The focus of this episode revolves around imparting financial literacy to students, an endeavor that can significantly influence their future financial well-being. We engage in a comprehensive discussion with Andrea Farmer, a math educator and department chair at South Cobb, who explains the evolution of financial education within the school curriculum. As financial management becomes increasingly complex, it is imperative that students are equipped with the requisite skills to navigate their economic landscape effectively. We delve into the pivotal concepts of budgeting, saving, and investing, underscoring the urgency of establishing a solid financial foundation during the formative teenage years. This episode serves as a call for parents to foster meaningful conversations about financial responsibility and to actively participate in their children's financial education, thereby preparing them for a successful transition into adulthood.

Guest:

Andrea Farmer

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Takeaways:

• The importance of teaching teenagers financial literacy cannot be overstated, as it equips them with essential skills for managing their finances effectively in adulthood.
• Students often view credit cards as free money, which leads to misconceptions about debt and financial responsibility that need to be corrected through education.
• Teaching students to establish a budget, particularly when beginning their first job, is a crucial step in fostering responsible financial habits that will serve them well in the future.
• Encouraging teens to save a portion of their earnings, even in small amounts, helps build a foundation for financial security and prepares them for unexpected expenses in life.
• The urgency of financial education for teenagers is heightened by the accessibility of the internet, which exposes them to both opportunities and risks related to money management.
• Engaging parents in discussions about financial goals and budgeting strategies can significantly enhance the financial literacy of their children, leading to more informed decisions in the future.

Quick question, parents. If your teen got a paycheck tomorrow, would they know what to do with it or would it disappear by Friday?

We're talking about developing money skills for student success today on the Inside Scoop. Hello and welcome back to the Inside Scoop. I'm David Owen. Do your teens think money grows on trees? Ward knows. It seems like some of mine do.

Managing their money well can make the difference between a good life and a life filled with financial struggles. I thought it would be good to hear straight from someone who teaches those skills.

So joining us today is South Cobb math teacher and math department chair, I believe, Andrea Farmer. Andrea, welcome to the podcast.

Thank you. Thank you. I'm happy to be here.

So first thing about this is I've heard over years, actually parents say we need to be teaching finance how to manage your money, how to use a check, if people still use checks, I do, and that sort of thing. We have had that embedded in courses, right?

Yes.

And you taught that for a while?

I did. I taught it at South Cobb. It is a course called Advanced Financial Mathematical Thinking in our school.

And that's one particular unit in our school in that particular course where we teach students money management, budgeting, finance. And just I wouldn't say it's a glance over, but it's very brief. It doesn't. It's not in depth, so it's just a splash in the bucket, so to speak.

But that's changed.

Oh, absolutely.

Okay. Because it sounds like maybe the superintendent and the board heard these same people saying, this is a need in our society.

So what is that, what's it called now? And what does that do differently?

So there's an additional course that they added to our curriculum within the last two years, and it's called Advanced Financial Algebra. And it's a course that students can take in their fourth year.

So typically as a senior, they take it and it focuses on financial management for the entire semester. So we really are able to delve into debt and I'm sorry, asset and debt ratio equity. We can delve into liability, what exactly a liability is for you.

And I'm able to really not only provide a foundation for our students for financial management, but really expand on it so that then when they go into the world, whatever path they choose to take after they graduate, they're prepared to make sound financial decisions.

Okay, so. And some of the terms and finance can be intimidating. Right. But they are things that at least a basic understanding is really important.

I know when you're talking about debt and so forth, credit scores and all of that. Do you get into that sort of thing, like a personal.

Oh, for sure.

Okay.

Oh, for sure. We definitely get into credit scores. We go into the first question that I ask my students when I open up and I was like, so what do you want to do?

And they say, we want to make as much money as possible. And then I say, and then what? And they can't answer the. And then what? They're like, we don't think that far.

And I'm like, so once you have the money, then what do you do? And how do you make it, you know, last and how do you sustain it?

And then that's how I'm able to go into showing them what's important, what's relevant. Going from your credit score, going to. Do you want to rent? Do you want to own? Even with cars? Leasing and buying.

Oh, especially with cars. Right.

We do a project where I make them either buy or lease a car. It's a life after college project that they have to do and they have to create. And they have to create a budget.

And they can't have less than $2,000 in their account at the end of each month. And they have to either decide whether they want to re. Or, for example, either lease or buy a car. So they have to look it up.

They have to find a bank that will give them a loan. So they have to shop around.

They have to figure out what the value of the car is.

Absolutely. And what their loan or lease payment is going to be. And then decide which one you're choosing and tell me why.

Okay. I'm only asking because one of my teens had a car accident the other day and everybody's fine, but it was totaled.

And so I'm looking at, okay, how much do I owe? How much is it worth? And you know, so it was a great learning opportunity. Right. Everything is. But I'd rather it not be that harsh.

But the reality is kids don't think in those terms. And that's a key part of being successful in life. Right. Financially speaking.

So when we're talking about financial literacy and all of these various things, why is it so urgent for them to learn these things at their young age? I guess it's considered young as a teenager.

