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March 31, 2008

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I'm a SoDak girl - not sure what they teach now for personal finance classes, but 15 years ago we had to learn how to create a budget and balance a checkbook. Very basic skills that I thought everyone was learning in school!

I usually am a large supporter of teaching personal finance skills in school, but I was just thinking of something. Exactly what things is the school responsible for teaching our kids. If it's just the basics like the three R's then this goes way too far. Is the public school system supposed to be teaching life skills? What about morals? Who's morals? How about self defense? Why not require some military training too, in case the country needs to mobilize a huge army in the future?

Maybe what we need is a document that describes exactly what is up to the family to teach and what is in line for the school to teach rather than just adding more and more on to the schools as needed. Maybe schools just should be teaching the kids how to read and write, and how to think critically of information and that's about it. Maybe the reason the school system is falling apart is because they aren't focused enough.

9. It should be mandatory for each student to start an eBay business.

They will learn more about 8. by doing ... my 13 y.o. son now earns $30/week this way (his allowance is only twice his age per MONTH).

I never had to take a personal finance class to graduate in Georgia. Must be a new law.

All I see missing is taxes and insurance. People need to understand that if you make W per month, you end up with W-T-I in your pocket, where W=wages, T=tax, I=insurance. Also, explaining how insurance works (car, life, auto, disability) would be a big step forward.

My kids have full schedules now. No study halls or free periods. That's just to meet the required subjects plus foreign language and music.

But it's a good list. I forced my 15 year old to sit down this weekend and do her taxes with me. It was her first W2. Then I forced her to fill out some paperwork so her mom and I can start a Roth IRA for her. I couldn't force her to read about the mutual fund we chose, and yes, in a perfect world she would research it herself. But we don't live in a perfect world, we live with teenagers.

I think the job of schools is to prepare students to function in the real world and be a contributing member of society. People who don't understand how to manage their money get us into the mortgage mess we are in, spend wastefully (perhaps contributing to environmental problems), and possibly even collect welfare, which is obviously a drain on society rather than a benefit. I think that all these topics (and taxes and insurance) are essentials for a HS graduate to understand.

Public schools need to adapt with the times. Used to be, the three "Rs" were the only necessities. Now, it seems that personal finance and foreign languages need to be added.

It used to be okay, too, to teach to the weakest link. I believe, however, now that we've fallen behind many other industrialized countries in terms of a qualified and educated workforce, that we must modify that thinking a bit. Two- or three-tier systems must be put in place so that we can thrive again.

Our weak economic growth has as much to do with our undereducated workforce as it does with our economic "maturity." We could solve all of our economic problems if only we had the strength and courage to pursue more than 3 percent growth per year.

Teaching not only personal finance but economics might be a start. It's amazing how many college-educated folks haven't the faintest idea how the economy works.

going out on a limb but how bout school's just stick to reading, writing, and arithmetic. i doubt most teachers grasp pf concepts. I can imagine what the results would be, not to mention public sector education is expensive as it is.

First, the teachers and school staff should be taught these items, because I wouldn't want a teacher with mountains of credit card debt teaching my kids about finance.

Couple of comments here:

For those people wish schools would reduce their curriculum: First, I assume you are talking about public schools and not private schools. Having no children myself, I don't really have an opinion. But I do know that the public school system's basic responsibility stops after teaching children how to be citizens of the nation. After that (the extras of the three R's, for example) the local communities decide on what to teach. I think it's a great idea that communities are beginning to awaken to the need to understand finance as a basic skill in today's society - after all, having someone who has been trained to teach personal finance is probably better overall than having the parents who are facing foreclosure due to an interest-only adjustable rate mortgage default and $40,000 in credit card debt teaching children about personal finance. This is assuming, of course, that there is someone qualified to teach the subject available at any given school.

What is missing: 9. Inflation and how it affects 1-8.

Mixer

10 years ago, New York state required seniors to take a half-year Economics course to graduate. In my economics class, we took one day off and covered credit cards. That's the extent of personal finance education I received in school.

Balancing a checkbook and/or staying within a budget seems like common sense (with a tiny bit of math) - but I'd guess that even some of my honors-level classmates never bothered to keep track of their finances once they were out on their own.

But hey, curriculum changes with the time. Weren't Home Ec. and/or Shop class required classes 60 years ago?

These are all great additions and comments. I think we ought to include basic philosophies on charitable giving, general philanthropy and "giving back."

I've often thought that would be a great class to include in any M.B.A. program.

The mortgage crisis was partly because of the lack of financial education we have in America. Somewhere along the last 30 years of prosperity, the population forgot how to manage money. My grandfather - who lived through the great depression - learned about money the hard way.

In the past, the schools didn't need to teach kids about money, because parents did. But now that the lack of financial education has been exposed with a national financial crisis - I think we need to consider a solution. But, I don't think the schools should take on this responsibility. I think the non-profits (and parents) should fill the need by offering money management classes. As the recession drags on, many people will be learning about money the hard way - as my grandfather did in the great depression.

The Federal government can no longer depend on the population to make good financial decisions that put the financial markets at risk. Therefore, they will likely create a lot of new regulation in the next few years to protect the nation from the financialy uneducated.

I'm a HS business teacher in Idaho. I teach Personal Finance. It is NOT a required course. The required course for high school seniors is "Economics", which is taught by the... wait for it... Social studies teacher!@# So it's an overview of supply/demand, factors of production, monetary policy, deficit/debt, foreign trade, etc. Heck, I've taught the subject myself at some schools. There is very little in our state standards for Economics that is focused on PerFin. All the business teachers in the state would LOVE to get the Econ ball dropped in their court, or at least be able to question WHY students are supposed to learn econ in the first place. The state legislature believes that they are taking a course to make them more financially aware, but in fact, it's just an intro to micro/macro wrapped in high school garb. In short, you can scratch Idaho off the list of personal-finance-requiring states. But we're working on it!

