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Teaching Kids About Math Not Money is the Key to Keeping Them Out of Debt

Much has been made following the last economic recession about how to educate consumers and prepare them to avoid debt. More than 43 states have mandated some form of financial readiness courses at the high school level, and efforts are being made to increase that number.

However, studies suggest it’s not money skills that prepare students to be future responsible consumers, it’s math.

“It makes sense,” says Robert Semrad, senior partner at DebtStoppers and one of Chicago’s leading bankruptcy attorneys. “Although there are some commonalities in the clients we help, I can say that financial distress does not discriminate. I’ve helped individuals and families from all walks of life."

“Many people facing debt and/or foreclosure or bankruptcy are not even sure how it got to this point, and it’s frequently not a matter of ‘how’ but ‘why’,” he explains.

The studies say the same—teaching the ‘how’ of money, for example, balancing a checkbook or managing a balance sheet (frequent skills learned in financial readiness classes) don’t share with students the context that often trips them up later in life. It’s the ‘why’ they miss—the big picture of how everything fits together.

A 2014 ongoing study by Shawn Cole at the Harvard Business School, Anna Paulson at the Federal Reserve Bank of Chicago, and Gauri Kartini Shastry at Wellesley College, challenges the effectiveness of state laws requiring financial literacy be taught in schools. Their study concluded, “State mandates requiring high school students to take personal finance courses have no effect on savings or investment behavior.”

If not courses taught with money management skills in mind, what does work? The 2014 study concluded additional mathematics courses are the key. Similar to Semrad’s assertion, it appears the context and principles applied to a financial problem better determine how effective the subject will be at conquering the challenge.

“There are other pressures on young people these days – not least of which are stagnating wages and mounting college loan debt. It’s definitely not about having or not having individual skills; it’s the mathematical certainty that more money needs to come in than go out,” says Semrad. “And, when you consider that many people don’t have realistic means of ensuring they can make more money than they need to survive, they are coming out of high school and college with debt already floating their lifestyles, it’s easy to see that yes, this is something to address in school. We just need to do it correctly.”

Aside from getting your kids into additional math courses, Semrad suggests talking to kids about spending early and at age-appropriate intervals. He also says being a good example and discussing your own challenges can help create a context for kids.

“Many times you see entire families create the same issues for themselves,” he says. “It’s important to face your own challenges and let your kids see you succeed.”

Lastly, he says to teach them the importance of saving and avoiding debt. “Critical thinking is key. Kids need to learn to prioritize and do the work needed to be a responsible consumer.

“With my own kids, we frequently talk about debt and what kind of trouble it creates, how hard it is to manage. Of course, my job as a bankruptcy attorney helps with that,” he knowingly smiles. “They are uniquely positioned to see how destructive debt can be.

“I hope they share my passion for helping people in this situation. Until they’re old enough, we’re just going to keep going over the basics and doing the work.”

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