Later On

A blog written for those whose interests more or less match mine.

Personal finance education in schools

with 6 comments

Not very good, it seems. Trent Hamm has an interesting post at The Simple Dollar:

When I was in high school, I took a consumer education proficiency test and passed it with flying colors, demonstrating that I had the knowledge needed to manage my own money and be a savvy shopper. Within ten years, I was buried in debt.

This isn’t an experience that’s unique to me. On The Simple Dollar’s Facebook page (feel free to become a fan), I recently asked “Did you take a personal finance or consumer ed class in school? Was it useful to you? Did it keep you from making financial mistakes later on?”

Quite a few people publicly stated the uselessness of their personal finance education, while still others emailed me or sent me direct messages about it. A sampling of the comments:

Ryan B.: “i had to take consumers ed with drivers ed and [...] no….i had to learn from mistakes…”
Kelly K.: “My consumer ed class in high school was a waste of time.”
Charlie R.: “Yes, I did, and no, it didn’t.”
Baley W.: “Senior year in high school we took FPU. I remembered the principles, but I still got into debt. I don’t think it helped one bit, even though I’d like to think so.”
Shiela F.: “In high school & college along with accounting classes and no, it did not help. ”
Annie J.: “We had a small personal finance chapter in Home Ec./Family Relations class and no, it wasn’t helpful.”

Even some who got value from their classes saw that it didn’t impact their peers. Amanda H. stated: “I took a college personal finance course at the behest of my father. It wasn’t perfect, but it gave me a whole new awareness on things like investing and how interest works. And how important it is to get started young. Which I think was rare and put me miles ahead of my college-age peers.”

Many others didn’t recall any sort of education, which either means there literally wasn’t a class or the class had so little impact on them that they did not recall it at a later date.

Simply put, personal finance education as it currently exists is not reaching people when they need it. Quite often, they learn about it later on through their own difficult experiences.

In fact, I think “experience” is the key word here.

Consumer education and personal finance education is often lumped in with many other classes at the high school level. They’re taught in a classroom environment with minimal examples that actually impact the lives of students in any way. Sometimes it’s a class all its own, but other times it’s just a small piece of another class and at yet other times it’s not dealt with at all.

Just like any other ordinary class, one or two will “click,” a handful of others will approach it like any other academic subject and succeed on the surface without deeply understanding it, and many others will let the info go in one ear and out the other, retaining as little as possible.

Simply put, treating personal finance as just another thing that students need to be “educated” in doesn’t really work.

How can we possibly make personal finance education relevant (beyond the simple step of making sure that it’s at least presented)? Over the past few years, I’ve been collecting ideas from the mountains of personal finance books I’ve read, and I’ve got some suggestions for how to turn personal finance education into something much more valuable than the experiences described above.

First, homework (and classwork) should focus on . . .

Continue reading.

Written by LeisureGuy

31 March 2011 at 1:18 pm

6 Responses

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  1. You have to know who you’re teaching. If you are working with students whose parents (on average) do not have bank accounts or much disposable income to start with, you are addressing a different audience. Many of my students could not understand how I could have 8 or 10 credit cards and not spend all of them up to the max. A common response to telling them that I’d have to pay them off with interest if I ran them up was to say: “I wouldn’t pay them anything! I’d just take it and run!” This sort of immediate gratification and “damn the consequences” approach is common among those who have nothing, see few prospects of having anything, and belong within families that live check-to-check. Of course many people are responsible. But there is a large segment of the population that has no home training on finance, and has no one in the home who has any concept higher than “getting by” till the next payday.

    Some students told me that they took the family paycheck to Walmart on payday and spent all but enough to buy gas for the next week. One told me that anything I couldn’t get at Walmart, I didn’t need. Think about that!

    Trying to teach checking account management to a kid who lives in a home with less than $200 of liquid assets is like trying to teach a new language to someone who doesn’t know there are places where English is not spoken.

    My name is probably still on a hot list at the SAT headquarters because I wrote so many checks for kids to pay for taking that test. They gave me cash and I wrote checks to mail in the days before online applications. This meant their parents did not have checking accounts. I even had students who missed a day or two of school each month to go out with mom to pay bills in cash. Yes, I know it cost them more to drive around to places that accepted phone or electric payments. But the long-term benefit of being able to mail checks doesn’t compute in the world of immediate gratification where setting aside $200 for a minimum deposit is not going to happen.

    I read the comments on the original poster’s site. They are pretty accurate from the perspective of 30+ years of teaching.

    bill bush

    1 April 2011 at 12:23 pm

  2. Good comment. Thanks. I would guess that the short-term focus of outlook is similar to what seems to afflict most businesses, politicians, governments, and the like. I was thinking (some posts back) that this focus is inescapable because the fact of mortality inculcates a dread of the long-term that leads to people not being able to face it.

    LeisureGuy

    1 April 2011 at 12:56 pm

  3. Wow! You’re crediting much of the population with an awareness that I don’t think they have. Seems to me that lack of thinking at all, rather than excessive forecasting, is the culprit. You and I are of an age to make some bucket list moves, but most people, in my experience, are just piddling around the entrance to our particular mall of life.

    bill bush

    1 April 2011 at 4:24 pm

  4. Still, the general and overall lack of awareness speaks to something deeper, I think. Take a look at the Goleman book that I see as so relevant to this issue: Vital Lies, Simple Truths. Looking at how people avoid recognition of things that would be painful to recognize seems exactly equivalent and the mechanisms he describes (as being part of the psychological make-up we ALL share) certainly seem to me to be exactly the mechanisms at work.

    LeisureGuy

    1 April 2011 at 5:19 pm

  5. Oh: and the problem is the opposite of excessive forecasting. The problem is the refusal to look at the future at all, even when presented with overwhelming evidence (cf. climate change deniers).

    a. If the future is bad, people REALLY do not want to think about it.

    b. The future includes the very worst thing possible (to the primitive part of our brain, the part shaped by survival instinct): namely, our own death.

    c. Therefore: people do not think about the future.

    LeisureGuy

    1 April 2011 at 5:52 pm

  6. OK, I’ve ordered Goleman (Amazon used, 58 cents plus shipping) and I’ll give him a read.
    Another angle: many people just do not discuss money, either within or outside the family, in terms of amounts earned, saved, needed or wanted. My family was that way. It was considered rude to ask and private to the parents. I wish that there had been actual open discussion. Instead, spending was something I learned to do secretively or without any analysis. As a kid, I had to beg for any nickle or dime I got. Denial was the only virtue in relation to money. That sets up some real future management problems. It makes it easy to spend a dime for a trinket, but hard to use $500 for a truly gratifying thing instead of all those bits of tiny stuff.

    I look forward to Goleman. Thanks.

    bill bush

    1 April 2011 at 6:11 pm


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