Young People & Money

Scholastic achievement is widely regarded as a prerequisite for future success. Trouble is, prevailing circumstances challenge the validity of this time-honored belief. Nearly a century ago, our educational system was founded on a simple and, by the standards of the time, sensible premise: Proficiency in reading, writing and arithmetic would provide a sufficiently broad framework of skills to enable students to thrive and overcome many of the challenges they’d encounter on their journey to adulthood. Trouble is, our scholastic system–conceived to prepare future workers for the challenges an industrial era economy–hasn’t evolved with the changing times to prepare students for an increasingly critical aspect of modern day life: the. Our schools utterly fail to help teens and twentysomethings competently manage the newly complex economic calculus of their own lives. This would be an academic matter were it not for youth financial literacy’s long-term cost.

The absence of practical money management instruction in our schools is curious given the mounting complexity of our financial world and the extent to which economic choices will influence students’ lives. The semi-rigid linkage between academic achievement and upward economic mobility has, of late, become disturbingly tenuous. Case in point: many steeply indebted college grads are struggling to reap the lifestyle rewards that academic achievement has traditionally afforded. Although this complex problem has many component parts, one in particular stands out.

As a matter of standard operating procedure, adolescents spend their formative years in a classroom environment. After 18 years of being lectured and quizzed, students are duly rewarded with a firm handshake, a formal certificate, and a moment of grand and eagerly awaited ceremony. It’s a cherished rite of annual tradition. Parents, teachers and students gather to celebrate and commemorate graduating classes nationwide as they toss their tasseled caps triumphantly skyward. Ceremony honorees are generally thought to possess the wherewithal to join the work-a-day world and begin their dogged pursuit of the American Dream. Trouble is, most diploma clutching graduates will struggle to capitalize on the value of their pricey educations and ascend the socio-economic latter because they’ve received no personal finance instruction whatsoever. As a model of flawed design, the situation is roughly analogous to manufacturing a formula 1 race car without a steering wheel.

If high school and college exist to provide teens and twenty-somethings the resources they’ll need to secure gainful employment as a springboard to future independence and a more desirable quality of life, it seems that a key factor has somehow been overlooked. In an act of preparatory omission that borders on outright cruelty, students are exhaustively grilled on all manner of questionably relevant academic minutiae; and yet, aren’t taught to productively (or even responsibly) manage the economic power that higher education may provide. At great cost, this aspect of youth education is completely ignored. By focusing on academic achievement and cumulative grade point averages as a primer for future success, students are being groomed for future employment but, as a practical matter, are unable to intelligently negotiate the complex and increasingly treacherous landscape of their own economic lives. Dan Ianicolla, the U.S. Treasury’s former Deputy Secretary for Financial Education, outlined the future implications when he said, “The downstream adult problems of rising bankruptcy rates, low savings rates and the abuse of credit can all be traced upstream to how our educational system fails to prepare young people for their financial futures.” In short, financial literacy and its productive application to everyday economic decisions is as fundamentally important to students’ future well as knowing how to read, write and add.

In a nation where 33% of high school students and 84% of college undergraduates carries a credit-card, it’s odd that personal finance isn’t a mandatory feature of scholastic instruction. Although students often take macro and micro economics, the concepts these classes emphasize are somewhat abstract and the curricula is likely to be useful for only those students who go on to become future economics instructors, Fortune 500 CEOs or central bankers. Because these classes address dry subjects like market equilibria and structure, business cycles, price elasticity, and the derivation of supply and demand curves, they treat money as though it were a theoretical abstraction; not a scarce yet vitally necessary resource to be prudently managed within the far more meaningful context of students’ day-to-day lives.

The result is tragically predictable. High school and college students step out into their lives as legally independent adults armed with little-to-no knowledge about investing, the mechanics of credit scores, the eventual cost of escalating debt, or even how to create a budget and balance a checkbook.

