PLUS: Grads say the darndest things -- about money More

Is your high school graduate ready to make smart money choices in the real world?

According to two recent studies, the answer is a resounding NO!

Whatever career young people choose when they leave high school behind, they will enter a world where people make an extraordinary number of financial mistakes that have both short- and long-term consequences.

In fact, based on their demonstrated knowledge of simple financial concepts, most high school seniors would be well-advised to don shoulder pads and helmets underneath their cap and gown. When it comes to managing their own finances, most are about to enter the school of hard knocks.

It's not just young people taking their first jobs who flounder fiscally. Major money problems can also wreak havoc on college students and even derail people who join the military.

The most serious problem for college students, says Gerry Stebbins, assistant dean of student affairs at Washington & Jefferson College in Pennsylvania, is a failure to understand that credit cards aren't free money -- and that poor spending habits in college can haunt them for years.

Retired Army veteran Dave Gretsch, who coordinates training for the financial assistance program at Fort Hood, Texas, believes that money troubles have a hidden hand in many premature departures from the military.

"You start taking a look at the soldiers who didn't make it, and you'll find most of them had this common theme that their personal financial situation is not good," Gretsch says. "It affects a person's happiness. You take a person who is financially stable and compare them to someone who is financially devastated. That affects their attitude, work performance, motivation. Really, it affects the attrition rate of the U.S. Army."

Smells like teen spending
How fiscally unfit are this year's grads?

According to a nationwide survey of 723 12^th graders in public schools across the country released in April by the Jump$tart Coalition for Personal Financial Literacy, the average participant answered just over half (51.9 percent) of the questions on the 45-minute test correctly -- an F or failing grade based on standard grading scales.

What's more, the class of 2000 fared even worse than participants in the first Jump$tart survey three years ago, who also flunked but still managed to score on average 57.3 percent.

"It is depressing," says Dara Duguay, executive director of Jumpstart. "What I see from these results is that personal finance is just not being taught. Schools are focused on back-to-basics to perform well on exiting exams and personal finance doesn't figure into those exams at all."

What makes these findings even more disturbing is that the 50 percent of students who don't plan to attend college, and hence will likely manage their own money sooner, fared far worse (39.7 percent average) than those headed to a four-year school (54.5 percent average). And even hands-on experience doesn't seem to help. Students who own stocks in their own name scored the same as those who don't. Students who receive an allowance or use a credit card actually did worse than those who don't.

In the only bright spot, those who participated in a high school stock market game scored slightly better than students who completed either money management or economics classes, which may simply indicate a need to make those courses more reality-based, in the few schools where they exist at all.

Chips off old blocks
Don Blandin, president of the American Savings Education Council, isn't surprised by the findings.

His organization's 1999 Youth & Money Survey, which polled 1,000 students ages 16 to 22 regarding their attitudes and behavior toward money, found that young people often consider themselves money-savvy simply because they know how to spend the stuff.

"There seems to be a sense of false confidence among 16- to 22-year-olds that they know more about money management than they actually do, based on their behavior," says Blandin. "Of the 16- to 22-year-olds who have credit cards, 28 percent are already rolling over that debt every month. At that young age, that's a very bad habit to get into."

A great majority of those polled, 94 percent, said they turn to their parents for financial advice on money. That may sound like good news until you consider that many parents today didn't have credit cards, IRAs, CDs or mutual funds readily available to them as teens, and in some cases may know less about these financial tools than their Internet-surfing children.

"If 94 percent of kids say they turn to their parents for financial advice, is this a situation where the parents feel equipped to give it?" Blandin wonders. "Plus, for parents in the sandwich generation who have both kids and parents to care for, it can be tough to set a good example. You find parents who can talk to their kids easier about drugs and sex than about money."

Robert F. Duvall, president and chief executive officer of the National Council for Economic Education, says flatly, "We are not prepared to deal with what our kids don't know."

Parents may not understand
Many parents may wonder, why all the fuss? After all, they never took a course on personal finance and they're getting by just fine.

In a word, change. This is not the world you grew up in.

Your kids are inundated with a single advertising message: Buy now!

Spending is portrayed as an entitlement of young people. Immediate gratification is the rule, not the exception. To make that easier, credit card companies target them with post-graduation plastic bearing their college colors or favorite hobby. We have yet to see a credit card commercial where the bill arrives.

Early debt can get you in deep
Simply put, never before has it been possible for so many to get so deeply into debt so early in life. Early debt is particularly crippling because it can seriously alter a young person's future, affecting their ability to obtain financing, find housing, save for retirement and even land a job.

"If a young person gets a credit card out of high school and doesn't know how to manage it, they can get themselves into big trouble," says Duvall. "Figures show that more and more young people are doing just that."

Blandin says the credit issue goes far deeper than young people are aware.

"It is much easier today to get yourself into a financial hole to where it affects you in the real world," he says. "A lot of companies will check everything about you before hiring you, and if they see that you have a poor credit history, they will consider you to have poor judgment and therefore not want you as an employee."

Duguay agrees: "They need to understand what a credit report is. You have to pay in a timely fashion. You may be tempted to pay on time when it's convenient, but most major creditors report monthly to the credit bureau, so they would show you to be delinquent every other month. When you go to rent an apartment, get a loan, lease a car or even get a job today, you may lose out because of a poor credit history."

Learning before it's time to earn
The experts agree that the school of hard knocks doesn't have to be the only option for America's kids. The key is incorporating personal finance into existing public school curricula, from kindergarten through grade 12, and encouraging more and more parents to get involved in the fiscal fitness of their children.

"Go to our Jump$tart clearinghouse, click on educational materials and do a search by your kid's age," Duguay suggests. "There is a wide variety of free materials you can use as guides that show step-by-step how to teach these things to their children. Have some structure in front of you. There is so much good stuff out there that there is no reason why you should have to sit down with just a checkbook and try to figure out how to teach their kid to balance it."

Jay MacDonald is a freelance writer based in Florida
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-- Posted: Aug. 9, 2000