Education For Living In The World: Support For An Early Introduction To Personal Finance Management

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Karyn N. Lewis Professor S. Warycka Written Argument 0502-443-01 Fall 20081 Education for Living in the World: Support for an Early Introduction to Personal Finance Management

While technology, the global economy, and other social trends are changing the financial planning environment, many fundamentals remain constant (Kapoor, Dlabay, and Hughes vi). Individuals’ ability to make informed choices related to spending, saving, borrowing, and investing continue to be the foundation of long-term financial security. Each day we are surrounded by new choices for shopping and other activities, while each day personal finance planning activities are affected by changing influences in our society and the economy. With a continued emphasis on technology, realworld decision-making, and practical advice from financial planning professionals, personal finance knowledge from an early age would provide a strong foundation for current and future personal economic activities. The logic behind teaching children and teenagers about personal finance is pretty obvious (Bal). Just think of all of the finance clichés: start investing as early as you can, the most important factor in investing is time, don’t get into credit card debt, etc.—all things that are best to learn sooner rather than later. However, the basic aspects of personal finance currently aren’t taught in schools. Is it any wonder, then, that when kids go off to college they rack up so much debt? A simple personal finance class with discussions on retirement, the negative impact debt can have on a person, automobile financing, and saving for the future instead of buying for the now should be implemented in every high school across the country. Every week or so, there always seems to be a new article in CNN, USA Today, or Yahoo about young adults struggling with debt, whether it be from credit cards or loans in general. High interest rates, hidden fees, whether or not to consolidate debt—these terms and concepts are mostly unknown to young adults (Kim). A prime example is thinking they just have to pay the minimum on their balance and not realizing that by doing so, they pay 2-3 times as much in the long run. Alongside that, most young adults don’t have a clue on how to invest their money. They don’t know what a Roth IRA account is, or a 401k, or the magic of compound interest, the tax benefits associated with investing in a vehicle, etc. Credit score is another big thing. A lot of young adults don’t bother to check up on it to make sure there are no errors. Even something as basic as creating a simple budget is beyond the grasp of some young adults, or the intangible things such as learning to differentiate between need and want, delaying the gratification,

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and having an inner sense of value. There’s a lot of specialized knowledge out there that young adults just aren’t aware of on when it comes to how they can invest their money. These concepts must be introduced in the classroom early on for the most benefit. A finance class that teaches fiscal responsibility and retirement planning would be a benefit to many young students. Instead of going off to college and binging on shoes, clothes, beer, cars, televisions, etc, maybe they would think twice before piling on the debt. I am guessing that most of these students graduating with a ton of credit card bills assume they will just pay off the bill when they get a job, but this is often not the case. In fact, the average college student is now more than $20,000 in student loan debt at graduation (Weston), with more than $3,262 in credit-card debt as well. On top of that, the personal saving rate has declined into the negative territory (Walker) and revolving consumer credit has reached a record level of $907.4 billion as of July 2007 (Spencer)—growing by 6.6% per annum. Furthermore, the average U.S. household owes $8,249 in credit-card debt (U.S. Department of Commerce). Overall, the official poverty rate in 2007 was 12.5%, or 37.3 million people who lived in poverty (U.S. Census Bureau), with a total of 822, 590 non-business bankruptcy filings in 2007 alone (U.S. Courts). Based on these grim numbers, it’s surprising that money management is not a mandatory subject in high school. Why don’t schools teach personal finance? It’s probably not a stretch to say that most people would be happy to see personal finance being taught in schools. However, there may be many reasons why it’s not. To start with, school budgets are already limited (Silicon Valley Blogger). Parents, teachers, and school administrators alike have their eyes on public officials to pass mandates for school funding; any delays throw huge wrenches in the schools’ planning and budgeting processes. If many existing, standard classes such as art, music, or P.E. sometimes get axed because of limited resources, it makes sense that it would be much harder for unconventional subjects like personal finance to make headway in school curriculums. Money management or personal finance topics may already have some coverage in schools—just not the way we think. The topic of money is often threaded into other subjects—for instance currency may be discussed in history or social sciences, or money problems introduced with mathematics. The subject of finance doesn’t get its own focused class, but may be taught in bits and pieces across various subjects. Overall, money management is not covered in depth at schools because there’s not enough support for it. It may be that we spend ourselves into oblivion not just because we can’t help it, but because we just don’t realize we’re compromising our financial futures by doing so. The lack of awareness and education in the area of money is what’s keeping many of us broke. The best long-term solution to money management crisis is educating people early and making financial capability a compulsory part of the school curriculum and embarking on a public awareness campaign to show the potential hazards of not saving (Bal). Financial literacy is necessary education for living in today’s world.

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Works Cited: Bal, Robin. “Should Schools Have Money Management Classes?” Fortunewatch.com, 2007. Web. 10 Nov. 2008. Kapoor, Jack R., Dlabay, Les R., and Robert J. Hughes. Personal Finance. 8th ed. New York: McGrawHill/Irwin, 2007. Print. Kim, Brian. “Top 5 Things That Should Be Taught in Every School.” BrianKim.net. Web. 10 Nov. 2008. Spencer, Julia. July Debt. CardTrak.com, 11 Sep. 2007. Web. 10 Nov. 2008. Silicon Valley Blogger. “How Would you Grade Your Money Management Skills?” www.thedigertilife.com, 4 Aug. 2008. Web. 10 Nov. 2008. U.S. Census Bureau. Poverty: 2007 Highlights. www.census.gov, 2008. Web. 10 Nov. 2008. U.S. Courts. Bankruptcy Statistics. www.uscourts.gov, 2007. Web. 10 Nov. 2008. U.S. Department of Commerce. “Projections of the Number of Households and Families in the United States: 1995 to 2010.” Bureau of the Census. www.census.gov. Web. 10 Nov. 2008. Walker, David M. “Saving Our Future Requires Tough Choices Today: Fiscal, Retirement, and Health Care Insecurity.” www.gao.com. U.S. Government Accountability Office, 2 May 2007. Web. 10 Nov. 2008. Weston, Liz P. “How to Blitz Your College Debts.” MSN Money. Moneycentral.msn.com, 2008. Web. 10 Nov. 2008.