Teaching financial literacy

[PokerGuy]

Doesn't surprise me one bit that the financial literacy classes don't help much. I think personal finance is a critical skill that everyone should master, but it basically boils down to the ability to apply critical and rational thought. Much of the population is simply incapable of doing that to a significant degree - a class or two isn't going to change that.

 

[Darwin333]

I can believe it. Exponents are 5th grade math and most adults have no clue what they are or how they work. If we actually understood exponents and had the slightest bit of critical thinking skills we would have all known that housing was in a bubble.

 

[Mursilis]

Good points - emotional relationships to money get in the way far too often - maybe most of the time for some people. Greed, jealousy, fear move people away from good decisions. They may know what the right course would be but emotions and a lack of critical thinking about a subject cause them to obscure the better path and justify the one they want.

That makes me think the basis for a positive relationship with money would need to be formed at an early age creating the foundation for subject specific education later

I don't think blaming emotions, in and of themselves, really gets to the root of the issue. I'd be lying if I didn't admit that a lot of my financial decisions are driven by fear - fear of growing old and not having adequate retirement savings, fear of not meeting monthly expenses, fear of financial emergencies, etc. - but the decisions that result are also very sound. I've got WELL above average retirement savings, no debt but a mortgage (which is on a modest house well within my means), college funds for my kids, and a credit score ~800. For me, fear is GOOD, and has resulted in prudent choices.

What I've got that others (for example, several family members who earn much more but spend it all and have large debt) lack is a healthy dose of self-discipline. This seems to separate the savers from the spenders. For example, my car is 16 years old, and I've wanted to get something newer for many years. I can't justify it to myself, however, because it still runs fine and ultimately, I don't want to pay for higher insurance, property taxes, and a car payment. I try to always keep my focus on the long-term picture.

 

[Mursilis]

Passing the marshmallow test is the first step to the self discipline and ability to manage ones financial life,

unfortunately those type make poor impulse consumers because they actually think before they jump into any type of financial decision.

http://en.wikipedia.org/wiki/Stanford_marshmallow_experiment

Absolutely - it all starts with self-discipline. Financial knowledge is useless without the will to implement proper decisions. It's like weight loss - most people know why they're fat, but choose to do nothing about it. Education isn't always the issue - sometimes, character is.

 

[nehalem256]

What I've got that others (for example, several family members who earn much more but spend it all and have large debt) lack is a healthy dose of self-discipline. This seems to separate the savers from the spenders. For example, my car is 16 years old, and I've wanted to get something newer for many years. I can't justify it to myself, however, because it still runs fine and ultimately, I don't want to pay for higher insurance, property taxes, and a car payment. I try to always keep my focus on the long-term picture.

I don't think that biggest problem for people is financial literacy, but self-discipline.

I remember reading a story in the NYT I think about a guy who was a financial write for the NYT who made all the same stupid mortgage mistakes as a lot of other people and admitted that he did know better.

Its easy to be deceived when you want to be deceived.

 

[Mursilis]

I don't think that biggest problem for people is financial literacy, but self-discipline.

I remember reading a story in the NYT I think about a guy who was a financial write for the NYT who made all the same stupid mortgage mistakes as a lot of other people and admitted that he did know better.

Its easy to be deceived when you want to be deceived.

I remember that story. That author even wrote a book about it. He knew he was digging himself a huge financial hole, and did it anyway. Education isn't going to solve that sort of problem.

 

[Exterous]

What I've got that others (for example, several family members who earn much more but spend it all and have large debt) lack is a healthy dose of self-discipline. This seems to separate the savers from the spenders.

:hmm: Isn't that basically what I said? Some (a lot) of people let emotions get the better of them when it comes to money - ie they lack the self discipline to handle their emotional impulses

I don't think that biggest problem for people is financial literacy, but self-discipline.

I remember reading a story in the NYT I think about a guy who was a financial write for the NYT who made all the same stupid mortgage mistakes as a lot of other people and admitted that he did know better.

Its easy to be deceived when you want to be deceived.

It may be a regional bias but a lot of high school students around here lack basic financial skills and won't be going on to college. They aren't taught at home and they aren't taught at school. Sure your best and brightest will probably figure it out but everyone else is left to their own devices to figure out the system - with predictably dismal results. Self discipline won't necessarily protect them from ignorance

 

[s0me0nesmind1]

I think it depends on how quickly that happens. Americans have already been deleveraging themselves over the last decade. For example credit card debt is down 13 percentage points and more people are debt free than in 2000. Even those people who have good/stable jobs are more cautious about getting a mortgage and are more reasonable in what they will spend on a house

The two big exceptions to this are seniors and recent college grads/students



Complete side note but it most likely will be. (Nothing wrong with planning like it won't be though) I'd be far more concerned with health care

As much as you can look at credit card debt being down 13% as good ol' American's learning, I would say it's quite the opposite.

After the collapse, banks and creditors had to tighten restrictions all around. We all know that. Anyone can tell you it's harder than ever to get approved for a simple credit card right out of school. Not to mention, the middle class has shrunk, which means the people that can get credit card debt has shrunk.

