WHITTEMORE – The building blocks of a solid, well-rounded education often consisted of learning about history, science, art and language – and rightfully so. However, not all curriculums account for some of the most basic, everyday situations that young people will undoubtedly face as they enter adulthood, such as navigating the challenges of money management.
Balancing a checkbook, researching various insurance options and budgeting finances in order to live within one’s means may not be on the lesson plan for all students, but it is arguably just as crucial as learning some of the other common subjects in school.
Among those who understand the importance of educating youth in the financial realm is Karen Collins, a Michigan State University-Extension (MSUE) Program Instructor for Whittemore-Prescott Area Schools (WPAS).
She and others introduced a new, interactive program at the WPAS Junior/Senior High School on April 1, entitled “Reality Check.” It was hosted by MSUE staff, in partnership with Dean Arbor Ford of Tawas, Farm Bureau Insurance and Alpena Alcona Area Credit Union (AAACU).
A total of four sessions were held throughout the day, one each for the seventh through 10th grade students, and all of the groups experienced the same program.
Collins said that AAACU representatives assisted her in preparing the program and helped formulate a list of different professions, which were broken down into gross and net monthly average income.
When students gathered in the gymnasium to take part in Reality Check, they each received a folder of information that included what profession they had been assigned as part of the mock exercise. They were also given such scenarios as whether they had children and, if so, how many; whether they were married; if they have any college expenses; and so on.
Participants found out what the annual salary was for their occupation, broken down monthly. To determine what their actual take-home pay would be, costs for such items as health insurance and federal/state taxes were deducted. The remaining funds were then what the students had left to work with, as they visited roughly 10 different stations in the gym to make various purchases.
Collins explained that they were able to decide what items they wanted to buy from some of the tables and, at other areas, the students were given the cost of something they were required to pay for, such as utility bills to heat their home. “This will all be deducted from their check register to see how much money they have or don’t have left.”
Upon obtaining their folders from the “Uncle Sam” table to get them started, they moved from station to station and tried to determine how much they should spend on housing/utilities, a vehicle, insurances, entertainment, clothing, furniture, groceries and communication .
Cindy Anderson of the MSUE Iosco County office likened Reality Check to the game of “Life,” and noted that the youth were to track their expenses on paper and learn to balance a checkbook. “This program is meant to teach kids to learn to live within their budget,” she stated. “It is also a wake-up call for them to learn how much things cost.”
Each of the participating grade levels were given a little more than an hour to peruse their choices before the next set of students took their turn, and the goal was for them to not be in the red by the time they wrapped up at the “Checkout station.
Organizers pointed out that this could be challenging, as some of the assigned occupations brought in salaries of just $1,350 per month.
There were 33 different careers that the students could have ended up with, ranging from a veterinary tech, hairdresser or secretary, to a plumber, construction worker or administrative assistant.
To make things even more versatile, and similar to real-life situations, Collins said that some of the students “attended” either four-year colleges, went for two years or had no college education. This could impact their take-home pay since, in addition to taxes and the like being deducted, some participants also had a student loan debt to contend with.
Collins said that incorporating a marital status and whether they had children also made the practice more lifelike.
A lot of the students were surprised at how many things they had to take into consideration just to address basic, everyday needs.
Having a roof over one’s head is a common expression but the “reality check” for people setting out to start their own lives, is that buying, heating and maintaining a home can be the greatest expense they will ever have.
So, to tackle one of the toughest things first, WPAS students began by exploring housing options. When deciding on a dwelling, they could choose between either an apartment or three different types of homes. All featured three bedrooms and one or one-and-a-half bathrooms, but varied in square footage, price per square foot, lot size and more.
They were able to make comparisons between the cost of an apartment, the most affordable house, a mid-range priced home and the most expensive option. Handouts were provided for each of the choices, which included photos of the homes and estimates for such utilities as gas, electric, water and sewer.
While the idea of moving into your own place can be very exciting, the learned participants that there is much more involved than simply picking out a home that catches their eye.
For all of the housing options, they were educated on what their monthly payment would be for a conventional mortgage with a 20 percent down payment, versus an FHA mortgage with a three percent down payment. They were also shown how much savings they would need to have for each, in order to afford a house.
Among the key takeaways for the students, was understanding that the more money they come in with, the lower their monthly payment will be. However, laying out a big chunk of change up front isn’t always possible for everyone. So, although the apartment example had the highest monthly payment, it also required the least amount of money to actually move into. Therefore, if a person doesn’t have very much savings, an apartment might be their only choice.
