Teach Youth the Finer Points of Financial Literacy

Simulation gives young adults a taste of the financial challenges they'll face in the future.

October 1, 2007

Edward flashed a cocky grin as he walked from the Mad City Mall. The 17-year-old high-school student, who spent $530 on a camera phone and a killer sound system, crowed about his budgeting prowess and the ease of managing his money.

Little did he know the "fickle finger of fate" lurked behind him, ready to strike.

"Edward, someone sat on your glasses," said Luis Jimenez, a.k.a. the fickle finger of fate. "That's going to cost you $89. Better bring some of that stuff back."

"What a rip," Edward replied. "This is rigged."

It was rigged. But what a great way to learn about life's unexpected financial setbacks.

Jimenez, a branch manager for $1.1 billion asset CFE Federal Credit Union, Orlando, Fla., shined as the bearer of bad financial news. He was one of 78 second-year CUNA Management School students running two Mad City Money simulations during July as part of the school's annual community outreach.

High-school students participating in this simulation belong to the University of Wisconsin's Pre-College Enrichment Opportunity Program for Learning Excellence (PEOPLE). PEOPLE is a precollege pipeline for low-income and minority students, most of whom are the first in their families who may attend college.

Mad City Money, a hands-on simulation from CUNA, introduces students to budgeting and other financial concepts. Participants assume an occupation, receive a salary, juggle debt, make insurance and other payments, and even get married—although their children usually bear little resemblance to them.

The students' challenge is to visit "merchants" to select housing, transportation, food, clothing, day care, and other necessities and still have some money left over, explains Lin Standke, CUNA's manager of youth programs. "Mad City Money allows participants to make mistakes—and suffer the consequences of their decisions—in a realistic but safe environment. Most participants are surprised to learn they can't have a big house and a new truck on their salary and still pay for day care and groceries."

CU outreach

This type of simulation is an excellent way to give young adults a taste of the challenges they'll face in the future, says Susan Chadwick, lending call center manager for $3.7 billion asset America First Federal Credit Union. She staffed the Mad City Money simulation's food booth.

The Ogden, Utah, institution offers a simulation called "reality town," which "is a very effective way to teach youth money management," she says. It also offers a teen account for members ages 12 to 18, complete with a debit card, student checking account, and access to online services.

Student credit cards also appeal to young members, adds Carla Day, director of sales and service for $161 million asset Hawthorne Credit Union, Naperville, Ill. Hawthorne's student card has a $500 limit at a competitive interest rate and requires no parental co-signer. Students who use it successfully move on to a standard credit card.

"We get them started before they get bombarded with credit card offers," Day says. "When they get out of school, they've built a responsible credit history."

Nonstudents without a credit history have access to a secured credit card if they have $500 in savings or a co-signor, she adds.

That might be a good option for Edward the spendthrift and his cohorts.

Another prescient observation from a CUNA Management School student: "A lot of people made their spouses take the bus to save money. I'm not sure that will work in the long run."