Mandatory Personal Finance Education

Agreed, but for a different reason. What reason do we have to believe that public school teachers are capable of teaching personal finance? If the state of mathematics education is any indiciation, attempting to teaching personal finance isn't going to do a whole lot of good. The public schools may have seriously reduced illiteracy in this country, but we're still rife with innumeracy. Besides which, I think it would be a serious case of the blind leading the blind.

For any public school teachers reading this, I also want to go on record: I don't think all public school teachers are bad. I had several great teachers throughout the years (including a 4th and 5th grade teacher with a PhD, which I always thought was odd). But based on my experience, there are far more bad teachers than good.

--Bill

We used to have this in senior year social studies, called "civics". But with all academic and social stresses on high school kids these days, this has been dropped at many places.

Also, has managing money become more complicated in recent decades? When I went ot college I had two bank accounts, and paid two bills twice a year. Now I have around 40 accounts I manage yearly- about a third due to employment benefits and another third due to homeownership. Plus with the "personal responsibility" revolution there must be at least 20 different ways to open accounts for this or that tax incentive.

Well they'll probably use canned curriculum. And I'm cynical about how that curriculum is going to get developed. Just imagine what a difference it would make if everyone (at age 17) was introduced to the concept that credit cards should never never never never be used to spend money you don't have in your checking account, and paying interest is one of the ways The Man keeps you down. And that buying a new car is out of reach of most Americans, from a financial point of view. And hey, politics too..."part of personal financial planning is voting for people who are going to do things that benefit YOU like cutting YOUR taxes." OK, maybe not so overt...just educating people about things like how taxes actually work.

I really doubt that these messages are going to make it in there. Financial industry associations will be approached to help develop materials, or will scream bloody murder if the message isn't right. Credit cards...convenient financial innovation! A simple way of dealing with life's little surprises (like a sale at Prada)!

And will schools in Ohio actually talk down a new car as something other than a birthright? What is it, 15% of the state's jobs? "Daddy, at school today they said new cars just make most people broke, why do you work for a company that just makes people broke?"

I am not trying to slam Ohio, it would be the same in any state, just different issues.

I also have to agree with Sgt. Sausage's observation...lead a horse to water, etc. Education can help, but very highly educated people can still make the dopiest financial decisions. And vice versa, of course - you can't teach common sense (I wonder though, can you teach the benefits of "delayed gratification"...?).

-Tad

I am a personal financial planner and I agree education would be a big help. Every day I see people lacking even the most basic knowledge of finances. Maybe if we can show kids how to balance a checkbook, not max out credit card, etc it would help.

Careful of your sample base. :-) It may seem to you like everyone in America is financially brain dead, but you aren't going to meet a bunch of people who can balance a checkbook in your line of work. :-)

I have to agree here. Our community has something called "Enterprise Village" that all kids must attend. (If I remember right it's around 8th grade.) It's a two week unit that ends with a field trip to a miniature city where the kids work jobs pass money back and forth and make change.

Unfortunately, part of the unit involves kids being given a monthly income and having to make a budget. That sounds like a good thing, but in this budget they are *required* to spend at least 20% of their income on car payments. Not a good message IMHO.

Like Tad, I agree with you on financial education. My experience is that the problem is not teaching people about personal finance, but teaching them how to make good decisions.

Towards that end my favorite saying on common sense:

"Common sense is not so common." - Voltaire

-HW "Skip" Weldon Columbia, SC

"Tad Borek" wrote

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Tad, your main point seems to be that industry will fight any effort that will stem Americans' indulgence in financial gluttony, since such indulgence is a part of industry's profits. Yet instances abound of the government promoting individual Americans' financial restraint and so seemingly defying any industry lobby effort. For example, in the vein of your concerns about the auto industry, and from the federal government (linked from its financial education site, mymoney.gov), we see, "It might seem glamorous to own a Mercedes-Benz, but if it causes you to go bankrupt perhaps it's not so glamorous after all."