For example, MSUE staff said that when they got their folders, some of the students were going to be making their choices based on the most affordable option, because they didn’t have a lot of wiggle room with their budget.
In addition to MSUE and WPAS staff manning some of the booths, others who donated their time and experience at the event were George Botos, from Dean Arbor Ford of Tawas, and Jeffrey Erickson of Farm Bureau Insurance, who is an agent/owner of Erickson Family Agency.
Similar to the housing scenario, when the students seek out a vehicle, they learn that the more they contribute at the start will reduce their payments each month – in addition to saving them money on interest over time.
One of the handouts Botos brought along, described a particular vehicle and indicated what the estimated loan payments would be, based on putting no cash down, $1,000 down or $2,000 down. For comparison, it was also broken up into options for 60 months of payments, 72 months or 78 months. For instance, the students got to see that their payment for this particular car, at 60 months, would be $454 a month if no money is put down, or $418 each month if they put $2,000 down.
With a new ride now checked off their list, the students then headed over to Erickson’s station so they could learn about protecting their recent purchase.
Erickson met with each participant to go over the best options for their particular situation and, along with discussing vehicle coverage, he also provided information on such other choices as life insurance.
He – as well as others who assisted with the program – commended the students for the good variety of questions they asked throughout the day, sharing that some of them were rather interesting. “You never quite know what you’re going to get,” he noted with a smile.
Once participants completed the required housing, vehicle and insurance exercises, they could go to the remaining tables in any order they wished, to see what they were able to purchase with their remaining funds.
When considering how much to spend each month on clothing, for instance, they were given cost comparisons for those whose family consists of one, two, three or four people. Further, they were able to see the differences when their occupation is business casual or a uniform is provided, versus having a job where professional dress or a uniform is needed.
To give the students an idea of some typical entertainment expenses, they considered a number of possible plans that included such activities as bowling, catching a movie or attending a local concert. There were options for a single individual, a couple with no children, a family with one child and a family with two children.
To enhance the home they purchased, the students also mulled over two different furniture choices. Package No. 1 was for an apartment or one-bedroom home and Package No. 2 was for a two- to three-bedroom home, for which appliances would also be needed.
In each case, they were presented with used, moderate new and high-end new options. They were able to see the total price for each option, as well as what it would cost if they financed these purchases – for 24 months, at 24 percent interest – and how much they would end up paying in interest over that period of time.
The students were to also decide on a basic or premier communication bundle, for their TV, phone and internet services, as well as a figure out how much money was in their budget for food.
The Reality Check’s grocery station additionally offered a number of resources to help the students stretch their dollars, including tips for dining out on a budget, ways to save money at the grocery store, how to track down the best buys when it comes to both cost and nutrition, sample food plan menus and comparisons of eating at home versus dining out.
Upon completing all of their tasks, Collins helped the students at the Checkout and they discussed what happened; why they were negative, if they ended up in the red; how they felt if they ended in the black; what went wrong; what went well; if they made any purchases that they could have done without; and so on.
Collins said there was a lot of participation on the students’ part, that the program was a real eye-opener for them and that they were truly interested in learning how they can stay out of the negative with their finances.
She intends to run this as a bi-annual event so that the students can participate one year, and then again a couple years later when they’re a bit older, to really absorb the information. She added that a job fair will be held each year for WPAS 11th and 12th grade students, with the 2022 event taking place in May. So, for new students coming in, the idea is that they will be able to attend the Reality Check program two different times, as well as the job fair on two occasions, during their time at the school.
As for the importance of young people receiving money management training, Collins said that she doesn’t think a lot of students get this type of education, and can enter adulthood without knowing some of the steps that are key to being financially healthy. Further, an understanding of just how expensive some things can be, may help them when considering their careers, as well as how a job is only part of the equation.
Additionally, she said that a majority of this particular area is low-income. “And I think maybe a little bit of planning and knowing – some education in that aspect – might help them get out of that, we hope.”
Collins shared that she loved the fact that the students had input in their financial choices, after which they were able to see this all broken down and how their decisions ended up panning out for them.
While it was an important lesson for the students, there were also some laughs during the program, such as when one seventh grader told Collins at Checkout that he never purchased insurance for his vehicle.
Also, apparently unsatisfied with his outcome, “This thing made me realize that I need to work harder in school,” another student equipped to a teacher. He was about $200 per month in debt and the WPAS employee suggested he spend a little bit less on clothing, saying with a laugh, “300 bucks a month? There’s only three of you!”