grade appropriate level.

There is one problem with this survey and that is defining basic financial education. Depending on the definition of basic, would make a difference where you believe it should start. I elected K-5, because the true basics of financial education needs to start as soon as possible, i.e. what is money and how it is used. Savings is a very important part of financial education and it can never start early enough. However, dealing with credit cards or checking accounts, budgeting and more advanced type financial education would probably be more appropriate for the middle school age student.

It is never too early to start teaching kids about money and budgeting. We have way too many financially illiterate adults in this world. Maybe a little early intervention would have helped.

Seems odd that most surveys say adults need financial education yet we expect them to teach it to their children. Doesn’t seem logical.

I think Parents should teach sex education and schools financial education.

Honestly, I believe your children’s financial education should start at home prior to starting school. My little tikes (8 of them) have been learning about financial concepts since they played with Little Tikes! They are all now in their teens and twenties and are on very solid ground financially.

The earlier the better. Kids see parents pay for things every day with money and credit cards. They should know how you earn, save it, grow it, etc. It’s just as important, if not more, than music and art classes.

We should hope to teach children so they do not repeat the mistakes their parents made. But sadly, many parents will teach their kids to make those mistakes by example. Do as I say, not as I do doesn’t always work!

Like many things, financial education requires repeated exposure. Beginning early with simple concepts and building on them over time is the best way to make the concepts stick.

I believe as soon as they can understand how to add/subtract and know how to count money, they should understand the concept of saving.

Just like English, Math, Science and Social Studies requirements, there should be mandatory classes (to graduate) for home economics.

I think back to my grade school days and I had a paper route. It was actually a little business as I needed a checking account to pay for my papers and had to collect door to door every two weeks for the subscriptions. The remainder was my profit. It provided very valuable experience for me and today I am a C.P.A. Education in my grade school years would have been wonderful.

Perhaps, is the answer to the question. Of course, we teach our children mathematics starting at very young ages and I don’t see this improving the ‘knowledge’ of our graduates compared to the rest of the world or even previous generations. Until we develop effective teaching techniques (or bring back ones that worked), the subject matter won’t matter. If anything, confusion may be created.

I think that it’s important to teach young kids basic financial information, of course on their level. In school, they can learn the facts so they are aware of the terms and concepts, but their parents should be responsible for instilling their values about saving, etc. The teaching both in school and at home should continue through high school and beyond.

Financial education for kids is going to have to go beyond counting coins and bills, because who carries cash today? You just stick a card in a magic machine and, poof! You can buy whatever your heart desires. That will be very challenging to teach, but oh so necessary. And maybe some of it will rub off on mom and dad!

Perhaps teaching basic finances will also help with the other basic school topics as well. Anything to get people to pay attention to what is happening to them financially will help

The challenge is educating the educators!

They should start courses before they are old enough to get a job (excluding babysitting, etc.) so they are prepared to handle their money smartly.

Teaching kids about money can’t start early enough. As I tell my kids, money doesn’t grow on trees! 🙂

We included a couple financial education courses in our homeschool curriculum. These included our child participating in real-life, hands-on experiences with our family’s financial life – bank account and credit card account reconciliation, online bill payment, investment and retirement account reviews, medical, dental, vision, life and auto insurance reviews and annual benefits enrollment.

The earlier the better. Introduce children to the subject while they are “sponges” for information and before they pick up bad habits from others.

Lessons should be tailored and age appropriate but there is a level of financial education that can be learned by everyone. Instilling sound financial habits at an early age will benefit everyone through the years.

Kids need to understand a basic budget, as well as using credit, specifically credit cards.

The kids should have little jobs to do around the house and be paid an allowance, and taught to save that money for something they would like to have. Giving them money for doing nothing will teach them that they can get by doing nothing and still receive benefits. What a country.

I think financial education should start as soon as most children are able to have a job. They should start learning about saving for retirement, balancing a checkbook, budgeting, etc.

Since it is not being taught at home, it needs to be taught at school. When I was a kid, I was told I needed to save for college and the rule was “save half, spend half”. I usually saved more than half because I had no need for money at such a young age. Every time I received money, my parents would take me to the bank to deposit it into my “passbook savings” account. Remember those? I still have the book! The majority of the entries were for very small amounts, less than $5.00. I was able to graduate from college in 4 years with no debt. In fact, I still had $2000 left in my account!

Financial education should be the most important part of a child’s education. Without financial knowledge, individuals struggle their whole lives. Start with learning coins at very early ages. Playing games like Monopoly, Pay Day, etc. reinforces the ability to understand money matters.

The sooner the better. Most families don’t talk about money.