Private industry itself often promotes caution in financial planning, even when it would seem to go against its interests. At , we see one of the biggest banks in the country discouraging people from buying too much automobile, even though the more it has on loan, the more it stands to profit. Tad, many curricula are in place now, quite developed and being taught in public institutions and by private industry. They contain messages of which I think you and others here would overwhelmingly approve. The existence of these curricula may leave you scratching your head "Wha... ? This sure is counter-intuitive... " But I think a careful analysis would bring a thoughtful person to the realization that a broke America is a low profit producing America. That's why corporations frequently promote personal responsibility.

Tocqueville's "enlightened self-interest" (1835, _Democracy in America_) applied to corporations is now not just a fashionable buzz phrase. It is also a frequent reality. It makes sense and cents. Financial education courses are well-publicized. Be that horse who drinks(!), google, and then relay some substantive comments about what actually exists, and not what you think exists. Are the messages of these courses mostly sound?

My prior posts to S. Sausage et al. state that the main path to financial (and other) "education" takes place through parental influence at the dinner table, after school, etc. I am confident classes in personal financial planning will do more good than bad, but I also strongly believe that /Thee Solution/ does not lie in these classes' mere existence.

On the applied front, one of my favorite "financial education" stories is from a parent I met last winter. He gives his young boys a small allowance. He has told them he will pay for their clothes at Wal-Mart. If they want "nicer" clothes, they have enough money in their allowance to "upgrade" to the name brands at the popular chain stores. He asks them to choose, "Do you want a pair of Levis from the Gap? Or will Rider jeans from Wal-Mart do, so you can then save your allowance for a trip to the amusement park?"

It's a shame we do not see more talk of solutions that work here. Teaching someone is not easy. I suspect discussion is further complicated because our culture is rife with the "instant this, instant that" mentality.

Also depends what is covered in the class- could be many many things (and as a resident of Ohio and with twins on the way, I think this is a good thing).

Personal finance-

balancing a checkbook use of credit

earning power investing in future (education or a trade) college finances

taxes tax brackets tax deductions income taxes business taxes

investing savings compound interest

then the relationships between investing and taxes relationship between saving and use of credit and the list goes on...

Part of issue is having the math skills to do this Part of issue is knowing the tools to do this Most of issue is making financial decisions, and understanding how making financial decisions as part of a group and not on spur of the moment will affect you. It was real easy for me to make decision when I was single. The day my wife moved in with me things got complicated times 4 it seemed. Getting married made it slightly harder...and I can say I am proud of progess wife and I have made in 5 years of being married. With twins on the way, I am finding the decisions getting even harder than before (how much to retirement and how much to increase household costs). There is no way these decisions can be taught, and I doubt at age of 17 I would have listened to any advice people gave about finances for when you have kids.

In that vain... I would like to hear other's opinions on the subject. Be sure to specify age ranges that you think the advice is good in.

One that I used when my kids were under about 10 or so. "If you ask for it in the store, you will definitely not get it." This tended to make for much quieter trips, with the kids pointing out particular kinds of candy or toys as being interesting, but the grabbing it and asking me "can I have it?" over and over was gone. For grocery trips, this rule got them involved in the pre-trip planning, "Did you remember m&m's? The candy jar is low." :-)

"Daniel T." wrote

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This made me laugh aloud. :-) I really like the firmness, and indeed maybe that's a large part of good parenting--not yielding to little minds that do not know what is good for them and so are "in training," with the parent as teacher.

I am confident your example above teaches the sort of discipline that gets kids away from the "instant this and instant that" mindset and gives them a greater appreciation of "things." For me as an adult, just going camping the other weekend gave me a little more appreciation for so much I tend to take for granted!

Disclaimer: I have not raised kids. I do not plan to raise kids. ;-)

Elle, it almost seems like you are making Tad's point for him.

