That’s how I was raised. You save money, make good investments … and never carrying credit. Anything on your credit card, you pay off every month. —Heidi Richardson Valdez
SALT LAKE CITY — Learning how to manage money is a challenge: How much is too much to spend? How much should you save for short-term needs and long-term planning? How should you use credit to your advantage and yet stay out of debt?
It's a problem for adults who have never been trained. But equally so for students who receive little guidance on the subject at home, putting them at risk for difficulty in their adult years.
In Utah, 11th and 12th grade public high school students are required to take Adult Roles and Financial Literacy classes as part of the Family and Consumer Science curriculum. Brenda Rhodes, who teaches financial literacy at Salt Lake City’s West High School, said about two-thirds of her students receive little or no money management training at home.
“A lot of people are living paycheck to paycheck and they don’t learn budgeting or financial (planning),” she said. Many students are enlightened by the “practical experience” lessons learned in the classroom, she said.
“They get it, about how important it is to save money and avoiding debt and using their paychecks more wisely,” she said.
The parents in many of her students’ households often work more than one job to make ends meet and have little education themselves on sound money management principles.
“It gets frustrating in a family structure to teach children all these lessons,” she said. While some of the challenges are socio-economic, there also may be some cultural components at influence making it difficult for kids to learn the difference between wants and needs. Priorities can differ widely from a cultural point of view, she said.
Too many students do not even know how to manage a checking account, Rhodes said.
“(This class) does open their eyes,” she said. “A lot of kids will say, 'I learned a lot from it' or they will ask more questions. It helps them process (the information) and use their critical thinking skills.”
The 2008 graduating class was the first required to take a semester of financial literacy training, which included lessons on credit, risk management, savings goals and investment planning.
Learning at home
Highland High School junior Nikita Valdez, 17, has yet to begin her financial literacy education at school, but her first lessons have started at home. Her parents started out by instilling the importance of saving money, she said, and continue to stress the value of proper money management.
“I don’t really get a regular allowance,” she said. “I pay for (things) with money I’ve earned.”
She earns most of her spending money through babysitting, and also does chores around the house for which her parents “pay” her by purchasing items she needs.
Her parents opened a checking account with her last year before a class trip to New York. Nikita said it was her first experience using a debit card — which she used to pay for food and expenses while on the excursion.
“I had never thought about tipping before or signing receipts or when to use a PIN,” she explained. There was also the matter of learning to deposit checks in the bank, all of which she said has helped enhance her appreciation for properly managing money.
“(Like all) the little things that your parents do everyday that you don’t pay attention to,” she said.
Using an app on her smartphone, she is also able to monitor her checking account balance to avoid overdrafts.
“I’m good about managing my money and not blowing it,” she said.
Her mother, Heidi Richardson Valdez, said those values came from her parents and grandparents.
The married mother of three said her grandfather, who was an advertising executive, was a “self-made millionaire,” who accumulated his wealth by living frugally and saving voraciously.
“He was a saver and a hard worker who pinched pennies, but enjoyed other things (like) traveling,” Richardson Valdez said. “He was a big believer in always saving at least 10 percent of your earnings.”
She also said he valued leaving behind something for your grandchildren, not your children. Her parents passed those same values down to their four children, she said.
“That’s how I was raised. You save money, make good investments and never carrying credit,” she said. “Anything on your credit card, you pay off every month.”
Richardson Valdez said each of her three daughters is learning those same lessons, beginning at 7 or 8 years old.
“(By that age) they really get that they are saving and spending money,” she said. “When they talk about things that they really want, then we talk about saving.”
For example, when her 14-year old daughter, Emma, wanted a high-end camera for Christmas last year, they made a pact that they would help her buy it.
“She had saved about $300, and asked if she saved half of the (nearly $800) cost of the camera, 'Would Santa kick in the rest?'” Richardson Valdez said. “I said that was a great idea. So she was able to get the camera.”
Because they don’t give their girls an allowance, she said they all work to save their money — even their 11-year old, Eliza.
“I just feel that if they are chipping in around the house, then I can give them money to do things with their friends,” she said.
Learning by doing
While some households have the good fortune of having learned financial responsibility from previous generations, others have to develop those habits on their own.
Nedra Hotchkins of West Jordan was the first in her family to graduate from college. She said growing up in a working class family in Oklahoma, there was little discussion about saving or investing money.
So she and her husband have developed their own money management ideals to pass along to their 16-year old son, Osiris, and 10-year old daughter, Isis.
“Take out 10 percent for God, half for savings and the rest (they) can choose to do with as (they) please,” she said. The kids have had savings accounts since about the age of three, she said. As they get older, they are able to take more responsibility for how the money in the account is handled, she said.
“For Osiris, understanding that things cost money and that saving for the long-term or in case something happens is important,” Hotchkins said. She also said her son is learning to be more discerning about how he spends his money.
“Once he had $100 and went into a hat store and bought two hats for about $60 — which was more than half of his spending money,” she said. “He bought them, but by the time we left the mall, he had returned one of the hats saying, 'Mom, it’s not worth it.'”
She said he is learning to look for sales or save up for big-ticket items that he really wants.
For his part, the West Jordan High junior said he is learning to appreciate the value of saving, and how to best spend disposable income.
“Don’t spend all your money in one place,” he said. “Follow the guidelines that you’ve been taught like not spending money on things (just because you want it).”
While he also has yet to take financial literacy in school, Osiris expects to be better prepared because of the head start he received at home.
Julie Felshaw, financial and economic education specialist for the Utah Office of Education, was instrumental in developing the state’s financial literacy program. She said the goal of the program is to help students develop objectives for financial goals and planning, career and income planning and money management, along with saving, investing and retirement.
“What we hope is that we’re giving them a basic understanding and planting seeds as well as helping them to be savvy about money,” she said. Students who are not exposed to money management are at risk for some of the financial pitfalls that exist for those who lack education regarding finances, but there is still plenty of time to take advantage of the principles taught in the classroom, she said.
Felshaw said students are taught that every financial decision they make increases or decreases their personal power.
“You want kids to pay attention to money, learn how to earn it, how to spend it, how to save it and how to share it,” she added.
“Money is an important issue in life and no one escapes it,” Felshaw said. “Therefore, the smarter you are about it, the better off you will be and the more choices you will have.”