In April 2008, the JumpStart Coalition (a non-profit advocacy group sponsored by Bank of America, Capital One, MasterCard, Wells Fargo and VISA) conducted an ambitious longitudinal nationwide study to assess high school seniors’ financial awareness. The survey instrument, designed by Lewis Mendell, professor of Finance and Managerial Economics at SUNY Buffalo, asked 12th graders to answer 49 multiple-choice questions spanning a wide range of personal finance topics. All told, 6,586 students and 40 states participated in this discovery effort. The survey’s findings? Nearly half of high school seniors are financially illiterate. The average score: 48.3%; a result which–judged by academic standards–is abysmal.

Regardless of students’ varied academic talents and vocational interests, knowing how to skillfully manage a buck, the very lifeblood of their labors, is indispensable to their future well-being. Gone are the days when a mastery of personal finance involved little more than managing a checkbook and maintaining a savings account. Although adolescents project supernatural confidence in their abilities and flaunt an unnerving degree of expertise in negotiating all manner of hi-tech gadgets and sophisticated technology. Strangely, despite this group’s proficiency in handling most technical aspects of modernity, they are generally ill-equipped to manage the ins-and-outs of their financial lives. And this is likely to be a costly blind spot in their educational development because the economics decisions students make over time will probably determine whether they’re eating caviar or corn chips in their 60s.

Financial literacy is particularly valuable for young people because, as many people have learned the hard way, an individual’s purchasing power is no longer limited by the amount of savings one has accumulated or whatever cash is available on hand. The wheels and cogs of commerce are further greased by the elimination of longstanding procedural formalities (for instance, the need to sign credit for card receipts on purchases amounting to less than $25) that may have once elicited a fleeting sense of fiscal awareness and, perhaps, even restraint. Thanks to these and countless other innovations, the business of exchanging currency for all manner of goods and services is impressively frictionless. Consequently, it’s never been easier for young people to casually–and, in some cases, recklessly–disassociate financial choices from their consequences. A growing body of statistical and anecdotal evidence shows that adolescents are disproportionately prone to financial error. A 2008 poll by the National Association of Retail Collection Attorneys found that 25% of college students say they will run up a debt to celebrate with friends and rely on credit cards to raise cash–which, like payday loans, are a notoriously costly source of funds. Additionally, 23% of college students ignore overdraft fees and are undeterred by the prospect of spending months or even years paying off a debt.

Looking out 20 to 30 years into the future, it’s increasingly apparent that young peoples’ economic futures will depend largely on the saving and spending habits they establish now. The seriousness of this issue is exemplified by the not so cheery lifestyles of tens of millions of people who are now nearing retirement. As many financially stressed senior citizens working menial service sector jobs will loudly attest, as decades pass and time wears on, everyday economic decisions have a way of adding up over time to shape ones’ future prospects. Because giving young people a compass and a map to help them avoid poverty in their old age is indisputably worthwhile, the merits of your financial literacy are compelling. How today’s students and tomorrow’s workers must plan and save for distant financial goals like retirement is radically different as well. Employer funded pensions–once regarded as the backbone of economic security–have quickly become a relic of the past. In the last ten years, stock ownership in the U.S. has risen 60%. At the time of this writing, nearly two-thirds of all equities are “professionally” managed on behalf of individuals by brokerage firms like Fidelity and Vanguard. Here’s another data point that underscores a seismic shift toward self-funded and personally managed retirement savings accounts. The Investment Company Institute estimates that the value of all U.S. pension assets totals $2.2 trillion whereas the combined value of all 401K assets tops $4.2 trillion. Of course, the widening gap between these different retirement funding mechanisms speaks to the growing importance of helping young people understand what investments are and how to successfully manage them.