Also from that site:

... a bad credit history or no credit history could result in: 1. Not getting the automobile you what. You could end up in a junker. 2. Not getting the ring or wedding you want for your spouse, which could end up in no spouse. 3. Not getting the house you want for your spouse, which again could end up in no spouse. 4. Not getting the job you want because of spotty credit, which could destroy your upward mobility.

The message is clear from the above. You should borrow money to get a decent car, decent spouse, decent place to live and a decent job. That isn't the message I want to teach my children.

But nowhere on that site does it even imply that you should pay cash for your car.

I posted an example of one of these curricula. When my daughter had to make a budget for her class assignment, she had to spend at least 20% of her income on a car payment. I'm not so sure that others here would overwhelmingly approve of such a move.

Corporations aren't people, the same rules don't apply. Nobody cares if one corporation kills another for example. And as the latest scandal (sub-prime mortgages) shows us, the little guy is going to be blamed in any case.

I think someone here mentioned this approach, more for a teen. They get an amount for clothing, geared toward a reasonable brand, and they need to use their own money (earned, saved from allowance, whatever) if they want to upgrade. I liked that idea. For my 9 year old, I try to point out the cost of packaging. For example, Friendly's half gallon (which now equals 1.75qt) was on sale but one get one free, so 2/$6. She saw a single serving size, about 4oz, for $2, and I held up both, "this is $2, and this is $3" I told her. She saw the $6 would be ice cream for tonight's desert, or for the week given the size difference. JOE

"Daniel T." wrote

First and foremost, this section is about establishing a good credit history. That's bad, Daniel? Plus, you took it out of context and so ignored the comments on how not paying a bill in a timely fashion causes bad things to happen... yada yada.

Nowhere does it say a new car is the only choice, either. The site is overwhelmingly about how non-black-and-white the purchase of a car is.

I think you are losing the context of the assignment. It's like nitpicking an English teacher for not taking off points for using a split infinitive.

Tocqueville was referring to both people and institutions when he wrote of "enlightened self-interest." The rules are similar. The fact is we (people and corporations) have a synergistic relationship, with each depending on the other. So what one does affects the other. Hence some care for what others (corporations, people) do is logical.

If you disagree, we're likely splitting semantical hairs.

Huh? People do care if a corporation causes bad effects on society as a whole.

Have you missed the many media reports showing the lending industry, Standard and Poor's, etc. are to blame? Seems to me far more blame is being heaped on corporations, as opposed to individuals who took out loans. Surely you have noticed NY Attorney General Andrew Cuomo going after Washington Mutual for alleged fraudulent appraisals.

"Daniel T." wrote

Yes, it does. Click on the link "Finance a Car" on the left. Bank of America notes: "Once you've settled on a particular car, you have two payment options (1) Paying in full; (2) Financing over time (loan or lease). Financing increases the total cost of the car because you're also paying for the cost of credit, including interest and other loan costs. ... If money is tight, you might consider paying cash for a less expensive car than you first had in mind."

Why on earth would Bank of America ever encourage people to pay cash? See my previous post. Plus doing this promotes good relations via educating the public, with honesty, and then letting them choose. It's still about profit, either way, but instead looking towards the long term.

OK, maybe I'm nit-picking and I certainly didn't read all the way through the sites you posted. But the below, I do take exception.

What crime is committed when Microsoft puts some "child" company out of business? People do care if a corporation causes bad effects on society as a whole, but nobody cares if one corporation kills another.

Actually I have. It seems like too much of my news comes from conseritive sources. :-)

"Daniel T." wrote

My "Huh?" was intended to mean that I do not know what one corporation killing another has to to with what I said earlier about corporations and "enlightened self-interest."

Ours was: "We don't buy cereal with sugar as the first item on the ingredient label. We're not paying for someone else to put sugar on our cereal." The real reason, of course, is that those sugar-first cereals are the most expensive, which I could ill-afford, but it taught them to read labels, and to be a bit more self-reliant.

Elizabeth Richardson