Dr. Rudy Papenfuhs, principal of Smithville High School in Missouri, believes kids should learn about money at home and in school. A native of New Jersey, he attended four Midwestern universities, was a biology teacher, and now teaches an MBA course at a Kansas City university. He shared techniques he and his wife Patt used with their own children:
When should you start teaching kids about money? "Certainly by elementary school kids can understand the concept of money, and how to earn, collect and save it before buying something. Understanding cash is important. Credit isn't brought up till years later."
Should kids have mentors? "Our daughters had a personal ‘board of directors' that included people we did things with as a family. It was a confidence-builder for them to ask these individuals if they could come to them for advice about financial and other matters. It's been most encouraging and enlightening for them."
Should you let kids make costly mistakes? "Yes! When our daughter Julie had braces but didn't wear her retainer - even after the orthodontist's warning - her teeth moved back. We had her pay for the second set of braces out of her own pocket. She learned a valuable lesson about maintaining what you've spent money on!"
How do you teach saving habits? "In February 2010 we brought Ryan, a homeless orphan, into our home as part of our extended family. We're teaching him our family philosophy that the more you earn, the more you save - not spend. For example, we don't believe 19-year-olds should have the car of their dreams, so he has a 2003 truck. We told him if he maintains its value and saves another $2,000, we'll talk again."
What about investing? "When Julie and Megan were in high school, we'd sit at the kitchen table and show them our financial reports. We explained that we didn't live beyond our means. We didn't have a fancy car, but we also didn't have car payments. We also talked about depreciation and the fact that once a car is driven off the lot it is worth less. We even explained compound interest. Now our daughters both have IRAs, and never have credit card service fees."
How important is education? "My hope is that students leave high school with two main skills - self-discipline and knowing how to learn from their mistakes. If they don't make mistakes, it means they've never taken any risks."
Should states require financial literacy credits? "Missouri has a requirement, and I think it's a good idea. Many students seem to know the price of everything, but the value of nothing. Our classes include lessons from the Yes, You Can curriculum, which helps students learn about checking accounts, getting loans and saving before buying."