Education Resources

A brief look back
From August 25 to August 29, 2005, the Gulf Coast region from Florida to Louisiana was at the mercy of Hurricane Katrina. The storm crossed the most southern part of Florida as a Category 1 storm and strengthened into a massive Category 5 when it moved into the Gulf of Mexico. On the morning the 29th, the storm weakened slightly as it cut a path of devastation across the "toe of the boot" of Louisiana before slamming into the coast of Mississippi. Louisiana's coastal wetlands and the parishes of Jefferson and St. Tammany suffered significant damage. The parishes of Plaquemines, St. Bernard, and Orleans suffered damage so severe that these areas verged on total destruction. In Mississippi, the coastal counties of Harrison, Hancock, and Jackson had some areas that were completely washed away.

The National Hurricane Center's report about Hurricane Katrina describes it as "one of the most devastating natural disasters" in U.S. history. According to statistics from the National Weather Service, this storm was the costliest to hit the United States and the third deadliest, with an estimated 1,500 deaths attributed directly to the storm. Evacuation orders for the northern Gulf Coast region, from Louisiana to Alabama, displaced 1.2 million people.

A teachable moment
Hurricane Katrina's physical devastation and the ripple effects of immediate, unexpected, and widespread long-term displacement shined a spotlight on some critical issues: very few people had an emergency plan in place, and even fewer had a financial cushion to weather the aftermath of the storm. Many people experienced sudden unexpected drains on their savings, if they had any, and credit cards became a lifeline, if they had any available credit on the account. For those who had bank accounts and direct deposit, access to money was impeded only by the loss of electricity or downed phone lines. The unbanked population and those who still relied on paper paychecks or assistance checks delivered by the U.S. Postal Service faced many more challenges.

The message was clear: if ever there was a teachable moment, this was it. Hurricane Katrina was the epitome of the idiom "Save for a rainy day."

"Katrina's classroom" still in session
The Federal Reserve Bank of Atlanta released Katrina's Classroom: Financial Lessons from a Hurricane in early 2007, and published extension lessons in 2009. The four-part curriculum piece presents video and classroom activities for middle and high school students, focusing on financial preparedness, financial responsibility, budgeting, banking, savings, and wise use of credit. The financial lessons are put into context through the stories of three teenagers and their families affected by Hurricane Katrina.

In the video, we first meet Nick and his parents. At the time of the storm, Nick is a sophomore in high school in New Orleans. His family is displaced to Atlanta for a full year. Through Nick and his mom, students learn the importance of organizing and protecting important documents and having access to bank accounts in the face of an emergency. Students follow Nick as he opens a checking account and learns to keep it balanced. The expansion lesson helps students learn about choosing banking services that are right for them. Students review various bank products and services, exploring their advantages and limitations as well as costs, returns, and requirements.

We meet Jacqueline and her family next. Jacqueline is an eighth grader in Biloxi, Mississippi, when Katrina destroys her home and forces her family to temporarily relocate to Starkville, Mississippi, and rely on credit cards for basic needs. Through their story, students learn the importance of managing credit by examining credit card offers and statements and exploring ways to pay down debt. The expansion lesson explains how financial decisions are reflected in a credit history and the impact those decisions have on a credit report and credit score.

Finally, we meet Jamie and her mom. It's 2005, and Jamie has just started her senior year of high school. She has big plans for this year and is working toward a scholarship for college. Her plans are interrupted, and she finds herself in Katy, Texas, with a host of other relatives. In Jamie's segment, students learn the importance of budgeting and saving for the future along with the relationship between education and the potential for greater earnings. The expansion lesson explores the total cost (including opportunity cost) of borrowing for higher education and helps students evaluate whether loans are a desirable option for financing their education beyond high school.

Change happens
Like financial planning, emergency preparedness is not a static process. Over time, goals, situations, jobs, families, and priorities change. In the seven years since Hurricane Katrina, emergency plans that may have been in place then may not be relevant now. It is important to regularly review your plans (financial and emergency) to be sure they are in line with your current situation.

We checked in with Jamie and her mom, Geralyn, to see what's changed in their plans over the past seven years. Jamie is now 24 and, like many college students, has changed her major a few times. She's working her way through school and pursuing a degree in accounting. She plans on becoming a CPA and would like to have her own firm one day. Jamie pays close attention to her finances and maintains a tight budget. She says that there are "some things that I can't go out and do because I still have to maintain my priorities and there are things that I know I need to have." And if an emergency situation threatens, she says, "I still have all my stuff that I absolutely need readily available in case of another evacuation. However, I highly doubt that I would evacuate back to Katy, Texas…. I think that I will travel a little bit further north before I go west."

Geralyn told us that "Katrina changed the mind-set of a lot of people, including me. It made me more conscious of budgeting and having, what we call in New Orleans, a hurricane fund—that just means saving for a rainy day. The evacuation process would be different if I have to do it again. I am now essential personnel [with the New Orleans Fed], meaning I would have to evacuate with my job, my family included."

Always relevant
The strength of Katrina's Classroom comes from the real-life stories and lessons that it contains. Upon release, the curriculum became widely popular because Hurricane Katrina was a significant event that touched nearly every state in the nation. The U.S. Bureau of Labor Statistics reported that evacuees were found in 45 states and the District of Columbia. Even today, interest in the curriculum remains strong. From January to June of this year, the lessons and videos received more than 42,000 page views.

The lessons remain relevant because financial planning and emergency preparedness don't have to revolve around a natural disaster. Tough economic times, unexpected illness, major housing or auto issues—all are situations that can be disastrous to your financial stability. Financial emergency preparedness must be a part of everyday life. Your financial future depends on it.

By Claire A. Loup, economic and financial education specialist with the New Orleans Branch of the Federal Reserve Bank of Atlanta

August 29, 2012