 

[s0me0nesmind1]

Better Question: How do we teach kids financial independence/development/teachings... when their teachers can't handle learning basic fundamentals of finance?

 

[dank69]

I'm curious as to who you think "the government" is. Do you honestly think that the high school teacher in Anytown USA has any similarity to the congressmen who dictate Federal budgets? The people who spend the money (often quite wastefully, it's true) have absolutely zero impact on an individual class curriculum anywhere in the country. It comes across as deranged to conflate the two.

You're dealing with a guy who is trying to justify to himself and the world why his decision to drop out of high school was the right one. :whiste:

 

[Mr. Pedantic]

Passing the marshmallow test is the first step to the self discipline and ability to manage ones financial life,

unfortunately those type make poor impulse consumers because they actually think before they jump into any type of financial decision.

http://en.wikipedia.org/wiki/Stanford_marshmallow_experiment

The marshmallow experiment isn't really as predictive as previously thought, because trust and prior experience have a lot to do with when children decide to take the marshmallow. So if you're brought up in a rich household where your parents always keep their promises, then you're more likely to delay gratification than if you were brought up in a household where your parents were too poor to deliver when you said you wanted so-and-so for Christmas, or when they said they'd go out to eat. Essentially, you don't think that the adult will actually follow up on the promise.

 

[Spungo]

Learning about personal finance is mostly a waste of time. Last bank statement says you start with X amount, you spent Y amount, now you have Z amount. Do you just want people to verify the math already done by the bank?

 

[Atomic Playboy]

Learning about personal finance is mostly a waste of time. Last bank statement says you start with X amount, you spent Y amount, now you have Z amount. Do you just want people to verify the math already done by the bank?

I think it's more along the lines of "credit cards aren't free money, they are loans you have to repay," sorts of thing. Credit card debt is a massive problem in this country because people have very little fiscal responsibility. As another poster's sig used to say (paraphrased), "Your ability to have nice things is totally unrelated to your ability to pay for them." Virtually everyone I know in my age bracket has destroyed their credit rating through stupid choices made because of a fundamental lack of understanding of basic personal finance. Granted, I know some people who tend to make poor decisions, but still, the lack of basic critical thinking in application of personal finances is positively shocking.

 

[Exterous]

As much as you can look at credit card debt being down 13% as good ol' American's learning, I would say it's quite the opposite.

After the collapse, banks and creditors had to tighten restrictions all around. We all know that. Anyone can tell you it's harder than ever to get approved for a simple credit card right out of school. Not to mention, the middle class has shrunk, which means the people that can get credit card debt has shrunk.

A recent study by the Federal Reserve Bank of New York found that between 2008 and 2010, for example, the typical household flipped from borrowing money to repaying it. "Holding aside defaults," the authors wrote, "consumers reduced their debt at a pace not seen over the last ten years."

"While tightened lending standards have played a major role in the declining liabilities of the household sector," the Fed study says, "consumer-initiated reductions in debt have contributed as well."

http://www.usnews.com/news/blogs/rick-newman/2013/04/23/americans-get-smarter-about-debt

http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q32010.pdf

So while tighter lending practices contribute as well to say that Americans are not reducing their debt (with two exceptions) on their own is incorrect. Delinquencies for everything but student loans is down as well

Learning about personal finance is mostly a waste of time. Last bank statement says you start with X amount, you spent Y amount, now you have Z amount. Do you just want people to verify the math already done by the bank?

There is a tad more to personal finance than balancing your checking account

 

[s0me0nesmind1]

There is a tad more to personal finance than balancing your checking account

Fuck it. Why teach financial knowledge independence when they can't master self-reliance in the first place?

 

[Spungo]

I think it's more along the lines of "credit cards aren't free money, they are loans you have to repay,"

People who don't have downs syndrome already know this.

 

[nehalem256]

I think it's more along the lines of "credit cards aren't free money, they are loans you have to repay," sorts of thing. Credit card debt is a massive problem in this country because people have very little fiscal responsibility. As another poster's sig used to say (paraphrased), "Your ability to have nice things is totally unrelated to your ability to pay for them." Virtually everyone I know in my age bracket has destroyed their credit rating through stupid choices made because of a fundamental lack of understanding of basic personal finance. Granted, I know some people who tend to make poor decisions, but still, the lack of basic critical thinking in application of personal finances is positively shocking.

You mean they don't understand they have to pay back the money they borrow on their credit cards?

Do their mommies still dress them in the morning too?

People who don't have downs syndrome already know this.

And sadly we let these people vote. No wonder originally only land owners could vote.

 

[Exterous]

People who don't have downs syndrome already know this.

You mean they don't understand they have to pay back the money they borrow on their credit cards?

Do their mommies still dress them in the morning too?

And sadly we let these people vote. No wonder originally only land owners could vote.

Disparage and feel all the superiority you want but the data shows that the vast majority of Americans are incapable of long term financial planning

 

[Mursilis]

Disparage and feel all the superiority you want but the data shows that the vast majority of Americans are incapable of long term financial planning

"I've said it before and I'll say it again: Democracy simply doesn't work". - Kent Brockman (The Simpsons)