I think right now the urgency is they have the world at their fingertips, that is the Internet, technology. Right. And by a click of a button, you can, for the most part, have what you want. But also with that comes risk.

You know, there's scams that are out there to get them that pops up on their screens. There's digital finance with, you know, crypto.

And so to make those decisions, you have to be financially savvy or at least have a good mindset of I'm not going to fall for this, I'm going for this and go in with the plan rather than falling for all of those things and then end up with debt you didn't even realize could exist for you.

Okay, now you've kind of, you've given me the idea of, you know, teenagers aren't perfect when they launch. What are some of the biggest mistakes?

Or can you give us two or three illustrations of typical mistakes that young people make as they enter the world of finance?

Absolutely. The concept about money, like you said before, money grows on trees.

Yeah.

They just feel if I work for it, I get it, I could spend it not having a budget and then just spending the money. And then also one of the biggest thing is not saving your money and not having a goal.

Yes.

If you don't have a goal, then you're not working towards something and then what you want, you won't even know what you want because you can't get there.

You know, at the risk of sounding overly philosophical, the reality is that we live in what some people call a fast food world and that is that we don't have as many opportunities to teach short term sacrifice for long term gain. Right. So what you are doing in a financial sense is that exact thing. So we work for a school district that has a 1.8 billion billion dollar budget.

I think that was what they said. That's huge. But budgeting is not just for the big institutions. It's for the home, it's for the kitchen table conversations.

How do you teach students to build a budget that's realistic for a teen's life? Because that's a teen doesn't necessarily have a 9 to 5 job and a salary that's predictable.

They're usually working hourly wage jobs that, you know, the hours fluctuate. They're not sure how much they're going to get. How, how can you teach that and how do they receive it as another thing.

So the first thing I say is we're going to, you're going to operate on 80, 20. You can spend 80% of your income and save 20%. So 20% you can't touch. Okay.

The 80% has to be allocated for everything, means there should be nothing left. So 80% of this I'm going to do self care. I can get a massage. And I'm thinking More about myself now.

Teachers in general.

Exactly. But the 80% is you're going to get manicures, you're going to get. You know what I mean? You're breaking all of it down to everything.

To what do if you want to eat out, I'm going to use this amount because they'd love to eat out. This amount I'm going to use per week. So I know at the end of the month I've used this amount.

So you allocate the entire 80, so there's nothing left, but everything is accounted for. Yeah. And then the 20% is savings. And they're like, well, I don't need to save anything because I'm living at home. That's perfectly right. True.

However, your 20% is something you don't touch and it sits there for a rainy day. So when the rainy day comes, it's sprinkling. It's not a tsunami.

Yeah, exactly.

And they normally receive it. And then I always tell them, I'm like, you cannot have champagne taste with Kool Aid money right now.

You have to be realistic with where you are now in the future, do you want to have champagne taste and champagne money? Absolutely. That's what I want for you as well. But right now, let's focus on what you have, because you want to create a goal.

And I always tell them, with your budget, what's your goal? Like, eventually, what would you like to have? Or what would you like to do? Like in, let's say, five years?

And if you can say that, then maybe part of your savings could be used for that. And as long as I'm putting it away, I can get to that.

Yeah. And other teenagers around them aren't necessarily thinking like that. So thought comes to mind. You're familiar with Dave Ramsey, the financial guy.

He has a phrase that says, live now like no one else so that you can live later like no one else. Right. Something like that. That kind of sacrificial mindset now, putting it off for greater gain later. That's huge.

And you're a big part of getting that in their minds. That's awesome. So credit and debt are two concepts that a lot of adults don't grasp. Right. How do students see credit scores, debt?

Do they have a preconceived notion about these things that you find yourself correcting all the time?

All the time. In their mind, credit cards is free money, and that's how it's advertised. Right?

That is.

It's how it's advertised. It's free money. I'm Going to give you this limit. They're like, oh, I have this money. And I tell them it's not free money. And I try to break it down.

I said first, the limit you're given is based off how valuable you are or how they trust you, their level of trust in you. If your limit is low, then likely they're going to watch you. If your percentage is low, then that means you're trustworthy.

Your interest rate percent. Yes.

Your interest rate percent of your income. If that's lower, your trustworthy. The higher it is, the more of a risk you appear to them.

Yes.

So with your limit, I always tell them if you must get a credit card because having a credit card is not a bad thing, but you should get it to use it as to increase your credit score. That's what I tell students.

Yes.

So if you have to get one, you get one. And you want to be able to purchase only what you have in your bank account right now.

So once you purchase it, pay it off within two weeks before your statement comes out. So then you are not. Because as soon as your banks is going to.

I'm sorry, as soon as the credit card company is going to give you a statement, they're asking you for a certain amount. A minimum amount from that amount is going to be their interest first. Which is why it takes so long to pay off her credit card.

Exactly. And I love the two weeks thing because now you're introducing working down that interest rate. Right. And the interest amount.

And the interest amount.

Because you're beating the grace period in most cases.

