Do these kids know more than you about personal finance?

Boy Scouts are too young to get payday advance loans. However, with a new merit badge up for grabs, more will be ready to properly evaluate their financial options when they become adults.

To earn the personal management badge, Boy Scouts must be able to correctly answer questions about credit, interest and budgets.

Take the quiz

There aren’t any questions about payday advance loans on the Boy Scouts’ quiz, but a little financial literacy goes a long way. If children and teens learn to understand budgeting and long-term interest, they’ll be better prepared to make financial decisions of all types. You can take the Boy Scout quiz at CNN Money to find out if you have the know-how to manage your money like a Boy Scout.

Financial education becoming popular

Possibly the best fallout from the recession is the new-found interest people are taking in financial education. Christian Science Monitor points out that “20 years ago, personal finance was significantly less complex than it is today.” The same article advocates that more states should add financial education requirements to public school curricula.

Land of opportunity – and options

It’s true, personal finance is a lot more complicated nowadays. That’s not necessarily a bad thing, though. People have a lot more options today than they did 20 years ago. Things like payday advance loans were born out of people’s changing needs as our money culture adjusted to becoming more credit-based.

It makes a lot of sense to educate people about long-term and short-term credit options — the sooner the better.

Good examples

We can rest assured that Boy Scouts will emerge from their programs ready to perform CPR, tie knots and evaluate whether payday advance loans are their best option. But what about everyone else? Financial education should be required for everyone. More states need to follow Kansas’ example and write up bills that would require financial literacy to graduate from high school. That way people will learn to use payday advance loans responsibly and won’t get stuck with bad debt.

Last year, online payday loan businesses teamed together to educate the public about managing personal finances. They formed the Community Financial Education Foundation (CFEF), a non-profit that is in the position of knowing what kinds of day-to-day money issues people struggle with and are concerned about. Their free, easy-to-use online portal is currently operational.

Household budgets, future expenses, savings goals and improving your credit rating are all areas covered by the new Web site. Intuit Inc., the company that makes the popular Quicken financial software, has even donated copies of its software to consumers who complete their free registration with the site.

Coming soon to your community

What I find most exciting about this new CFEF Web site is that their education programs don’t merely include static online information about no fax payday loans and other consumer credit aids (which are useful), but community outreach programs. Specifically, users will have the ability to request that CFEF money management seminars be given in their town. This should integrate well with the organization’s commitment to having financial literacy become an integral part of school curriculum. Grants and scholarships will eventually be available for students who show a commitment to financial health.

Under the leadership of Executive Director Miranda Harwell, the CFEF should make great headway against the tide of financial missteps that countless consumers make with their money. According to the Web site, “Harwell is a Certified Educator in Personal Finance and a devoted advocate of financial literacy. Recently, Harwell has become involved with the Financial Literacy and Education Commission sponsored by the U.S. Department of the Treasury.” With that background, your payday loan source is hopeful that the Web site will be a success.

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McCray-Miller says she plans to introduce the bill after the Legislature convenes Jan. 12.

Necessity

The recession has wreaked all kinds of havoc on the everyday lives of Americans. However, it’s also causing people like McCray-Miller to assess the causes and come up with solutions for preventing a repeat performance.

McCray-Miller says, based on Americans’ increasing debt, education is needed for individuals to avoid another financial crisis. She argues that children learn by example, and they have watched their parents (and their government) accrue debt all their lives. Her aim is to break the cycle.

While a payday loan may be a welcome relief for someone in a bind, it’s certainly ideal if people can prevent financial emergencies when possible.

If it ain’t broke … oh wait, it’s broke

I think we are well past the point that people can argue there’s not a problem. Yes, we can blame mortgage lenders and creditors for causing this recession. But while we can’t directly control what investments banks and government entities do with their money, we can control what we do with our money.

Some factors that went into causing this recession couldn’t be prevented. However, educating children about the dangers of accruing bad debt is a step in the right direction toward a generation of individuals who are more capable of financial freedom.

Lesson plans

A 2003 law in Kansas already requires financial literacy to be included in Board of Education guidelines for lesson plans. Apparently this law isn’t clear enough, because some schools still don’t teach the topic. McCray-Miller’s hope is that her law, if enacted, will require that students be financially literate in order to graduate.

So what should be included in personal finance education? Well, I have a few ideas. First, if children learn the difference between good debt and bad debt at a young age, they are more likely to avoid bad debt. Also, students should know how to assess whether the terms of a loan are realistic. With this kind of education individuals will learn how to manage their finances in a smart way and avoid risky deals, such as sub-prime mortgages.

Impressionable age

Some may argue that Kindergarteners are too young to understand personal finance. I believe if the subject is broken down into its simplest, most rudimentary concepts and then built upon year by year it will be successful. It’s like learning math. First, you teach counting, then addition, then multiplication and so on.

So first teacher would educate students on what debt and credit are and then go from there. If students can understand the difference between negative and positive numbers, they should be able to understand debt. After they understand the concept of debt, teach what kinds of debt are dangerous. If children learn this at a young age they are more likely to believe the concepts are true and avoid financial hardship in the future.

Hope for the future

Emergencies do come up, and with so many people teetering on the poverty line, there will likely always be the need for an occasional payday loan. However, starting financial education at a young age will help the next generation to be smart about their money, even in tough times.