Personal Finance Version of “Scared Straight” for Teens

Jen sent me a link to a very interesting article from Boston.com. The Boston Bar Association and the District of Massachusetts US Bankruptcy Court are running a five-part program to help teens with personal finance issues. It comes complete with a scare tactic for the last lesson…the students sit in on a mock bankruptcy hearing.

Financial-literacy programs have sprung up in all 50 states, many of them launched by lawyers and bankruptcy judges who have had a firsthand glimpse of the social wreckage debt can cause. “Bankruptcy judges have realized in the past few years that there’s a gap in education, that many high schools aren’t teaching students about personal finance,” said Judge Feeney, who presided over the mock hearing. “We’ve decided to fill that gap.”

[Via Boston.com]

After reading the reactions from some of the students that were interviewed for the article, it sounds like the program is working. One student learned that credit card interest rates can rise as high as 25% when he thought it was only 5%. As of right now, 750 students have attended the program.

I don’t know about you, but if I was a teen and had to attend a bankruptcy hearing, I think that would have made me think twice about getting my first credit card in college. It also would have been beneficial to learn the other things that they covered in the first four sections of the program (budgeting, taxes, wants vs. needs). It would be interesting to follow up with the students they interviewed a few years from now to see how they are doing financially.

Thanks Jen for the link!

Posted by Tricia on May 7, 2008 at 11:24 PM in Kids & Money | 7 Comments »
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Lazy Man and Money responded:
Posted: May 8th, 2008 at 1:17 am
I think Boston Gals Open Wallet wrote about this article as well. I love the idea of getting to students early.
Matt responded:
Posted: May 8th, 2008 at 12:12 pm
Good to hear that they’re starting to do something about the huge education gap when it comes to money. Unfortunately I think a lot of that education will still come from the parents and how they spend their money. If the parents live from pay to pay the kids are that much more likely. But more education in this subject area never hurts.

Though I have to say had I been given a course on what my finances might look like if I wasn’t careful I would have benefited greatly.
Wil responded:
Posted: May 8th, 2008 at 2:50 pm
This is awesome! This is way better than having a bank salesman come in to sell product to a captive audience.

Thanks for pointing this out!
Dewey responded:
Posted: May 8th, 2008 at 6:10 pm
I know from experience that our school system is way behind on topics such as credit and personal finance. I own a company called Early Bird Credit Training here in MA. Convincing schools that their students need credit education is impossible. Half of the time they donâ€™t even know what youâ€™re talking about. We need some progressive thing in our school system if we are going to compete economically with other growing countries. Do you think China is using the same education platform as they did fifty years ago? We are! Check out http://www.EarlyBirdCredit.com there is more info on teaching young adults about credit.
Mrs. Micah responded:
Posted: May 8th, 2008 at 6:28 pm
That’s a fascinating idea. Parents try to shield kids from the negative consequences of their bad financial decisions. Which is probably a good thing, since it’s not good for kids to grow up scared where the next meal is coming from. But that also means they probably don’t properly connect their parents actions with the real consequences.

I don’t think scaring straight works for crime, but I think it might work for finances.
Jen responded:
Posted: May 9th, 2008 at 11:26 am
And personal finance education could so easily be incorporated into math and home ec classes!

I was lucky in that my family not only knew how to handle money but they talked about it. So by the time I graduated college I had a good basis. I still ran up credit card debt, but I knew what I was doing wrong and I was still well under the national average for debt. But, I also opened an IRA when I got my first job and I signed up for the 401(k) plan.

In contrast, I had to explain what an IRA was and why it’s a good idea to my friends who were the same age as me and had also gone to college. They simply didn’t know, because no one had told them.

While telling children everything, especially the wrong stuff at the wrong age, isn’t good, overprotecting is also bad. I think knowledge is power, and knowing the honest truth about money helps demystify it.
asleey responded:
Posted: January 11th, 2010 at 2:21 am
Interesting and informative. I would often visit this site.