And let's say you forget and you don't. As soon as you remember, immediately pay it. Immediately pay it.

Just go ahead, get it out of the way. Now. I find that one of the hardest things in that scenario is for kids to stay on top of what they actually have. So if they have a.

Like in the case of a teen who has a car payment, if they look at their checking account and they see, oh, I've got $500 in there, that's awesome. But then that payment is getting ready to hit at 450, they got to make sure they don't spend that they shouldn't be.

Exactly. Yeah. Which is why when we do our budgets each month, every time you pay something or buy something, you are updating your budget sheet.

Yeah.

So that. And you see what's outstanding. So if you're looking that often, you see outstanding. Oh, I got a car payment up.

I know this is really the only amount that I have left in the account that I can use. So I know I'm not going to have that. That's not available to me.

Yeah.

So for those of you who are also math nerds, this is great talk, but for the rest of you, I'm sorry, we're getting a little bit in the weeds maybe, but do you have or do you help students find credible apps for how to stay on top of what they actually have? Or our banking systems now to the point where they provide the features that really work well?

We're still in the process learning that because for me, I don't use apps as often. But so the students are showing me. So I'm kind of learning from them as well, which is great. But there's apps out there as well.

But also, you're right, the banks have kind of like, okay, we need to get on board as far as technology wise. And they have the software built within their, you know, their. There are sites where this is how much. This is your spending pattern.

And so it kind of shows the students as well, and some of them actually keep track for them. So.

And if you do an auto payment thing, it can show you what's pending, right?

Yeah.

That's awesome. So you've talked about emergency fund establishment. Compound interest, I guess, is also a huge part of your conversation. On the debt side.

On the debt side, absolutely.

What about investing?

For investing, I tell them because oftentimes when they open up an account, it's typically at a bank where their parents or their family has one at. That's the easiest thing. Right. And I say starting off, that's great.

Sometimes you want to shop around and you want to have a savings or a savings account that you're looking at the interest rate of, you can earn because you always want your money to make money for you as it sits there.

Yeah.

And I said, your first investment could be a bond, a cd, and shop around and look at the interest rate and how long it has to sit. And they're like, well, they're asking it for three years. I said, okay, that's. That's great.

But at the end of the three years, are you going to have more than what you put in there?

Yeah.

Like you have to think about what's actually going to happen. I said, remember the. And then what question? They're like, okay. And typically that gets them. And I also have them do that when they're thinking of.

Especially with compound interest when you're trying to save. But also interest as well. I'm going off, but interest as well.

When they start to shop around, like for their car payments and things like that, for the banks, why it's so.

Important for even a half percent.

Yes. And what it actually does and what you're actually paying. And I've shown them an equation they can take.

And I've had students come back to me after they graduate, when they buy the car, when they go into the dealership and they have already been approved for a loan and they know the amount that they should have, and they make the dealership work for them.

I love that.

They're like, I got it what I wanted.

We ought to start a consumer talk show of some sort. Oh, my gosh, I love that sort of thinking.

Because then they go into the lot armed, not literally, but they walk in in a better negotiating position than everybody else walking in because it's so easy to go. Well, yeah, I guess I'll just have you finance it for me.

I even heard a commercial the other day that said these car lots will actually add 2 percentage points to your loan if you get it through them in many cases. So that's huge for them. So bringing it all together as we wrap up here. Parents usually listen to this podcast for some practical advice.

How can parents, I guess, partner with you to help their students learn these things at home? What practical things can they do at home?

Maybe even if their students not in your class or a class in the district, that would help them to launch successfully eventually. In a financial sense, I would say.

First, sit down with them and help them establish a budget when they get their first job.

Okay.

Just to start them off and then have honest conversations like, what do you want to do? Where do you want to go and have those conversations and show them? What does that look like for them financially?

Especially now as students start to look like in their sophomore, up to their senior year as going to college. And what does it look like? What is it going to look like when you go to college? And how do those rates work?

And sit down and have those conversations, help them map out, well, if we only want to pay this amount, let's start looking at these scholarships.

What would this amount look like if we start to pay it when we sign the promissory note on your first day as a freshman, what are you actually going to be paying when you graduate as a senior? Just have those conversations with them.

Is it worth maybe going to school part time to be able to work, to be ahead of that financial picture? Right.

Yeah. And students, they want to. They want to make money, but they don't know what they don't know.

Right?

Right. And if you like, if they want to get a credit card as a parent, shop around with them. Show them.

If you get this credit card, you got to be mindful of this and this and this. Because if you're with them, making that decision with them, you know, you're preparing them to be successful.

So, Andrea, this is some awesome information that I wish I had been able to have my kids in your course decades ago. Lots of kids, old guy, whatever. But it really could help them launch well.

And I know our viewers really appreciate you sharing this information and we'll be sure to put the links that would be helpful for you in the episode description and show notes. If you heard something you found helpful, please make sure to like, subscribe and share the episode with other other parents.

It tells the algorithms what's good to recommend to viewers and helps us get the word out. So thank you for listening to the Inside Scoop, a podcast produced by the Cobb County School.