There is nothing wrong with your computer; do not attempt to adjust the screen. I am now in control. I control the vertical, and the horizontal… Ah, the Outer Limits. A fitting beginning to this week’s post, as you once again find yourself exploring a world where I, Roger, The Amateur Financier, am in charge. Luckily for you, I’m a benign dictator. Mostly.
This week, we take on one of the most daunting tasks facing anyone trying to remake the entire financial sector: education. Education is very important, particularly when it comes to money; one of the first things almost any financial adviser will suggest is to get educated about your situation, your goals, and the various financial tools available to you. The problem is that there are few areas, save perhaps religion and politics, where there is more disagreement on what should be taught (if anything) and how it should be handled. Between religious differences on what investments are acceptable and unacceptable, personal feeling from the students (and their parents) on what should or shouldn’t be taught, and possible involvement from investment related companies, attempting to get their products before a captive audience, trying to strike a balance that pleases everyone will be nigh impossible.
School's in Session! Now, Quiet Down!
My solution: don’t try to strike a balance. Instead, present the basics of money management, saving, spending, and investing as well as possible, avoid the truly big pitfalls (i.e., don’t claim that all debt is inherently evil OR that you can leverage your way to riches in just a few short years), and above all, try to give the students the information and skills they need to do the research and make the choices that are right for them. That was the goal I attempted to reach with my Financial Lesson posts, and it’s a good approach to take with students of all kinds. So, let’s take a little peak into the curriculum at Roger’s school of personal finance, shall we?
My (Lesson) Plans
Home Economics – No, not the type where you learn to cook a meal from scratch or to sew your own clothing (although both of those are skills that more people could definitely use). Instead, here the students would learn about creating a budget, setting up savings and checking accounts, balancing their checkbooks, and generally using their money in a smart manner during their daily lives. It’s a shame that so many people even now cannot balance their checkbooks that it’s practically a cliche, so why not try to tackle it at the source?
Financial Literacy – Given the sheer overwhelming amount of financial products and potential investments out there, the best thing to teach students is how to read up and find out information about them. Explaining the information presented in stock listings and mutual fund prospectuses, as well as how to compare and evaluate them, would go a long way towards making the students more skillful and thoughtful investors when they graduate.
Budgeting - This would probably fall under the category of Home Economics, but well, it’s a very important subject. Teaching the students how to use credit cards properly (if they opt to use them at all) and that you must avoid building up more debt than you can afford to comfortably finance will go a long way to prevent any future credit crises. Letting students know that there is a trade-off involved in all financial decisions, from whether to spend or to save to choosing between all their various wants, will help them to keep their eyes on the important goals they have in life.
Investing – It’d have to be handled fairly delicately; there’s a lot of area here where some parents will try to have your head if your contradict their beliefs/wishes. Sticking with the broad principles, such as how to compare investments and the trouble with beating the broader market, will go a long way to helping the students plan for their future. Noting the average returns and potential risks of various types of investments like stocks and bonds will give the students a standard for comparison for the promises of other, more unusual vehicles. Which brings me to the last, but perhaps most important point:
Bulls*** Radar – Probably the most important financial tool for a student to develop, and also one of the hardest. There’s no surefire method to teach someone to catch all the tricks that potential con artists will use, but knowing what sort of return is realistic for a given level of risk, knowing to thoroughly investigate any investment, and knowing to run when someone offers high yields with no risk are all good starts. Add in an understanding that every investment has its pros and cons, and that there is a balance between risk and potential return, and you will have students prepared for the investing world.
That in a nutshell is how to improve the educational system when it comes to personal finance; change the curriculum to reflect these policies, and watch the students’ understanding of economics soar!
Related Websites
Case of the Mondays Money Links
on October 12 2009
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