So, before graduating school and entering the workforce, adolescents must be able to competently and effectively manage all aspects of their financial lives. Something which, in turn, means knowing how to establish, incubate, and eventually hatch a decent sized retirement next egg; grow their net-worth over time; and skillfully juggle competing economic goals and priorities across multiple time frames. To maximize their future paychecks, adolescents must: 1) capitalize on time’s wealth compounding power; 2) be appropriately mindful of the opportunity cost of squandering it; 3) sensibly distinguish between “needs” and “wants” in their day-to-day spending routines; 4) understand the basics of taxes and inflation; 5) create, manage and periodically re-balance a diversified retirement portfolio of stocks, bonds, real estate and commodities, and finally; 6) understand how these disparate asset classes are likely to perform, both with respect to one another and through varying phases of the economic cycle.

The proliferation and widespread use of credit cards is another way that the financial landscape has changed. Before they became commonplace wallet accessories, credit cards were exotic novelties that endowed their users with a blinding aura of economic prestige. Initially, as a matter of strict operating prudence, credit card companies were a bit more selective in choosing their clientele. Prospective applicants’ credentials and creditworthiness was carefully vetted before lenders felt comfortable minting and mailing a shiny plastic card conferring a predetermined credit limit. Before the financial industry’s creation and feverish promotion of collateralized debt instruments (which enabled creditors to profitably underwrite unusually risky loans and avoid subsequent economic fallout resulting from surging customer defaults. A remunerative trick that was accomplished by cleverly repackaging this risk and selling it to allegedly “sophisticated” third party investors whose purchase decisions were, it seems, misguided by credit rating agencies’ glowing AAA endorsements), just about anyone in possession of a credit card could be safely considered to be financially astute and responsible. Remarkably, lending standards have since been loosened to the point that fiscally clueless high school and college students were (until the passage of consumer friendly legislation which, among other things, curbed abusive lending practices to minors) routinely deluged with offers of in-store-financing and “pre-approved” credit card solicitations received via e-mail and snail mail.

For adolescents, the odds of financial mishap resulting from the misuse of credit are heightened by other factors. To wit: in many of our nation’s hippest cities and towns, shopping is no longer merely an idle distraction, but rather, a widely celebrated national pastime. Young people, who’re naturally inclined toward risky behavior, run a disproportionately high risk of acquiring and reinforcing poor fiscal habits. Meanwhile, a mix of environmental cues discreetly encourage fiscal irresponsibility. Case in point: youth spending is seldom checked or even restrained by the need to manage a long list of other financial obligations; the kind that are irksomely abundant for many-if-not-most working professionals–things like a monthly mortgage or rent payment, household bills, and ongoing expenses for food and transportation. What’s more, it doesn’t help matters that adolescents can often raise money simply by extending their needy hands and asking bank of Mom and/or Dad for it. Sadly, in the real world, money isn’t as easily acquired. Oh well, as they say: easy come easy go… All of which lays the groundwork for a rude awakening when independence day finally arrives and adolescents must confront the economic calculus of adulthood.

There’s another X-factor in the mix that may skew young peoples’ economic choices and behavior. When it comes to promoting their materialistic expectations and applauding their care-free spending habits, corporations wield tremendous clout. Of course, profit seeking firms that cater to the whims and wants of this artificially affluent demographic are understandably keen to court and accommodate their yen to spend. As author Juliet Schor, professor of economics at Harvard University, points out in her book, Born to Buy: “Companies spend lavishly on advertising that’s specifically designed to appeal to, and, if at all possible, exploit young consumers’ impulsive tendencies. Needless to say, corporations are often very shrewd and calculating in their well coordinated efforts to secure teens’ and twentysomethings’ patronage. And the numbers are telling. Businesses spend billions recruiting and retaining top-notch marketing talent. Schor’s book argues that, to get the biggest bang from their advertising dollars, companies looking for a competitive edge will hire youth psychologists who (owing to their scholarly expertise when it comes to plumbing the murky interrelationships between the conscious and sub-conscious) are uniquely qualified to crawl into young peoples’ heads, figure out what makes them tick and spike commercial advertising with subliminal messaging that promises to deliver a potent subliminal punch. No-doubt, the overarching economic imperatives of capitalism ensure that corporations will do almost anything in their earthly power to enhance their bottom-lines and maximize the ROI (return on investment) of their vast advertising budgets.

