Gas station without pumps

2012 May 30

Financial literacy

Filed under: home school — gasstationwithoutpumps @ 17:29
Tags: , , , ,

I don’t usually read USA Today, but one of the many blogs I read pointed to this article Millennials struggle with financial literacy, which calls for “financial literacy” instruction in high schools.

While I can see the need for high schools to teach some basics of consumer finance (like the monthly payments for different levels of debt and that college loans can’t be avoided through bankruptcy), I’m not sure how much it will help people avoid acquiring more debt than they can handle.  People acquire debt to buy things they want or things they think they need.  In both cases, few people properly weigh the future pain of too much debt against their current desires or needs.

As long as the credit card companies and banks make it too easy to pick up too much dept, people will do so, even given well-meaning advice in school or the mathematical tools to figure out just how bad the debt load will be.

Still it probably wouldn’t hurt for high school students to work through a free online consumer education curriculum like FoolProof, unless there is a strong bias to the material.  I know that the home-school umbrella school that my son is part of had an “economics” course for high schoolers this year that I believe was mainly this sort of consumer financial education.  My son did not take it, because he already had too many courses and the material looked like it would be too low-level and too slow-paced for him.  Perhaps I should look for a quick tutorial on debt financing, budgeting, and investing for him to read, since he probably won’t have the patience for videos.  Any suggestions from my readers?

I do wonder about how he will handle the transition to independent control of his money when he goes to college in a couple of years.  Currently, he has a bank account but rarely spends anything—clothes, food, books, and transportation are things we usually buy for him, and he has not expressed much interest in other purchases (truthfully, he hasn’t expressed much interest in any purchases).  I suppose if he lives in a dorm on a meal plan, he’ll have to control his money for book purchases and making sure that tuition bills are paid on time, but not much else.

Perhaps we should start putting him in charge of buying his own textbooks for his homeschool classes.  The practice at searching for used copies and previous editions from multiple web sites will probably be useful for him.  We can help him learn to identify warning signs for trashed copies, and he could watch the fluctuation in online prices of text books at the beginning of each semester (buying out of sync can save huge amounts on used books).

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6 Comments »

  1. My kids and I often plan purchases together. We’ve also starting having our older son, almost 17, pay for his own outings with friends. He used to not go out much, but has started going out quite a bit. We would pay for many of these outings, but now he does. He’s actually hoping to do some babysitting to make money.

    As a family, we’re not as good with money as I’d like, but we are honest about things. My kids generally have a sense of how much things cost and understand the idea of putting off large purchases or saving for them. I’ve been lucky in that my kids don’t really want much.

    Comment by Laura — 2012 May 30 @ 18:06 | Reply

  2. My introduction to financial “independence” was $20 with a post-it note attached that said, “Last of the gas money. Get a job.” Worked out for the good and the bad there, though.

    Comment by Tom Panarese — 2012 May 30 @ 19:19 | Reply

    • I don’t think that would work for my son. First, he doesn’t drive, and second, he has enough money in the bank that he could handle all his “incidental” expenses for the next several years (he doesn’t buy much). The “get a job” approach probably worked better when jobs for teens were more readily available—in this town college grads take up a lot of the entry-level jobs that teens used to do.

      The only way I can see to get him into financial independence is to start moving some of the essential purchases into his responsibility, with an allowance that should cover them. The trouble is that he wouldn’t buy clothes or food on his own, except under extreme circumstances. We might be able to get him to buy his own books.

      Comment by gasstationwithoutpumps — 2012 May 30 @ 22:14 | Reply

  3. A classic introductory book on investing is “A Random Walk Down Wall Street”. College graduates should know the difference between a stock and a bond and what a mutual fund is. I think many do not. Since your son is good at math and programming, he may be interested in computational finance. For example, given the ability to invest in domestic stocks, foreign stocks, and bonds, what is the “optimal portfolio” according to mean-variance theory. What is the “minimum variance” portfolio?These problems are nice examples of the use of multivariable calculus and linear algebra.

    Comment by VR — 2012 May 31 @ 05:47 | Reply

  4. I haven’t read the book itself, but I read the guy’s blog: http://andrewhallam.com/ (“Millionaire Teacher”). In terms of investing, he advocates low-fee index ETFs. Also, there’s the lifestyle issue (i.e. spending less than one makes, and how to teach kids to do that).

    Comment by plam — 2012 June 4 @ 20:21 | Reply

    • For spending less than income, my wife and I have been models for our son forever. Investing in low-fee index funds has been standard advice for the stock market for a long time (that’s the basic conclusion of classics like A Random Walk Down Wall Street).

      Comment by gasstationwithoutpumps — 2012 June 4 @ 20:45 | Reply


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