Kids generally do not understand the basics of finance (credit, budgets, saving). If they are taught good financial habits early, they will be able to handle their finances better.

Yes, absolutely! I had no idea when choosing to go to college that they would loan you more money than you would ever be able to pay back with the major you chose, and neither did my parents who had never gone to college and only had a mortgage.

Kids want toys, electronics….then they want more and more. If taught early about the money then they realize how much things costs. Some kids brag about how much their pants or their shoes costs thinking the more the better “image” to their peers; especially when other kids’ families can’t afford them, and put them down for what they wear. Teaching the value of money and saving is important. We put our grandchildren’s birthday money in a savings account for them every year so that when they turn of age to buy a car, they are able to purchase a decent used car. They get excited watching their money grow and the “little” interest they earn when the money is put in certificates of deposit for 5 year terms. We do this as a “start” to get them excited about saving.

I think it should be ongoing from K on. By the time kids graduate high school they should know budgeting inside and out, know how to balance a checkbook and other basic financial necessities.

Ask pretty much anybody in the retirement space what would greatly boost retirement readiness/preparedness, and they’ll say “financial literacy” without any real notion of what that means. And yet, most studies show that if you teach it before kids are ready to apply those skills, it’s for naught. So, I expect you’ll get a massive response that it should be taught, and that it should start early. The followup question is – what would that curriculum look like?

The earlier the better. My kindergartener asked me the difference between ‘cash money’, debit and credit cards the other day. The younger she learns the basic concepts, the less taboo they will be.

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.
Deals and People September 23, 2017

Who’s Working for You?: American Benefits Council

In a series of articles, PLANSPONSOR is profiling industry groups that work for retirement and health plan sponsors to protect them from onerous burdens and help them with plan design and administration. In this article we profile the American Benefits Council (ABC).

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The American Benefits Council (ABC) is 50-years-old this year.

Jim Klein, president of the American Benefits Council in Washington, D.C., says in 1967, large employers interested in sharing information about employee benefit developments, as well as service providers, started the group as an information exchange. According to Klein, after the Employee Retirement Income Security Act (ERISA) was enacted, the group’s board felt there was no group in Washington to represent and advocate for plan sponsors, so it became a 501(c)(6) advocacy association.

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The group was called the Association of Private Pension and Welfare Plans, and changed its name to American Benefits Council in 2000. Its mission statement is: “The American Benefits Council advocates for employers, connecting public policy and private-sector solutions to shape employee benefits for the evolving global workforce.” Klein says the mission statement was very recently changed for two reasons: one is, the prior statement used the term “voluntary benefit plans” which has taken on a new meaning, and secondly, the group has gotten more involved in global benefit issues, as well as domestic issues.

The ABC currently has 425 member companies, mostly large employers, including 62 of the Fortune 100 and 172 of the Fortune 500.

Plan Sponsor Interests

According to Klein, with regard to health care, ABC’s members are concerned about what is going to happen with Affordable Care Act (ACA) repeal and replacement effort, and the implications it will have. “Most of the debate has been about individual insurance market coverage, which is important for large plan sponsors, because they want to make sure policymakers are focused on implications for employers, preserving the uniform framework under ERISA and ERISA’s preemption over state laws,” he says.

In addition, Klein says, “The Cadillac tax is viewed by members as a threat that can erode employer-based coverage. We have established a coalition to fight it—Alliance to Fight the 40—which also addresses imposing a cap on the exclusion for providing health care coverage.”

Diane Howland, vice president of Legislative Affairs for the ABC in Washington, D.C., says retirement plan sponsors are concerned about full or partial Rothification of defined contribution (DC) plans. “We believe this could have an immediate detrimental impact on DC plans,” she says.

According to Howland, tax reform also impacts defined benefit (DB) plans, and DB plan sponsors are concerned about funding rules and Pension Benefit Guaranty Corporation (PBGC) premiums. “The continued viability of DB plans is on the line. Plan sponsors can’t control accounting rules, volatility of assets or fluctuation of interest rates,” she says.

In addition, an exemption for the ERISA preemption for state retirement plans would affect plan sponsors’ decision to sponsor retirement plans, Howland says. This is of particular importance to employers with employees in multiple states.

How ABC Advocates

The ABC advocates for plan sponsors in multiple ways, according to Howland, including by face-to-face discussions with legislators and regulatory agencies. The ABC also comments on proposed regulations.

For example, the ABC is engaged in continued efforts with lawmakers for electronic disclosures of retirement plan data. “There are bipartisan bills in Congress to permit electronic disclosures. We are making an effort to get those enacted, and are guardedly optimistic,” Howland says. Klein adds that the ABC also is pushing for electronic disclosures for health plan data.