Think adolescents lack economic clout? Think again. According to Packaged Facts, tweens (a demographic comprising consumers between the ages of 8 to 14) directly or indirectly influence $40 billion in spending a year. In 2011, spending by young adults is expected to reach $209 billion. Not surprisingly, high school and college students are inundated with slick advertising that’s artfully designed to relieve them of their dollars and sell them everything from fast-food and fashion accessories to cell phones and sneakers–and everything imaginable in-between. In the tug-of-war that’s being waged for young peoples’ hearts and minds, there appears to be a significant and growing tension between commercial and academic influences. Though it’s often difficult to tell which faction is winning, it’s revealing that shopping centers in the U.S. outnumber high schools and they attract over 200 million consumers a month. Interestingly, in many states, the biggest tourist draw is no longer a historical, cultural or even natural attraction, but rather, a mall.

Though the commercial world presents itself as a kind of alluring technicolor dream-coat, if one looks past this pleasing veneer, it seems that repeated exposure to commercial stimulus can have unsavory side-effects. In October 2006, Lorrin Koran, professor emeritus of psychiatry at Stanford University, published the findings of a first-ever study documenting the prevalence of compulsive spending disorder. Koran found that over 5% of U.S. adults suffer from this condition. Commenting on the study’s findings, Koran cautions “compulsive shopping can cause people to go deeply into debt and even lie to loved ones about purchases; long-term consequences can include bankruptcy, divorce, embezzlement and, in some cases, suicide.” Though few adolescents will adopt these overtly self-destructive patterns of behavior, they face gale-force headwinds on other fronts as well: stubbornly low personal savings rates; escalating living costs; soaring tuition; stagnant wages; stringent bankruptcy laws and the cut-throat imperatives of global capitalism jeopardize young peoples’ future economic prospects.

Not surprisingly, in recent years, signs of financial stress have become more broadly apparent among high school and college students, a group not generally associated with money troubles. According to BusinessWeek (Nov. 14, 2005), in 2004, the average credit card debt among 25-to-34 year olds was $5,200—a 98% increase from 1992 levels. Although this may not seem like a crippling sum, it’s the median amount; half of young adults owe more. And soaring education costs worsen students’ debt burden. According to Kiplinger (Oct. 2008), in 2006, the average debt carried by college graduates was $16,432 and the maximum debt load of the top 8% of student borrowers was $40,000. Robert D. Manning, author of Credit Card Nation, warns “Young people are taking on levels of debt that would’ve been impossible for prior generations of students. And this is partly because access to credit is no longer based strictly on income.” Manning cautions that “Generations X and Y have a razor-thin margin for financial error.” Tamara Draut, author of Strapped: Why America’s 20- and 30- Somethings Can’t Get Ahead, cautions “this debt-for-diploma system is strangling young people right when they’re starting out in life. It’s creating a sense of futility, a sense that, no matter what they do, they’re not going to be able to get ahead.” Increasingly, financial problems are forcing teens and twentysomethings to delay traditional rites of passage. After graduating school, many are moving back home to live with their parents. According to Money Magazine (Oct. 2006), though 25% of children between the ages of 18 to 24 lived with their parents in 1990, this figure rose to 52% in 2000. Meanwhile, the vice-like power of the pocketbook is affecting young peoples’ prospects in other ways as well: many are putting off buying their first home, postponing marriage and delaying having children. Scores of books—take your pick; there’s Suze Orman’s Young, Fabulous, and Broke, Boomerang Nation by Elina Furman and Anya Kamenet’s Generation Debt—offer a more detailed accounting of the financial difficulties young people face.

Despite financial literacy’s potential to help students get their financial lives started off on the right foot and avert economic disaster later in life, bureaucrats and decision makers who collectively set scholastic policy and enforce curricular standards don’t deem this non-academic topic to be worthy of formal study. At the time of this writing, only seven states (Alabama, Georgia, Idaho, Illinois, Kentucky, New York, and Utah) offer financial literacy programming at the high school level. These progressive forward-thinking states require 12th graders to satisfy minimum proficiency standards in personal finance as a prerequisite to graduating high school. Given the potential lifelong benefits of investing in adolescents’ fiscal education, one might expect the Department of Education to implement similar curricular reform nationwide.

