It’s not a revenue play for the public education system. A new financial education program that Vanguard is offering free of charge to U.S. classrooms uses experiential learning to teach students from kindergarten through high school about money, including how to earn it, how to save it and how to spend it.
The program, My Classroom Economy, establishes a simulated economy in a classroom where students earn credits, or “dollars,” by completing classroom jobs, extra-credit assignments, getting exceptional grades and participating in extra-curricular activities. They can use those credits to pay for rent on their desks or at a class store or auction where they can purchase grade-appropriate items like markers and small toys. They can even save enough to buy their desk or buy other students’ desks as a source of income. Students can also be fined for misbehavior.
The program website features materials and guides to help teachers guide their students through various activities, as well as a suggested schedule for introducing topics.
“We get a lot of encouraging emails from teachers,” Shannon Nutter-Wiersbitzky (left), director of market research for Vanguard and head of the My Classroom Economy program, told AdvisorOne on Tuesday. “Kids love it. They love being grown up. Even paying rent, they think, ‘Oh, this is so neat.’ It’s also great from a classroom management perspective. Teachers can encourage good behavior and discourage bad behavior.”
The program was developed by Vanguard with the help of Rafe Esquith, a fifth-grade teacher at Hobart Boulevard Elementary School in Los Angeles who has won multiple awards for teaching and wrote several books on teaching.
“They called me because they read some of my books and thought how I teach economics might be a better way to teach financial responsibility,” Esquith told AdvisorOne on Tuesday. “Initially, they just asked if I would be interested, but the more I spoke with them, the more I thought their goals were worthy. This is just a volunteer project by their people.”
Vanguard had more than 40 volunteers who contributed their skills in training development, design, IT, writing, project management and investment expertise to the program, Nutter-Wiersbitzky says.
Esquith, who has been a teacher for 30 years, says students in his school are up against a lot. Just 32% of students in his school finish the 12th grade, he says, and 92% are below the poverty line. “I saw early on that it’s not always the students’ fault,” he says. “Many of the lessons have no relevance to their lives.”
As students advance to higher grades, the program’s activities become more complex. Middle school students begin paying for utilities and taxes in addition to their rent. High school students can buy investment products like CDs and can purchase insurance. They can also open investment accounts with stocks and bonds.
“The additional aspects of the program are meant to make it more real life,” Nutter-Wiersbitzky says. Older students who may be inclined to write the program off as unimportant can see that the principles behind fake money and investment accounts are more than just pretend. “They can see how their investment, if they started to save, how it grows over 32 years. They can see the power of compound interest, and that time shift will be powerful.”
The program has only recently been expanded to include middle school and high school students, but has been available for students in kindergarten through fifth-grade classrooms for the past year, Nutter-Wiersbitzky says.
Vanguard doesn’t have any metrics on how many classrooms are using the program, Nutter-Wiersbitzky says. “We don’t require teachers to register,” she says. “We wanted to make it as easy as possible for teachers to use.”
So, what happens if a student can’t make rent?
“That can happen,” Nutter-Wiersbitzky says, calling it a “teachable moment.” If a student hasn’t saved enough to pay rent, the teacher can coach him or her to help figure out ways to earn additional income. For example, if there are any tests coming up, how can the student earn a better grade and get a bonus, Nutter-Wiersbitzky suggests. “In real life, you may have to figure out how to earn additional income.”
For Esquith’s students, not being able to pay their rent isn’t an option. “At the beginning of the year I joke that if they can’t make rent, they’ll have to sit on the floor,” he says, “but that never happens. There are so many ways to earn extra money in my classroom.”
Although the program materials suggest using good classroom behavior as one way for students to earn money, Esquith insists that he doesn’t do so. “Good behavior is expected,” he says.
The program overlays any curriculum, Nutter-Wiersbitzky says, and meets common core state standards published by the National Governors Association Center for Best Practices and the Council of Chief State School Officers. It also meets standards developed by the Jump$tart Coalition for Personal Financial Literacy, which provides advocacy, research and educational resources to improve young people’s financial literacy.
“This is not about a teacher or one person coming in and telling students what they need to know,” Nutter-Wiersbitzky says. “It’s about getting to fail in a safe way.”
She compares the program to learning how to ride a bike. “Before you send a kid out on a two-wheeler, you get them training wheels. This is the training wheels. It lets kids practice, and when they’re ready to go out on their own, they know how to handle themselves.”
A major concept in the program is that of delayed gratification. Esquith teaches his students that sometimes they may want something, but if they don’t have enough money, they have to walk away. It’s a lesson they’ve taken to heart and are using in real life. Esquith admits that most 10-year-olds with $5 in their pocket will spend it, but not his class. They’ve taken several field trips and his students have shown that while they may see something they like in a gift shop, they understand that in a few months, it’ll be gathering dust, Esquith says. “They’re very careful with their real money.”
Nutter-Wiersbitzky agrees. Young people are under a lot of pressure to be consumers, she says, but they don’t have an equivalent pressure to be savers.
As the father of four, Esquith is confident saying that young people don’t understand the value of money and have a sense of entitlement. Many children at his school are eligible for free breakfasts or free lunches. “It’s easy to understand how a 6- or 7-year-old can learn things are just handed to you.”
“I realized that of course I’m going to teach my students mathematics, history, literature, but I also wanted to teach them about real life. People are quick to blame Wall Street or politicians or bankers, but part of the problem is us.”
“We’re talking about the economy, but it’s part of a bigger lesson,” Esquith says. “The motto in my classroom is ‘There are no shortcuts.’ If you want financial security, it takes a long time.”