College Preparation Requires Financial Literacy

Every young adult must possess the knowledge and skills to be financially independent. This has become even more apparent in light of the recent financial crisis. Against rising college tuition and mounting student loan debt, students and families must plan even earlier for college completion.

The Case for Financial Literacy (Source: Emerging EdTech)

1. They don’t know enough. Studies by the Jumpstart Coalition for Personal Financial Literacy and the National Longitudinal Survey of Youth have shown that many young people have little understanding of finance and economics. They are spending and borrowing without knowing that interest builds up, or that credit cards aren’t free money.

2. They have more debt options. A report by the Federal Reserve showed that 53,000 student credit card accounts were opened in 2008, and by 2009 there were some 2 million student credit cards in circulation. Agreements between banks and colleges have made it easy for students to get debt — more students are paying tuition with credit cards every year in addition to charging schoolbooks and other expenses.

3. Student loans are costlier. In 2011, student loans accounted for a greater slice of the debt pie than credit cards for the first time in the U.S. While the costs of education have grown, incomes and government aid aren’t keeping up. Students are taking on more debt, and with banks tightening their belts, many of them are turning to riskier subprime lenders.

4. They start saving later. More kids are taking their time in school and starting their careers and retirement plans later than their parents. It’s not uncommon for a student to start a stable career only in his 30’s. If they learn the importance of saving and investing in high school or college, it will encourage them to get started earlier, and to work harder to avoid taking their time in college.

5. Not everyone is given the same chance. The Jumpstart Coalition surveys showed that the most financially literate youngsters are mostly white, male, and come from well-educated families. A separate study by the NLSY showed that financially literate young adults have parents with ample retirement savings, often invested in stocks. The data suggests that financial literacy is concentrated in the middle and upper classes, but everyone is faced with the same financial decisions. Teaching all kids in schools helps to ensure that all kids are on the same footing when it comes to handling their own money.

Financial Literacy is College Preparation

At Intrepid College Prep, we equip our students with the financial tools to establish discipline and lifelong habits that will have demonstrable impact in college and throughout their professional careers.

Our financial literacy curriculum consists of personal finance, entrepreneurship and economics. Starting in fifth grade, we teach these concepts through the fundamentals of reading, writing, and math. For example, students are expected to master verbal and quantitative reasoning skills in each grade. Teaching prepsters to analyze the differences between owning and renting a home involves students reading passages and case studies about home ownership for comprehension, memorizing and using key vocabulary, calculating the costs of home ownership and renting and choosing a course of action (whether to buy or rent a home) based on several assumptions.

Making choices about renting or buying a home is related to the central concept in finance theory – the time value of money. We return to this central concept over many grades so that prepsters learn how to determine, in today’s money, the tradeoffs of buying a home now versus delaying the purchase of a similar property in the future. To simplify these concepts and expose prepsters to multiple ways of representation, we partner with organizations like Khan Academy, which operates a video library of over 3,000 videos in numerous subjects like financial literacy.

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We believe that mastery of these types of skills is required for college preparation. It is our high expectation that 100% of our students will complete a four-year college degree within 6 years of high school graduation and that every student will be able successfully manage their finances to plan for college, maintain financial wellbeing in college, and maximize professional opportunities after college.