This hasn’t happened… But, as we’ll soon see, the problem is largely one of context. By and large, the Department of Education lacks the means and methods to combat this nettlesome problem. Ironically, the dysfunctional economics of education itself are largely to blame. With massive budgetary shortfalls forcing California to close state parks, issue pink slips to teachers, shutter schools and either cut or eliminate youth enrichment programming in areas like art, music and physical education, there’s legitimate cause for skepticism as to whether California schools will ever acquire the political will and wallet necessary to expand its already burdensome curricular workload. The economics of education are further strained by the mounting legacy expense of paying healthcare and retirement benefits to a large (and still growing) population of now retired teachers and other administrative staff. Collectively, these factors exert tremendous financial pressure on a system that’s frightfully underfunded as it is. Add to this a renewed sense of political urgency to improve student performance in less progressive subjects like reading, writing, and arithmetic, and it’s not hard to understand why youth financial literacy may not soon vault to the top of our golden state’s educational agenda.

As a kind of P.S. to the above, the business of education suffers from a debilitating structural problem as well. When it comes to matching 21st century challenges with fresh and effective solutions, public schools aren’t widely known to be trail blazing innovators. And this is partly because there’s no viable alternative to the Department of Education when it comes to the nationwide scope and scale of services that this institution provides. In marked contrast to the private sector, a frenzied hyper-kinetic realm in which most firms survive by correctly anticipating and swiftly accommodating their customers’ needs in a fiercely competitive environment, public education operates in a comparatively sedate arena; one in which its “customers” are, by force of law, a captive audience. Unfortunately, this remarkably cozy dynamic doesn’t give the educational establishment and the entrenched interests that serve it (a diverse and often discordant patchwork of interests including teachers unions, government bureaucrats, parents and policymakers) a sufficiently compelling survival incentive to periodically revisit and refresh its value proposition. Because the Department of Education is thickly insulated from free-market forces and the adaptive qualities that they invariably foster, it can afford to be somewhat indifferent to the needs of the politically dis-empowered constituency it serves. Bill Gates, an iconic and reasonably astute businessman, has (with characteristic brashness) blasted our educational system’s effectiveness; he warns, “America’s high schools are obsolete. By obsolete, I don’t just mean that our high schools are broken, flawed, and under-funded… By obsolete, I mean that our high schools—even when they’re working exactly as designed—cannot teach our kids what they need to know today… This is not an accident or a flaw in the system; it is the system.”

Which begs an important question: Does financial education ultimately lead to higher levels of personal affluence? To rephrase this question, is there any empirical evidence to suggest that one’s fiscal knowledge and net-worth are positively related? There is. A study by Annamaria Lusardi, professor of economics at Dartmouth College, and Olivia Mitchell, professor of insurance and risk-management at the University of Pennsylvania, offers relevant insight. After quizzing people on simple calculations–such as compound interest and percentages–and comparing respondents’ test scores to the magnitude of their personal wealth, they discovered a striking correlation between the extent of one’s financial knowledge and economic affluence. Those who understood the mechanics of compound interest, for instance, had a median net-worth of $309,000 vs. $116,000 for those who missed such questions.

