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vicsmom
08-26-2019, 01:26 AM
I've often wondered why financial literacy isn't taught in schools as a core subject since it will have major implications for the student in his/her adult life, especially with regard to debt. I haven't figured out how to post an official poll, so please forgive me. I'm curious what you all think of the following:

1. What do you believe a financially literate person should know how to do?

2. Who should be responsible for teaching a young person how to manage his/her finances? Should schools be involved or would parents find that crossing the line?

3. If such a course were taught, what subjects ought to be covered?

4. Do you consider yourself a financially saavy person? And are you passing your knowledge down to your kids?

Thanks in advance!

alexsmom
08-26-2019, 11:05 AM
(Wow! I dont know why your post was in moderation! )

I think it isnt effectively taught in schools because until one has money, it’s a conceptual thing.
Rules like “dont spend more than you earn” are great in theory, but require self discipline, and dont take into account the unexpected. Even other platitudes such as “put X percent / amount into savings from every paycheck” and “put maximum into a 401k” really dont take into account the reality of peoples budgets and situations.
My (very frugal, responsible) mother in law took a financial course geared for people with credit card trouble, and now refuses to use a credit card. Even though she would pay it off each month, and she sees how much money we get back each year in a rebate (thanks costco visa!).
Not using a card is probably a good idea for some people, but not if you can have excellent credit!

A couple years ago, I went through with my older about finances. We looked at our household expenses, broke it into categories, researched ways we could reduce some of them (shopped for insurance, cable, phone plans, etc). We compared what a week of eating out cost, compared to eating at home. We saw how much money we didnt spend by abstaining from Starbucks for a month. (It was a vice at the time... that habit is long dead!)
It is a big panicky deal for us if we cant pay our credit card bill for the next month. (Having to pay a finance charge is like taking a personal wound!) Im not sure how aware the boys are when this happens, but not only do we go into a month of ‘austerity’, but we switch the card we are using so that we will have less interest charges. (This hasnt happened since we recovered from when we were paying for younger DS’s therapies out of pocket.... but sometimes things happen - this month, our car insurance was due, our AC got repaired, and DH bought two new laptops for the boys because they were a ‘really good price’. If we didnt have liquid savings, it wouldve been too much.)

There is a lot of information out there about credit scores, thatd be useful to make sure kids understand as well. Not just the math of calculating how much money gets wasted by paying interest on something. The freebie credit monitoring thing that comes with Turbotax sends me monthly reports of what our credit score is, what changed since last month, and what is holding it back. If you want to teach your kids the credit score game, thatd be a good place to start. :p

inmom
08-27-2019, 08:58 AM
1. What do you believe a financially literate person should know how to do?

SAVE! BUDGET!! Set up bank accounts, apply for one or two credit cards (which are paid off at the end of the month), apply for a loan (car/house/education), know the very basics of 401k and the market.


2. Who should be responsible for teaching a young person how to manage his/her finances? Should schools be involved or would parents find that crossing the line?

I think parents should be the first to teach their kids how to manage finances, but that assumes the parent has the time to do so and knows how to manage their OWN finances. I believe a semester course should at least be offered (if not mandatory), and offered during high school when kids are possibly earning money from part time jobs, college costs are looming,etc. It makes it more relevant.


3. If such a course were taught, what subjects ought to be covered?

Same as above in #1, including how to compare costs of items, delaying gratification (reducing impulse buys).


4. Do you consider yourself a financially savvy person? And are you passing your knowledge down to your kids?

I do. DH and I were able to save for both kids college educations w/o loans (529 plans) and for hopefully an early retirement. We also scrimp and save ALL THE TIME, but over the past almost 30 years, it's really paid off, even living on one salary. I hope I passed this knowledge to my kids. As young adults, they are pretty good about not buying stuff "just because," knowing they need a financial cushion. When in high school, I used the free resources from the Actuarial Foundation (https://www.actuarialfoundation.org/building-your-future/) with them.

Excellent question Vicsmom!! I wish more parents considered this a part of their kids' education.

NZ_Mama
08-27-2019, 10:20 PM
This was part of what I wrote in my DD's homeschool exemption application that I want to teach her, because I think it is really important, but we have not really got round to much yet.

1. What do you believe a financially literate person should know how to do?

How to live within your means. So knowing how to figure out what your incoming and outgoing amounts are, and not spend more than your earn while making sure you put some aside for saving.

2. Who should be responsible for teaching a young person how to manage his/her finances? Should schools be involved or would parents find that crossing the line?

Both. It should be done in school at some stage.

3. If such a course were taught, what subjects ought to be covered?

I don't really know.

4. Do you consider yourself a financially saavy person? And are you passing your knowledge down to your kids?

Enough to achieve #1. I do not know anything about investing or wealth accumulation. But we make sure we save (both short, long, and retirement) and prioritize paying off debt (hoping to be mortgage free by 45! then we can have at least 15 years of earning with no mortgage to pay).

As to passing it on to kids, so far for what they can pick up at their ages. At the moment we just talk a lot about $, like how I might pay with my debit card but that is directly reducing the amount of $ I have in the bank or I might pay with my credit card but that accumulates and I have to pay it off at the end of the month. How a mortgage works and how interest on that accumulates. What other $ we have to pay for our house and living that they don't really see (rates, insurance, utilities etc.). Money is pretty abstract to them. NZ is a really cash-free society. We use cards and online banking for almost everything. Compared with other countries, NZ was a very early adopter of things like Eftpos, online banking and direct transfers, and pay wave (contactless payments). I know when we lived in San Diego, we had some initial culture shock at how the $ system there was at least a decade behind what we were used to in NZ. So I know $ is something that my kids struggle to get because they very rarely see it. I might only use and have cash on me four or five times a year.