As for my part, I teach an Accounting course, and this year convinced my administrator to cut it to 1/2 year and offer PerFin for the second half. (I did the same last year for Entrepreneurship). My PerFin class borrows heavily from Dave Ramsey, and includes all the stuff you guys mentioned above. (Surprisingly, Ramsey doesn't have much on car shopping in his program. I used to work in car sales, and we do a lot with that.)
Doing my part!
James

" In my economics class, we took one day off and covered credit cards. That's the extent of personal finance education I received in school."
This is way more financial education that either I or my parents received in the Soviet Union. Yet somehow we managed to understand how credit cards work as soon as we were able to get them. How long do you need to understand that a) if you borrow money you always have to pay it back, so don't borrow more than you can pay back b) if you pay everything by the due date you pay no interest c) if you don't - you pay a lot. Repaying your debts is something every person has to learn as this is morals; parents must make their kids repay every dollar they borrowed from a friend.

"Balancing a checkbook and/or staying within a budget seems like common sense (with a tiny bit of math)".
It is common sense with a tiny bit of math. 15% a whole lot greater than 4 or 5%. Every college algebra textbook includes compound interest examples. Yes, I know, not everyone learns college algebra, but it's not like those who do are all responsible. What is their excuse?

Maybe kids should simply learn more math with better examples, not just simple addition/substraction but money problems involving substracting expenses from income. Just a thought.

BTW, I used to know a guy with PhD in Math who couldn't manage money. He even borrowed from a foreign live-in nanny. Who knows more about finances a PhD in math or a live-in nanny? Yet she had money and he didn't.

I think, the lack of knowledge is just an excuse. The real problem is the sense of entitlement, the desire to have this new toy or new thing because friends or neighbors have it that overcomes common sense. If parents had told their kids "no" more often, than maybe fewer kids got in debt? If parents had told kids that just because someone else has it doesn't mean they need to have it too, maybe fewer people would overspend.

Did kids in the 50s or 60s or 70s had more financial education? Did they have more or less debt than today?

Anonymous said:

People who don't understand how to manage their money get us into the mortgage mess we are in, spend wastefully (perhaps contributing to environmental problems), and possibly even collect welfare, which is obviously a drain on society rather than a benefit.

Actually, welfare recipients without some other source of income (and a LOT of welfare recipients have some unreported source of other support) generally manage their money well, simply because they have to.

kitty said:

Did kids in the 50s or 60s or 70s had more financial education?


No, but they had more English education. (LOL)

I am a 24 year old accountant. I did not have a single class relating to personal finance etc in high school (I am not even sure there was really anything offered). I chose to take a course in college but even as an accounting major nothing we learned really applied to personal finance. I was lucky. My parents have great money sense and taught us a lot. Unfortunately most kids are being taught through their parents who are swimming in debt and have no clue. Something has to be done to break the cycle. Maybe the answer it to incorporate in through math classes and econ classes. But anything has to be better than the education that is being given by society of instant gratification with no thought for how you are going to pay for it later.

I think that your list is great. The only thing that I would add would be a topic on how to avoid dangerous financial pitfalls (ie: predatory lending involving payday and car title loan businesses, pyramid schemes, and other situations that can lead to financial fraud and/or financial demise). You may be including these items in your other classes, but these days it seems that once you're in over your head financially, it's very very difficult to get back into the black. It's a slow road and it takes baby steps. Kids need to learn that there is no magic financial bullet.

Great comment from James on giving back and from (perhaps a different) James on what he is teaching. THANK YOU! My only comment is not to forget Home School. Our kids attend a fairly pathetic public school and take required Personal Finance classes (i.e. how to balance a checkbook). But these schools have also attempted to teach our kids that Hilary is a Republican candidate, we are in a “Depression” let alone recession, and to avoid the draft if America ever goes to war (yes, late 2007). All of the meaningful lessons about finance (and life for that matter) are taught here at home. Our school system is for watching movies and sopping up taxes. I can only imagine that a finance class here would focus on FEMA and nationalized healthcare as the solution. Admittedly there are a few excellent teachers which the system is trying to convert. The point is if you are on this site, you are smart enough to assist kids with their education. Don’t pass up the opportunity. Thanks again James – keep up the good work.

rwh - kudos to you. Your daughter probably doesn't appreciate it now, but in 10-20 years when she is working & hopefully saving and that Roth has grown she should be in great shape and will thank you.

I was just talking to my fiance about this topic over the weekend. We bought thought that there should be more personal finance education in high school. When I was in high school we had a 'civics' class that was a combination of practical government and some economics, and I think about all we got as far as personal finance was how to write a check. They really should do more to educate people on basic topics such as credit cards, savings, retirement and budgets.

-Jim

Thanks to No Child Left Behind, if it's not on the test it's not taught. Personal Finance is not on the state tests. Also be aware that in most states government (civics), history, literature, computer skills, health, p.e., art, music, and countless other subjects are not tested. These things that make a student well rounded are being eliminated to make room for more low level reading and math classes. If a community does not like what is being taught in its schools then they need to contact their local and state leaders. The teachers are restricted to teach only the school, county, and state curriculum.

Personal Finance is a subject that stems far beyond the basic knowledge. It is an area of expertise for many. If the education system believes that computer literacy is important, why can't the "basics" of personal finance be implemented. This is a subject that can take one course out of all four years of high school. It is vital information for survival in this world we live. It is our schools responsibility to teach the things in which many of our parents have had trouble. Money is a universal language and if as a society we don't believe our kids need this information, then we are sadly preparing them for failure.

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