Despite financial literacy’s legacy value, there are other valid reasons for students to preemptively bone up on the financial basics. Simply put, financial knowledge and its rigorous application to the betterment of one’s daily life isn’t strictly an economic matter; more importantly, it’s a powerful determinant of one’s overall health and well-being. Arguably, a generation or so ago, financial literacy exerted less influence on various aspects of one’s life. Going back to the Carter administration, conventional wisdom held that finishing school and finding a decent job with a stable (and preferably blue-chip) employer was the surest way to achieve lasting economic security. Of course, such thinking was wildly popular at a time when large paternalistic firms could, for the most part, be safely trusted to look after their employees’ interests; pay their healthcare expenses, and at the far end of a 30+ year career, spring for a gold watch and a ritzy retirement. With the dawn of the 21st century, a growing cultural interest in money and what it takes to attain and maintain a dignified threshold of wealth, perhaps now is a good time to retool scholastic policies with respect to what subjects students must study if they’re to flourish beyond academia’s hallowed halls. There’s reason to believe that students’ interests may be better served if cellular biology and ancient history (though truly fascinating subjects) were assigned a distant back seat to personal finance.

Business headlines make a strong case for curricular reform. Apart from a shrinking list of government and tenured teaching jobs, lifetime employment is frustratingly elusive. Stubbornly high unemployment and under-employment (which seems to have reached epic proportions of late) rates put a giant exclamation mark on this point. The abrupt and mostly unexpected collapse of colossal and once respected firms (think Enron, WorldCom, AIG, Freddie Mac, Lehman Brothers; over three hundred large-enough-to-fail U.S. banks and a few domestic automakers) calls longstanding assumptions about job security into question. In recent years, the ranks of the middle-class have noticeably shrunk. Bottom line oriented businesses, many of which are vocationally preoccupied with pleasing shareholders and right-sizing their balance sheets, have, with industrial strength and efficiency, shifted much of their operations and manufacturing (General Electric is emblematic of this trend since it long ago moved the bulk of its production overseas–in part to avoid paying higher U.S. tax rates) overseas to exploit significantly lower labor, land and material costs. This process, multiplied by all the large-and-small profit seeking companies out there, has idled millions of rank-and-file U.S. employees. Moreover, an alarming percentage of workers who’re on the cusp of retirement are having to rethink their economic preparedness for this endeavor. And this is partly because of complex and astonishingly flexible accounting rules that have permitted firms in the public and private sector to, by inflating the value of the assets on their books and invoking rosy assumptions about future investment returns, exaggerate their capacity to fund future employee entitlement obligations. And so, through the magic and majesty of accounting, employers enjoy tremendous discretionary leeway in how they manage and regularly fund their employees’ pension and health care plans. Barron’s, a popular and widely read investment weekly, recently reported that, among S&P 500 companies, only 25 or so have fully funded employee pensions. To be sure, there’s no shortage of weighty ballast to support the timely argument that modern-day circumstances require a significant but sorely neglected emphasis on financial literacy in our schools.

All of which raises an altogether more titillating question: will today’s students and tomorrow’s nascent professionals realize the promise of the American dream if they pin their hopes of future affluence to the threadbare notion that hard work and devoted service to one (or, for that matter, even multiple) employers will, in due course, pave the way to the good life? Facts and figures suggest otherwise. According to statistics, young adults will switch careers ten times over the course of their professional lives. The financial adversity posed by a higher frequency of cyclical unemployment, a byproduct of greater workplace churn, exerts more pressure on adolescents to acquire the fiscal expertise to cope with the income instability of their own lives as they struggle with the challenges posed by a increasingly turbulent labor market. Shockingly, even elite college grads aren’t exempt from financial worry. According to the Bureau of Labor and Statistics, half of employed college grads are working in positions that don’t require degrees. Median incomes for Americans 25 and under with a four-year degree have actually fallen 12% from 2000 to 2008. A study by the Economic Policy Institute found that employed 2011 college grads are laboring for an average hourly wage of  $16.81. Adjusted for inflation, compensation for college graduates is 5.4% lower than it was in 2000.  It seems that the lingering economic malaise resulting from our financial sector’s near collapse back in 2009 has far-reaching consequences for young peoples’ future earning power. Graduating into hard economic times makes it that much harder for new grads to get ahead. Lisa Kahn, a Yale economist, studied the lifetime impact of recessions on younger workers’ earning power. Kahn examined college graduate career paths from 1979 to 1989 and found that, for every 1% increase in the national unemployment rate, starting incomes for college graduates fall by as much as 7%. A persistent disparity in the unemployment rates of younger and older workers is equally troubling. According the the Bureau of Labor and Statistics, 15.3% of 25-to-34 year olds are unemployed versus a nationwide unemployment rate of 9.5%. The National Association of Colleges and Employers recently reported that only one-in-five college grads who applied for work in the last year was hired.