RTB
08-28-2019, 05:48 PM
1. What do you believe a financially literate person should know how to do?
How to / understand - open a checking / savings account, balance a checkbook, read their paycheck, pay bills IRL and online, pay taxes, save for retirement, apply for a loan, interest, get a credit card, budget, understand health / dental / life / car insurance.


2. Who should be responsible for teaching a young person how to manage his/her finances? Should schools be involved or would parents find that crossing the line?
I think school can and should teach financial literacy. Parents can teach the values associated with money.


3. If such a course were taught, what subjects ought to be covered?
Same as #1


4. Do you consider yourself a financially saavy person? And are you passing your knowledge down to your kids?
Yes I think I am financially saavy. DH will retire at a younger than average age. We will be able to help our kids pay for most of their college and hopefully give them a tiny nest egg to start their adult life. However - I'm also a middle class, college educated person, who grew up in a middle class college educated home - so some is saavy and some is luck. Yes, we talk about budgets and spending all the time in our house - the kids have bank accounts and their own mutual funds (it's built from part their money / part ours).

RTB
08-28-2019, 06:03 PM
. . . Money is pretty abstract to them. NZ is a really cash-free society. We use cards and online banking for almost everything. Compared with other countries, NZ was a very early adopter of things like Eftpos, online banking and direct transfers, and pay wave (contactless payments). I know when we lived in San Diego, we had some initial culture shock at how the $ system there was at least a decade behind what we were used to in NZ. So I know $ is something that my kids struggle to get because they very rarely see it. I might only use and have cash on me four or five times a year.

Interesting point NZ - money has become much more abstract than it was when I was a kid. We pay for almost everything with a credit card (yay points!) I personally hardly ever use cash.

Free Thinker
08-31-2019, 05:30 PM
When I think of Financial Literacy, I think of understanding how money works. I'm actually teaching this class for high schoolers at my local co-op. Things I think kids should understand about money and how it works:

1. Payroll taxes and how they work, basic tax forms, how to estimate how much how much $$ you will take home
2. Interest- both directions! Credit cards, home loans, car loans, student loans..... and investments- very basic, but dividends, overall trends in stock market
3. All things banking- how to balance your bank statement, record transactions, all services the bank offers as well as basic loan info
4. Insurance- basic, but still very important- renters, car, health- knowing how to compare, how buying different car models affects car insurance
5. Budgeting- how to figure out what things cost and how much is reasonable to budget for them- household stuff, clothing, food.
6. Importance of making responsible decisions- this may not seem Finance related, but I"m sure we all know people who made stupid decsions (drinking and driving) and how much that decision ended up costing them between legal costs, increased insurance, ect. Thinking through all decisions before we make them, trying to see all the possible outcomes.
7. Advertising and marketing- spotting the true costs of things like phones, gym memberships, rent to own furniture- teaching them to look below the surface for the fine print.

That's all I can think of for now. I am trying to teach these things to my kids, and I DO think public schools should have an entire CREDIT YEAR LONG class covering these adulting topics. It is my opinion that the first 5 years you are on your own, most financial mistakes are made, often due to kids just not understanding how thngs work. It's a trick, it isn't fair, and kid are not prepared to figure it out on their own. If parents feell ike it's an overstep, they probably are not in good financial health themselves.

Me, I'm currently early retired ;) Live frugally b/c we saved when we were young and did not get caught up in any of those scame (Thanks Mom and Dad!). We also learned the power of investing early.

NZ_Mama
09-01-2019, 12:23 AM
I have even had to teach my kids what a bank is because we really never go to one. We do all our banking online, and then things like a mortgage, you can do via a mobile mortgage manager (i.e., they come to you). We had visited our local bank branch before because it also hosted a postal office but never to do anything to do with the bank, and now it has shut anyway because so many people do all their banking online. All our statements are e-statements as well, so our kids never see anything on paper from the bank.

Another thing that I would teach beyond the basics would be alternatives to $ and wealth accumulation as measures of success.

vicsmom
09-01-2019, 02:17 AM
Thank you all for such a wonderful discussion. Your answers show how expansive this subject about money is. Because there is so much to learn, I think kids should be taught these things early on, perhaps as early as elementary school, in baby steps, so that making wise decisions about money becomes second nature. I too think so many people get in trouble because they don't understand how their lives could be so much better had they made wiser choices about what to do with their money after they earn it. One side of the coin is spending it responsibly. But the other side is saving it and how to make it work for you (planning and investing).

We wouldn't have been able to make it on one income had I not started learning about investing ten years ago. DH, who saw his parents lose money in the stock market, used to be a cynic. He believed the only way to make money was to go out and work for it. After seeing the power of investing, he is a believer now. Like Free Thinker, I was also lucky enough to have parents who kept hammering in the importance of passive income and making money work for you, rather than the other way around. In our society, with robots replacing people, it's one of the few ways we still have to get ahead.

Some people shy away from the topic of money because they somehow think money is evil or related to greed. But I think that the wise management of money gives one freedom and choices.