Does your tech-savvy teen know what a 401(k) plan is?

If ever there were a teaching moment about the perils of financial ignorance, it’s the current economic crisis.

Millions of Americans are learning the hard way about the pitfalls of teaser mortgage interest rates and runaway credit card debt. Sadly, their children may be doomed to repeat the mistakes of their overdrawn elders.

Financial teaching at home and in the nation’s schools is skeletal at best, educators say. American youngsters who can Twitter, text, blog and download with ease are downright clueless when it comes to old-school chores like balancing a checkbook or understanding retirement savings.

“We’ve been going for years without that education, and it’s one of many factors contributing to the whole mess we’re in,” said Karen P. Varcoe, a consumer economics specialist for the University of California.


The good news, Varcoe said, is that teens are keenly interested in learning about money. Arming them with some fundamentals may help them weather the next recession better than their parents are faring now.

At an exhibition hall near Glendale last week, dozens of juniors and seniors from Allan F. Daily High School participated in a financial literacy program sponsored by the nonprofit educational group Junior Achievement.

The hands-on event was an attempt to thrust teens into the grown-up world of budgeting and bill-paying. The students were assigned adult identities, with children and incomes, then required to navigate a host of financial obstacles such as getting a mortgage and paying for medical insurance.

As an Alicia Keys song blared, a wave of hoodies and Converse sneakers swept through the faux brick and painted stone storefronts. Steffy Sulub, 17, found she had morphed into a 33-year-old married woman trying to make ends meet on $42,516 a year. Budgeting for a house and car while still managing to eat three times a day is hard work, she discovered.

Back in the real world, Sulub’s own family is in financial straits, she said.

“It’s kind of scary, thinking about doing this on my own,” she said. “People our age are just let out on our own when we don’t even know what to do.”

It’s a dangerous cycle, said Adam Levin, chief executive of the consumer education website Parents are so preoccupied with -- or embarrassed by -- their financial affairs that they don’t take time to mentor their children about money. Cash-strapped schools are struggling simply to teach the three Rs. And many businesses have no incentive to teach their future customers how to read the fine print.

“Finance companies are better off with customers being financially illiterate,” he said. “And financial literacy organizations have to scratch and claw for every penny -- it’s like going into battle with a weapon but no ammunition.”

Nearly all young people agree that acquiring good money habits and setting financial goals are crucial to success, surveys and studies show. But high school seniors correctly answered fewer than half the questions on a 2008 test of basic finance knowledge, said the Jump$tart Coalition, a financial literacy group.

Nearly three-quarters of 1,000 teens surveyed for the Charles Schwab Corp. brokerage firm in 2007 predicted an average annual salary of $145,500 for themselves. But just 13% knew what a 401(k) plan was.

Just 7% of people 19 to 39 said they felt very financially secure, according to a survey from the American Savings Education Council and AARP. More than 80% said they already had some type of non-mortgage debt.

Last spring, more than 46,000 teenagers took a personal finance test from the Treasury Department, but only 35 students had a perfect score.

Nine states currently require students to demonstrate proficiency in personal finance. California isn’t one of them.

And, although most young people attribute their financial knowledge to their parents, only 30% of students surveyed for Charles Schwab said their parents tried to provide some economic education.

Paul D. Golden, a spokesman for the National Endowment for Financial Education, said his own parents never talked to him about finance.

“Money is still a taboo subject, and the concept is becoming less tangible,” he said. “Kids see parents punch in numbers at an ATM and watch as it spits out money.”

Teachers can be just as intimidated.

For years, Judy Mullan, 62, was the queen of financial faux pas. She signed quitclaim deeds and raided her retirement savings while she was still young. But she mended her ways and earned a securities license before launching the finance class at Daily High this year.

“I’ve made all the mistakes,” she said. “Nobody taught me anything, and I wasn’t asking questions either.”

She inundates her students with flowcharts and guest speakers, and carts around a maroon binder stuffed with work sheets on the difference between credit and debit. Students are required to write resumes and investigate their families’ budgets.

Yair Pablo, an 18-year-old senior with a shaved head and a plaid shirt, said he was helping his parents calculate their net monthly income.

“Now I realize how many bills there are to pay,” Pablo said. “But knowing that makes me feel safer, because I know how much I can spend.”

As the economy worsens, demand for financial education seems to be booming.

Websites like and Bank High School offer free lesson outlines, work sheets and activities. In the summer, Creative Wealth International puts on Camp Millionaire programs to teach children about money management and investing.

Back at the Junior Achievement event, four teens crowded around a table blanketed with calculators, tapping their pencils as they pored over their budgets.

“We have to pay for trash too?” one student whined.

“You pay for everything,” said Jon Kutas, a volunteer from the consulting firm Deloitte.

“I don’t want to grow up; this stuff is expensive,” another student mumbled.

Senior Armando Magana, 17, agonized over expensive cars and unaffordable utilities.

He grew up watching his parents neglect their bills, he said. Just like them, he used to quickly blow through his cash. Learning about budgeting is helping him “take control,” he said.

“I was scared about money because I never knew how to make it work for me,” he said. “But now, knowing that money is pretty much what runs my life makes living it a lot easier.”