Paradoxically, though boosting the percentage of college educated participants in the workforce has long been a staple of U.S. government policy, the law of supply and demand dictates that whenever the number of graduates in the labor pool exceeds demand for them, the value (though, generally speaking, not the cost) of higher education falls. In a dynamic and tightly integrated global economy, countries like China and India produce millions of motivated and technically skilled graduates–many of whom are eager to experience a middle-class lifestyle. And blue or white collar jobs are easily dispatched to virtually any part of the world, this too may adversely affect developed countries’ college graduates. Chances are, to get ahead, young people will need to make the most of whatever money they make. And this is especially true at a time when most new economy jobs don’t pay particularly well. A study by the National Employment Project, which crunched employment data, found that 75% of new jobs in 2010 came within industries that, on average, pay less than $15 an hour.

It’s true: stellar grades and a sterling extra-curricular record will generally attract the attention of desirable employers and enhance one’s chances of getting a lucrative job. Trouble is, the sort of knowledge that’s required to get a degree doesn’t provide students the fiscal savvy they’ll soon need to effectively manage an income. And this too is well documented. Thomas Stanley, who wrote The Millionaire Mind, studied the habits and varying eclectic personal histories of the super-rich and found little-to-no correlation between academic accomplishment and long-term affluence. Of the millionaires he sampled, the median college GPA was 2.9 and the average SAT score was 1190; hardly indicative of the rarified academic performance needed to get into Harvard. More importantly, even a brand name education obtained at one of the pricier and typically more prestigious Ivy Leage schools won’t guarantee lasting economic success. Even those few and exceptionally fortunate students who manage to claw their way into a top-tier school, graduate with marketable skills and parlay their academic exploits into an outsized paycheck aren’t promised much in the way of lasting wealth either. And the reason why is simple: a paycheck (no matter how large) is a short-term solution to a long-term problem.

Of course, this is all just part-and-parcel of a larger and potentially much thornier dilemma: financial responsibility can’t be legislated. It’s a matter of discretionary choice. Luckily, this hasn’t discouraged our elected representatives in Congress from enacting bold forward-thinking legislation that requires employers (of a certain size) to automatically enroll new hires in 401K-type plans. Although this hopeful exercise in default choice architecture is probably well-intentioned, and possibly even helpful, it wrongly assumes that young professionals will, once enrolled in a 401K plan, be sufficiently inspired to continue funding their retirements at a time in their lives when they’re easily distracted by less abstract and more immediate desires. Apart from the obvious problem of being able to opt-out of this clever default arrangement, the long-term efficacy of such a Band-Aid approach is (to be kind) questionable. And the reason why is clear: more than half the U.S. labor force works for companies that don’t offer 401K plans.

The takeaway point? If adolescents are to make the financial sacrifices necessary to brighten their future prospects, their economic choices should be guided by an appropriate sense of personal urgency and a clear unvarnished appraisal of the long-term challenges they face. Curiously, though the term “ownership society” is frequently bandied about by jabbering politicians and our chatterbox media, there’s been no substantive follow-up explanation of what, exactly, this cryptically undefined term means. Chances are, if the next generation of taxpayers isn’t very careful, they’ll someday find out.