Klein says the ABC meets with members of Congress, testifies at congressional hearings and engages members to be involved in grass roots activities in their states with their constituents. The ABC also has a Washington representatives group—member companies that are based in D.C. or come to D.C. to advocate. “Frequently, some are expert lobbyists and provide an expert plan sponsor voice,” he notes.

In addition, if one member company has an issue with about the way current laws or regulations may affect them, the ABC makes a special advocacy effort and can often engage with lawmakers or agencies to get information clarified to make sure a law or regulation doesn’t cause a problem with that member.

Klein adds that very often Congress will write a law and then carve out provisions for small employers so it’s not applicable to them. He says lawmakers see that problems exist much more commonly among small employers. But, the ABC has suggested that instead of, or in addition to, small employer carve outs, lawmakers give large employers carve outs when a provision is not applicable to large employers. In addition, when regulations are issued, regulators are required to make a statement under the paperwork reduction act about how many hours it thinks employers will take to comply. The ABC believes the onus should be on regulators to make sure the policy they are seeking cannot be obtained in a less burdensome way than what they’ve proposed.

Jason Hammersla, senior director of communications for the ABC in Washington, D.C., adds that the council advocates on a judicial level, solo or with groups, to file amicus briefs in court cases against plan sponsors.

For retirement plans, Klein says the ABC counts as an advocacy “win” that its retirement income task force first developed the concept of catch-up contributions starting at age 50. “This was in particular a response to the retirement security of women who may have had a gap in saving,” he says.

Also when the ACA was being considered, there was a provision in section 13-32 giving state innovation waivers. Klein says Congress is strongly looking into this now—giving states more flexibility. The original version granted ability to issue these waivers to three different cabinet secretaries, and the ABC persuaded lawmakers to remove the Secretary of Labor from having this ability because of a concern that in the future this could lead to erosion of the ERISA preemption over state laws.

Klein adds that authors of the legislation to repeal the Cadillac tax would argue that the ABC’s coalition played an important influence on delaying the tax to 2020.

Howland adds that leading up to the passage of the Pension Protection Act (PPA), the ABC had an influence on funding rules for DB plans. “If not for that, the rules would have been more onerous and difficult to comply with,” she says.  Also, leading up to the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), in addition to provisions about catch-up contributions, the ABC gave input about increasing statutory limits on retirement plan contributions.

Klein says in more recent years, the ABC has successfully ensured additional funding stabilization for DB plan sponsors to have a smoother duration period to meet funding rules, and it has continued its efforts to hedge PBGC premium increases accompanied by funding relief.

Most pressing for the ABC right now, according to Klein, is ensuring ACA efforts do not intentionally or inadvertently affect negatively the employer-sponsored system—that state waivers do not affect how multistate employers operate and are confined to the individual marketplace. The elimination of the Cadillac tax is also a top priority.

According to Howland, at the top of the list for retirement plans is tax reform, helping expand coverage and advocating for multiple-employer plans (MEPs), an additional safe harbor for automatic deferral escalation and electronic disclosures of retirement plan information.

Klein adds that the ABC is focused on making sure the way state laws are written do not affect employer plans. For example, he says, “Our members provide excellent paid leave, but as states have passed their own laws, it has become a huge administrative and costly headache to try to comply with the variety of approaches. We advocate for a voluntary federal standard for state and local laws to comply with.”

Resources ABC Provides

Klein says the ABC offers a benefits compliance center as a resource, with attorneys on staff that can answer questions for members or find them out through relationships with lawmakers and regulators. The council also performs benchmarking surveys for members to find out how fellow members are designing plans or dealing with strategy, compliance or communications issues. The ABC also has a feature on its website to help members determine what the laws are across the country at the state and local level.

The ABC has task forces that meet several times a year to deal with particular issues, and it holds meetings around the country for which ABC staff goes to metropolitan areas to meet with companies and give members legislative and regulatory updates and facilitate the opportunity for them to share strategies with each other.

Globally, the ABC has established a relationship with the International Employee Benefits Association (IEBA) in Brussels. “It’s not an advocacy organization but an information exchange. The ABC serves as the U.S. chapter of the IEBA, and any of our members can tap into its resources,” Klein says.

The ABC is also a private-sector adviser to the U.S. government for the Organisation for Economic Co-operation and Development (OECD) in Paris. “Through that body, we can ensure our government is doing what it can to help U.S. companies operate abroad,” Klein says.

Hammersla adds that the ABC hold webinars to inform members, and there are podcasts on its website that are not just for members, but open to the public. “I interview plan sponsors about their efforts. I just did one about answering Millennials’ questions about saving for retirement,” he says, adding that there will be more to come.

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