How Should Schools Teach Personal Finance?
Recently read interesting article why personal finance should be taught in schools, but is not.
Despite the fact nearly unanimous 99% of adults now agree that personal finance should be taught in high school, just four states require a stand-alone personal finance course in high school and just 13 require money management instruction as part of some other class.
The reasons, according to the article, are:
* Only one in five teachers feels qualified to lead a personal finance class, according to a University of Wisconsin study. So we don’t have enough instructors.
* Personal finance concepts are not part of standardized tests like the SAT or ACT. As the saying goes in education circles: If it’s not tested, it’s not taught.
* Education is run at the state level. So there is no federal authority to mandate personal finance classes, and each state has its own ideas on how to go about it.
* There is little academic agreement as to what kind of personal finance instruction works. Many educators are waiting for clarity before they sign on.
The reason for the lack of personal finance education in the public-school system seems to be stemmed from the fact that there is not a consensus in regards to what to be taught. Furthermore, people seemed to be put off by the sheer amount of information available about financial issues and it’s difficult to learn about personal finance.
Do you think personal finance should be taught in the school system? If so, what do you think should be taught? Personally, I think just know what exactly are your assets and debts are as well as investing can go a long way. I would love to hear your opinion.
My macroeconomics teacher taught his class a little bit faster so he left like a week at the end of the semester to go over the basics with us. It boiled down to balancing a check book (understanding assets and debt) What is a 401k and IRA, Roth and traditional. And to scrap some money together and start one. The effects of compounding interest on the retirement account and individual investing accounts. If you don't know what to invest in.. S&P 500 index. Make sure to be cognizant, when dating, to make sure your partner is responsible with money. Realistic list of monthly expenses
I 100% think that Personal Finance should be taught in public schools. There are far too many young adults that don't even know how credit cards work. My sister teaches 6th grade and had students that didn't know that interest was a thing or what a bank account is.
Since it is widely known that it isn't taught in school, what I don't understand even more is that parents aren't teaching their children this. I grew up in an upper-middle class family and by age 5 had a basic understanding of interest (you send your birthday money away instead of spending it on Pokemon cards and you'll have more money later). By age 16 when I got my first job, my mother made open up a Roth IRA and explained compounding interest.
If this isn't going to be taught in school, parents definitely have a responsibility to pick up the slack. The advantage of it being in school is that students who don't have financially literate parents will actually be able to learn and break that cycle.
Although I'm not a huge fan of the material, the concept of Rich Dad Poor Dad is spot on. Many upper middle class and up kids are raised with at least a basic understanding of personal finance, while those in poor families tend to not be. In my opinion, the wealth gap is at least partially the fault of poor personal finance. Of all my friends that own their own houses and condos, we're all in our mid 20s, they're all from the upper middle class and up. Very few if any really needed much financial assistance from their parents (ie living at home for a few months or assistance with the down payment). Most learned to save when they were kids and had no trouble putting away a portion of each paycheck. In my market, owning is a lot cheaper than renting and therefore once the down-payment was made, monthly expenses for all of my mid/upper class friends went down, so essentially, the "rich will get richer".
What market do you live in where owning is much cheaper monthly than renting because I need to move there
One of the biggest downsides of metro NYC is that you still pay large monthly amounts after you own a place
"Those in poor families tend to not be. In my opinion, the wealth gap is at least partially the fault of poor personal finance."
C'mon now, you can't really believe it's that simple
These are the things that parents must teach their children. It's cruel to say so, but unfortunately most people are not good parents and do not do this.
I have often wondered why personal finance is not taught in high school. It is easy to say all responsibility should be on the parents, but there are two reasons this can not happen. The first being that not all kids have involved parents and the second being that some parents are terrible with their own finances so it wouldn't do any good teaching their kids the same methods.
I do not believe you need a super qualified person to teach a course like this. States or even districts could have someone develop the curriculum and then get some teacher to go through that curriculum. I do not think that teaching kids the basics of starting a checking account, savings account, what effect credit cards have when you can't pay them off up front, and how important it is to save for retirement should not need a registered CPA or CFP. However, I know this is all easier said than done.
I'll try not to go off on a tangent but be forewarned. First the reason Personal Finance isn't taught is because we probably don't have teacher's who can teach the subject. In order to teach effectively I strongly feel you would need someone who is a Financial Planner or a CPA to come teach the course.
Maybe even require CPAs X hours of teaching as part of their licensing or even CFPs? Secondly courses on these topics tend to be put on the back burner and until teachers, parents, and even students lobby State representatives to press for curriculum change it won't happen.
I would much rather reform the entire education system and model it after college. Offer your core History/Government, Math, English, and Science but also offer legitimate classes such as Personal Finance as a year long class that incorporates classroom learning and outside the classroom learning.
Imagine if part of the testing process or to drive the point home you took a trip to a car dealership and went through the financing piece and had to figure it out on your own based on what you learned? Maybe even take students to a bank and go through the mortgage process?
As far as what to teach just head over to your local State U if they offer the course and see what's in their curriculum. I took one at my university and learned everything from how to look for, negotiate, and close a car purchase to how to do my taxes and understanding marginal tax rate. We combined this with financial statements where we figured out our net worth and made a budget for the next year.
You can only get so far by teaching in class and giving out tests. Taking it to the next level is the way to drive the point home and you need someone teaching who deals with this on a day-to-day basis (or has) rather than Mrs. January from State U whose background is in English.
Hi there, yes I agree with you that this things children should learn from their parents.