Once upon a time, parents could easily teach their kids the ABCs of personal finance. It was a simple affair. Today, many Moms and Dads are understandably befuddled by the burgeoning complexity of their own economic lives. Not so long ago, knowing how to handle a checkbook and maintain a savings account was enough to get by. Clearly, the formulas for success have changed. Nowadays, young adults’ financial progress is inextricably linked to their nuanced understanding of credit scores, the mechanics of debt, investment acumen and countless other factors that, until recently, didn’t exist or were practically irrelevant. To be sure, getting ahead in the 21st century requires a good deal more than a steady paycheck (a need which our educational system narrow mindedly addresses); it requires financial literacy and its systematic application to everyday life. To capitalize on the economic potential of an academic degree, students must learn how to: 1). create a functional budget; 2). select, oversee and periodically rebalance their retirement and/or brokerage account assets; 3). use personal finance software to track personal spending and chart their economic progress over time; 4). responsibly manage debt; 5). establish and improve their credit to minimize borrowing costs; 6). explain how state and federal taxes work and understand why they account for the disparity between one’s gross and net pay; 7). combat inflation’s wealth eroding effects; and finally, 8). balance a checkbook.

Though many Moms and Dads are understandably eager for their kids to morph into fiscally productive and mostly self-reliant adults, many lack the time, patience and expertise to tackle this multi-faceted project solo. And the reasons why aren’t hard to guess; many parents are stretched dangerously thin as it is by the escalating demands of work and home. According to a Fleet Boston study, only 25% of parents expressed confidence in their ability to teach their kids the ABCs of personal finance. Moreover, almost half of parents say they don’t set a good example for their children when it comes to how they manage their household finances. Another study by VISA found that (81%) of parents think that personal finance should be taught in school.

Although it stands to reason that financial literacy is a kind of economic springboard that can vault high school and college students to greater future success, this type of educational programming significantly albeit indirectly benefits parents as well. Why? Because, as veteran moms and dads might rightly guess, when their kids run into financial trouble, their knee-jerk response is to ask Mom and/or Dad for a bailout. And, rightly or wrongly, when it comes to rescuing their children from fiscal discomfort, parents generally feel obliged to reach for their wallets or hit the nearest ATM. Meanwhile, the underlying problem–young peoples’ dysfunctional relationship with money–is charitably dismissed as a one-time incident and is often ignored. To be sure, this is an unnecessarily costly remedy for all concerned. Why? Because adolescents who don’t learn to competently manage their financial affairs will be costlier for their parents to support. But here’s the real kicker: apart from lessening the long-term economic burden of parenthood (which amounts to a sizeable penny considering that it now costs roughly $250,000 to raise a kid from age 0 to 18. Meanwhile, according to Money magazine [Aug. 2010, pg. 99], a third of parents are simultaneously struggling to support and/or care for aging loved ones), Money 101 workshops will enhance parents’ quality of life in another respect as well by sparing them the tedious (and often thankless) chore of having to repeatedly lecture their kid(s) about the importance of handling their finances responsibly and explaining how, exactly, they should do so. And since money can be an emotionally charged topic, the recurring prospect of strained or stormy parent-child relationships can easily interfere with or prevent open and constructive dialogue on this topic.

Many parents are understandably concerned about their kids’ fiscal competence. A 2008 Parents & Money survey by Charles Schwab found that 93% of parents with teenage children are worried that their kids will make poor financial choices, including: overspending and living beyond their means (67%), getting in over their heads with credit card debt (65%), failing to save for emergencies (60%), or failing to stick to a budget (57%). A third of parents expect that their golden years will involve helping their kids financially. In 2008, The Hartford Financial Services Group polled parents with children between the ages 16 to 24 and found that 55% of respondents worry that their kids won’t become financially independent without ongoing monetary assistance from them.

Until now, parents looking to provide their children a sound and well rounded financial education have faced a difficult choice, they could either: 1) tackle this thorny topic on their own and hope for the best; or 2) trust their children to master the ABCs of personal finance on their own while, at the same time, avoiding costly missteps along the way. For parents caught on the horns of this sizable dilemma, Money 101 workshops offer a complete, cost-effective turnkey solution. An interactive hands-on learning environment and personalized lesson plans will familiarize students with everything from the nuts-and-bolts of budgeting and taxes on up through the basics of investing and planning for retirement—and everything in between.