Good reads from around the Web.
Lee and Rob, two up-and-coming personal finance bloggers in the UK, are calling for better financial education in schools.
Over on Five Pence Piece, Lee writes:
Right now students leave the family unit to enter further or university education – or the even more daunting world of work – with only the vaguest hint of how to manage their money, wages, taxes and bills.
The little that is taught is about the math and not about the personal responsibility, the benefits of being financially astute and the dangers of not. It does not present the knowledge in a fun and ‘wow’ style; it’s just all about the numbers in the maths lesson.
Rob continues the theme on his own blog:
I was never taught anything about personal finance and to be honest with you I wish someone had at least taught me how to fill in a tax form or taught me my responsibilities with capital gains tax. These are all things I had to teach myself when I didn’t see why they weren’t taught at school.
The two would like other personal finance bloggers to share their own views on educating youngsters in the ways of debt, APRs, and interest only mortgages.
I’m happy to highlight their campaign. But I’m not sure they’d want me on their team!
I’m skeptical of school-taught education, to be honest, especially pseudo-practical knowledge that is theoretical until you’re faced with buying your first house, say, or taking out car insurance.
I’ve seen plenty of people’s eyes glaze over as I’ve tried to explain how mortgage repayments work over the years. I don’t think little Johnny gives a monkey’s.
But to not be totally negative (who could argue with the aims?) I would certainly teach kids about compound interest, perhaps by alluding to the still-magical £1 million figure. That could capture the imagination.
Beyond that, I’d probably try to find something that appealed to the here and now, rather than to their future selves.
Lessons in the second series of The Wire
Perhaps using the personal finances of a top-flight footballer or a reality TV winner might do the trick?
The bottom line is our education system is teaching kids to start working life mired in debt by going to university without evaluating the return, so I don’t think Rob and Lee should hold their breath.
But I wish them better luck than even the mighty Martin Lewis had with his e-petition to Parliament.
From the money blogs
- Does birth order influence financial behaviour? – Len Penzo
- Do you have the courage to be wealthy? – Roshawn Watson
- Divide and conquer ETFs – Rick Ferri
- How to manage risk? Diversify! – Investor Junkie
- Investing with the sentiment pendulum – Investing Caffeine
- I’m rich and life is perfect: What now? – Mr Money Mustache
- Is someone getting the best of you? – Objective Wealth
- How to set and use investment goals – UK Value Investor
- BoE governor going out on a whimsy – Simple Living in Suffolk
Deal of the week: I sheepishly admitted to a published novelist the other day that I only read five or six novels in a year. As a teenager I read more in a month! He harrumphed. Perhaps I was a bit insensitive, but am I unusual? A friend swears by audio books, and I see Amazon spin-off audible is offering a free audiobook download
Mainstream media money
- Selling Edvard Munch’s The Scream – The Economist
- Europe: Going for growth, but how? – The Economist
- On buying gold (and more) – Marc Faber & Jim Rogers on Index Universe
- Time to invest in U.S. natural gas? – Wall Street Journal / Fool
- What they don’t tell you at graduation – Wall Street Journal
- Roth: Goldman Sachs thinks my clients are muppets – CBS
- Yes, you can become a millionaire farmer – MarketWatch
- All signs point to lost decade – The Fiscal Times
- John Lee: Share prices can bely true value – FT
- Interest-only loans disappearing fast – FT
- Tech sector backed for value and growth – FT
- Overvalued US will be worth the wait – FT
- Investment trusts with a multi-decade income record – Telegraph
- Cheap way to buy an iPhone 4S – Independent
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I’m with you on that school teaching can only teach the techniques, and perhaps at least highlight the hazards.
Success in personal finance is down to values. And that is why people have parents. I didn’t borrow for consumption but only for assets, because I never saw my parents do that, and they took the time out to describe how a mortgage works and that you shouldn’t spend money you haven’t earned except in the case of productive assets.