Already knew about personal finances, but took a class in college because the credits applied to my second major.
We had a personal finance course in high school. It covered basics like balancing a check book, retirement accounts , very basic information on investments, loans, mortgages, taxes and so on. I think it should be a requirement, possibly replace a year of phy ed.
The fastest way to get money is to steal a bank machine. It doesn't take rocket appliances.
Most kids already know the importance of science, yet a lot still choose not to focus on developing any areas of expertise in the field. The ones that do are going to be successful. Once kids get past their junior year in high school, learning science is an elective. My school had a basic intro to physics FR, inro to bio SO, election of science JR, so basically, it's already understood that not knowing any of that will make or break you. If people do not choose to study science, it's probably because they don't want to, and may never get there. I understand this will drive some crazy to think about, but science is not needed unless kids are interested. Math was the same thing with the only requirements being Alg and basic Geo, and I think a pre-calc course, which most people never make it to, since they end up spending extra years in remedial or repeating the prerequisite courses.
Not to even mention that a lot of science/math credits taught at the grade school level aren't even accepted at higher levels of education, so that most end up having to hit the restart button anyway. I'm sure we could add in more options for kids so that people's strengths, interests, and life goals can be better aligned with what schools are teaching.
I'd just hire the teachers capable of teaching personal finance (CPAs or those with some experience) and either offer it as an elective, which most will realize is important, or possibly swap out some of the harder science requirements with a personal finance requisite. I'm sure it'd be difficult to find people right now for the jobs, so obviously programs will be needed to create the professionals capable of teaching the courses, which means there might be a problem with funding, but certainly it can be fixed.
I'm also a big proponent of increasing trade and vocational schools. Coding can be a modern vocation, as well as understanding things like supply chains and how manufacturing works. Computers can also be a vocation. It will take harder choices to be made in education politics, but there are many places where improvement can be made in our current school program. Harvard recently started allowing law school applicants to use the GRE instead of only the LSAT, so I think it's a good precedent to rethink our use of the current structure of focusing heavily on test scores, since after all there's some critique on using test scores to determine a kid's abilities to learn and succeed.
While I totally agree that schools could easily fit in relevant subjects like personal finance into curricula, I also believe that students themselves are often at fault.
As someone only several years removed from high school, I remember my friends always bitching and moaning about constantly learning concepts that hold - in their opinion - no real world practicality (differentiation and integration methods in calc, Punnett squares in biology, studying Shakespeare in lit).
Yet these same kids demonstrate no interest in exploring more "interesting" or "useful" topics such as how credit cards work, tax returns are filed, checkbooks are balanced, etc (all of which btw are pretty mundane tasks/knowledge that anyone with a brain can figure out if they invest a small amount of time). I readily admit that I am guilty of this myself; much more appealing to jump on Xbox live after school with the boys.
The point is, the vast majority of kids are intellectually lazy and dislike anything they are forced to learn. If we replaced some more traditional subjects with areas like personal finance, it would simply transform students' disdain for studying the Periodic Table into a healthy distaste for memorizing IRA tax treatment guidelines.
Simply put: You can lead a horse to water, but you can't make it drink.
99% of people want this to be taught. Can even two of them agree on how it should be taught, or what should be taught? This who thing is stupid, all it will do is boil everyone down to the lowest common denominator and that will be something like of you make minimum wage as an adult you can't afford to buy a new car. Teenagers don't care about the information, won't absorb the information in a usable way because they most likely have no life experiences that would make the information relevant. I'm all for teaching the information early and often, I just don't think it will be nearly as useful as people expect it to be. You either have to have this drilled into your head from kindergarten onward or you have to just say fuck it and let people make their own mistakes.
100% agree some fundamentals should be taught (e.g. teaching about compounding interest, starting a savings account, how to build credit, how your credit score is determined, etc etc), but giving the wrong specific advice could potentially be worse than no advice at all
cc IlliniProgrammer i know you'll want to chime in on this thread
I actually disagree. I took a personal finance class in high school that was taught by a self-made multi-millionaire who retired after selling his company for several million at the age of 35. There is only so much fluff you can put in one of these classes before it gets redundant.
What I do when I meet someone or have a friend/family member who is clueless about personal finance is buy them On My Own Two Feet. It's technically written for women, but the Harvard-educated CFAs who authored the book do an amazing job at explaining everything from saving for retirement, to basic investing, to insurance, to buying a car in a way that anyone with a high school education can understand. I recommend this book so much, I really should ask the authors to cut me a check.
I took a course my senior year of high school that was basically personal finance with some general economics in there somewhere. As Heister mentioned, most people didn't give a shit to learn or retain the info. That being said, I think it helped a few people in the course understand the realities of budgets, credit and interest, job prospects, etc. - Lots of it was redundant, but it drilled the ideas into your mind. That's enough to justify it to me. Sometimes, a kid just needs to hear the concepts from someone who isn't their parent or guardian.
I remember taking a personal finance course my senior year of high school in fall 2008 with a teacher who clearly had no idea what he was talking about. We'd just sit and watch CNBC all class. Then, a week into class, Lehman collapsed and watching him try to explain what was going on was hilarious.
Anyways, he was useless and taught the class all wrong. At the high school level, personal finance classes should mainly focus on the benefits of having financial literacy and not go into some of the finer details. Then, colleges should make personal finance mandatory since they have the funds to bring in a CFP or CPA as an adjunct to teach the class and go into more detail.
Also think basic economics should also be required. Blows my mind how people don't have a clue how supply and demand work. Like duh it effects every consumer decision you ever make.
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