When Financial Education Hits Close to Home

When Nashville, Tenn., teacher Danette McMillian was planning an economics project last year, she started with a question that hit close to home. Most of her twelfth graders at Maplewood High School have grown up in rental housing. What would it take to put them on the path to homeownership?

That question launched students on an in-depth investigation into the social and economic barriers that keep many low-income families priced out of the real estate market. The project also sparked kitchen-table conversations about everything from credit scores to savings habits. By sharing what they learned, students were able to improve financial literacy for their own families, as well as for the broader community.

Demystifying Homeownership

"Many people who live in this area don't know there is a correlation between the cycle of poverty and renting your home," McMillian explained when I interviewed her last year about the project. "They aren't aware what homeownership can do for your life." The Home Ownership Project is described in more detail in the book, Setting the Standard for Project-Based Learning.

This is the kind of real-world project that helps students appreciate the power of personal finance. Some 60 percent of Americans struggle with their household finances, according to the Center for Financial Services Innovation, a nonprofit based in Chicago. Over a lifetime, the extra charges paid for late fees, payday loans, and higher interest rates can cost families hundreds of thousands of dollars.

Meanwhile, renters miss out on one of the most accessible opportunities to build wealth. Homeownership rates are currently at a 50-year low.

Through the Home Ownership Project, McMillian's students learned to take charge of their own financial futures. That sets them apart from many incoming college freshmen. According to a recent survey published by a financial aid company called Higher One, most college students don't use budgets. Some 12 percent avoid checking their account balances, risking overdrafts and late fees rather than facing up to the reality of their own finances.

Making It Personal

To launch the home project with high engagement, McMillian had her students help with a Habitat for Humanity building project for a former student from their own high school. The future occupant was going to be the first in her family to own her own home, and she shared her story with McMillian's class.

To learn more about homeownership versus rental rates in their neighborhoods, students surveyed community members. As students digged into data, they asked hard questions. "Some students went home and asked their families, 'Why don't we own our home?'" the teacher said. Students were able to teach their parents about steps they could take to improve their credit scores and perhaps start saving. "I realized, I'm teaching the kids, and the kids are teaching the parents!" McMillian says.

To further share what they were learning, students organized community education events with staff from a local bank on hand to help answer questions. In some cases, families were able to clean up credit histories and adopt new savings and budgeting habits. Even if family income stays the same, a household's financial health can improve with the adoption of better financial habits, according to CFSI research.

At the final stage of their project, McMillian's students went through a simulation of buying a home. They filled out loan applications based on the projected income they would earn in the careers they planned to pursue. Students met with loan officers and went through the entire approval process. Then they worked with a real-estate agent to find a home within their budget. They produced a video documentary to chronicle the whole process.

Will these well-informed students make better financial decisions in the future? Time will tell, but McMillian is optimistic. "I like projects that have the potential to change students' lives."

How are you helping students take charge of their own financial futures? Please share your financial education project ideas in the comments.