Teaching high school students about 401(k)s

In a pre-calculus class at John Champe High School in Loudoun County, Virginia, juniors and seniors are learning abstract mathematical concepts. And in a personal-finance course, 16- and 17-year-olds are learning about something that might seem even more abstract for the teenagers: retirement.

Virginia was one of many states that moved to offer more personal-finance courses on the heels of the Great Recession, hoping to instill practical money-management skills to help the next generation avoid the pitfalls that many of their parents experienced. Proponents of the requirement argued that American children were falling behind in financial literacy and that the increasingly complex world of consumer banking demanded a new kind of education.

Results from the 2012 Program of International Student Assessment showed that U.S. teenagers were in the bottom half for financial literacy among the 18 countries that participated, ahead of France and Spain but below Latvia, Russia and China. There are now 17 states that require high school students to take personal-finance courses, according to the Council on Economic Education. In 2007, there were just seven.

An economics and personal-finance class is now a required course for those who want a high school diploma in Virginia, and the Class of 2015 was the first that needed the course to graduate.

Northern Virginia now has one the best personal-finance education programs in the country, according to Working In Support of Education, a New York City-based nonprofit that designs personal-finance curricula for high school students. It ranked 38 Virginia high schools in the top 100 schools for personal finance among those that use the group's programs. And Champlain College's Center for Financial Literacy gave Virginia an A for its level of personal-finance instruction, one of only five states to earn the top grade.

Many in Northern Virginia fought the legislature when it proposed the change, saying that the requirement meddled unnecessarily in matters that should be decided by local school districts. Some also worried that an additional requirement would put a squeeze on the schedules of busy students.

And that's what some students at John Champe High, a high-achieving school that graduated 99 percent of its students last year, thought when they learned they would be required to take the personal-finance class.

One student hoped to add another Advanced Placement course to her schedule, which she thought could make her more competitive for colleges looking for students with challenging course loads and could give her a chance to earn college credit ahead of time.

"I was kind of angry that it was mandatory," said Jisoo Jang, a 16-year-old Champe junior. But she values the basic skills she has gained in the first quarter of the personal-finance class - on the mechanics of debit and credit cards, the importance of a good credit score, and how to avoid scams - that have immediate, real-world applications. "This is actually something I'm going to use in life."

In the class, taught by former lawyer Mary Doherty, students are slated to learn about personal-finance issues that could affect them at nearly every stage of their lives. Many already have jobs and will get help filing taxes for the first time. They will learn about the potential pitfalls of using credit cards and how to be judicious about spending and budgeting.

They also will learn about applying for college loans and the cost of higher education, something that is imminent for many of them. And they will learn about various kinds of retirement accounts, something long on the horizon but that many experts believe is a vital topic that many people put off until too late. Doherty said the class is so thorough that other teachers - and even some of the students' parents - ask whether they can sit in on certain topics.

The class serves as a sort of reality check for many students. One said she imagined she would probably take on $5,000 in debt for college before learning that college graduates often are entering the working world owing $20,000 or more; the average federal student loan balance per borrower in 2015 was nearly $29,000, according to the Education Department.

"This class is like a wake-up call," said senior Lainie Gibbs, 17.

Teacher Toni Fasan, a former banker, said the biggest jaw-dropping moment for her students is when they do a budgeting exercise, learning how much it costs to raise a family in affluent Loudoun County. She recalled one student's guess for how much it would cost a hypothetical family of four to make it through a month: $75.

"They are very disconnected to what it costs to live here, to raise a family here," Fasan said.

But one thing many students understand is the tangible effects of a financial crisis. The recession is recent enough that some of her students can recall its effect on their families, Fasan said.

"They're still close enough to the recession" that there are students who can recall the "heartache and the struggle" of losing the family home to foreclosure, for example, she said.

Fasan worries that students would not have learned about personal finance had it not been in the classroom. Many, she says, might have gotten their only advice from people trying to profit from them, those who might not have their best interests at heart.

Her goal, Fasan said, is to turn these teenagers into "educated consumers."