California students are getting some practical lessons in economics through programs designed to teach financial literacy. Mike O'Sullivan reports, the students are learning to budget, invest, and plan for the future.
At the Los Angeles branch of the U.S. Federal Reserve System, students watch from a distance as workers count stacks of bills, with $20,000 in each bundle. Nearby pallets hold millions upon millions of dollars in currency.
Visiting teenagers Ricardo DeLeon and Cherae Harris are impressed, and a little bit jealous of the people who work here.
RICARDO DELEON: "I liked all the money."
CHERAE HARRIS: "Those people have to go through so much temptation, just going through all of that money, I swear. They must have a pretty closed system to be able to let people work there and get their hands on all of that money and trust them not to take it."
Security is tight here. The U.S. Federal Reserve System, or Fed, has branches around the country, and has never been robbed. It is the nation's central bank, where other banks keep their money.
The Los Angeles facility, part of the Federal Reserve Bank of San Francisco, has the second largest cash vault in the United States. It holds funds for Southern California, Las Vegas, and much of Arizona. The largest Fed cash vault in the country is in East Rutherford, New Jersey, outside New York City.
Andrea Abrams is education coordinator for the Los Angeles office, where she leads student tours and financial workshops. Today, she will give these students from Bellflower, California, a short course on money.
"We start the workshop off by [asking] what do you already know about money, or what does money mean to you? And a lot of the students say things like, you need money to survive, money makes the world go round," said Andrea Abrams. "They know they need it. They're just not always sure how to get it and how to hang onto it once they have it."
She tells students to start saving. If they put away $15 each day, with a five percent rate of return, they will have $1 million at age 65.
They learn that some investments pay a higher rate of return, but that a higher return generally means a riskier investment.
These students are already making economic decisions. They are part of an after-school program that exposes them to business. Teacher Estelle Rubio Delgado says they are assigned to banks, offices, and retail stores as interns.
"There's no guarantee that they'll get hired, but once we put them through the training process and helped them with their resume and how to dress, and how to go through an interview, we've got our fingers crossed that most of them will get hired," said Estelle Rubio Delgado.
Student Cherae Harris is working part time at a home loan company. She wants to study psychology, and says this introduction to finance should help her plan for college.
Ricardo DeLeon is studying banking, and hopes to pay his way through technical college to study computers.
Andrea Abrams tells them that successful financial planning requires a budget, with careful monitoring of income and expenses.
She says most students get the point, and are fascinated by the huge amounts of money they see here. They are most intrigued to see old currency shredded to make way for new bills.
"Typically, when they witness us shredding the $27.4 million a day, which we do here in Los Angeles, their immediate reaction is, well, I don't mind that it's worn out," she said. "I've love to have some of that worn-out money. When they understand that we're replacing the money of the economy and then just shredding the worn-out currency to keep the amount stable, it dismays them but at the same time, really helps reinforce the concepts of monetary policy."
Students in San Francisco are also learning about money through an organization called the National Foundation for Teaching Entrepreneurship. It held a recent competition where students outlined business plans. High school student Ugo Ugamba has designed a cap with a battery that powers lights in a flashing logo. Vivian Chau created a bottled tea mixed with jelly, similar to the jellied milk tea that many students buy in San Francisco's Asian cafes. Huong Cheng won first prize for her plan to start a business that sends student volunteers to a home for senior citizens.
"The students will do small tasks that the elderly need help on, like read a book with them, take them out for a stroll, help them carry their groceries - small things that that a volunteer is able to do," said Huong Cheng.
Half the profits earned by the volunteer workers will support their high school clubs, and the other half will go to Cheng's business.
These students are getting help from adult professionals, including Neville Richardson, a financial advisor with Merrill Lynch. He asks the budding entrepreneurs some questions.
"How much do you want to actually make? And how much time can you realistically dedicate to this business, with school, possibly a part-time job to help you fund your business, and who are your funders? So they're getting a little lesson in capital acquisition," said Neville Richardson.
He says these lessons will serve the students well in later life.