They also wisely taught me that endowments, which were all the rage at the time, were an uncertain and stupid way for a single man to buy a house, but I daftly ignored their wise words on that. Proving that theoretical knowledge isn’t enough when it meets desire in the real world 🙂
It’s values, not techniques, that will make you successful at finance. If you have the values right you will eventually seek out the techniques. But the techniques on their own won’t teach you the values; why deferred gratification is giving to your future self, and it is values that will guide your hand away from acting on the endless advertising signals that “You deserve it” “You are worth it” and “You deserve it now”.
It’s the parents that need to sharpen up their act here, and not send their kids out into the world unprepared for the financial pitfalls.
Re: books. No – you are not unusual. I read 100+ books a year but I’m unusual – my work colleagues wouldn’t know a book if it fell on their heads. I find it bizarre but diff’rent strokes etc!
If anyone is an equal book junkie, then visit librarything.com but be warned – it’s a terrible time suck and will triple your “to be read” pile. You might want to rediscover your public library too or all those investment gains will be gone. You can get audiobooks there too.
Ermine – I’ll be playing my role in this joint campaign with Lee by trying to get us to do more to praise those who have gone beyond the call of duty through hard work and past that empty no-man’s land. We need to create more positive role models and feel good about ourselves in the process if we ever want these kids to realise what they can achieve in life. This is something we can all do very easily and highlighting good role models is a great educational techniques and the best way to highlight role models is to make a habit of dishing out praise where it is deserved.
Those kids just need to realise what people go through to become successful. You can’t say there aren’t things out there to help teach them this… a film called 8 Mile comes to mind as a good one for the older kids (I think the language is pretty strong), but that’s the sort of idea. The main problem are those films that seem to suggest that you just need to bounce a ball once a day and you’ll not only become a pro-basketball player, but use your basketball skills to defuse a nuclear bomb. They create unrealistic expectations and I can’t tell you how many talented other kids I’ve seen who’ve failed because it got hard and they gave up when they were so close. They just need to know that it being hard is what you have to push through to succeed.
“Beyond that, I’d probably try to find something that appealed to the here and now…”
I guess if you want to appeal to children nowadays you need a loveable mascot, a catchphrase, and a snazzy name. Mr Monevator, taking it slow and steady!
I tend to agree with ermine, but there is a role for schools in imparting values too and there probably is a case for covering PF in PSHE, maybe from a modern Micawber point of view: ‘real life’ cases of hapless people shafted by a combination of the finance industry and their own stupidity, then discussion.
If a top notch PF presenter like Alvin Hall did small programmes for schools, covering basic financial instruments and institutions, which could then be analysed in class, it might help.
Of course, numeracy is a sine qua non, so the financial principles still have to be covered in maths too.
I definitely feel PF should be taught in the schools. I wonder how much teachers can counterbalance what’s modeled at home if the family has bad habits. I also wonder to what extent the teachers will good models of financial stewardship themselves.
Thank you for linking to my ‘Courage’ post.
@Salis — What’s PSHE? (Something something home economics? Or am I betraying my age as well as my childlessness! 😉 )
@The Investor – Personal Social and Health Education – the greatest waste of time known to man.
Thanks first of all for the highlight and bringing the problem to a wider audience.
I think it important to say that in principle, I agree with you. Anything taught in schools has the danger of being irrelevant, or purely hypothetical when students cannot ‘do’, but just ‘see’ and ‘discuss’. I know if I’d had any sort of financial education as a child though, I may not have ended up in the situation I did several years ago.
A grounded, structured early appreciation of financial topics can only benefit, and right now there is nothing that really fits the bill.
On the above topic, I think there’s definitely scope for educating students about why the maths theory they’re learning is useful in real life – I do some educational volunteering and always try to explain to the students how what they’re learning relates to what I do in my day job (however tenuously!). It is difficult though, with the all-pervasive advertising of products and lifestyles implying that we should consume. For me, one of the strongest messages was when someone on one of these websites (might have been Mr Money Mustache) showed how much present and future income the purchase of a car, for example, required – when you look at the assets you’d need, at some fixed withdrawal rate, to support such a purchase it’s pretty significant.
On a related topic though, it does frustrate me a bit that several of the early retirement blogs are written by people who’s income I consider to be very high – I believe the excellent MMM mentions having been on $120k plus, with others even higher. With that kind of income I could be looking at retirement by 35 too but I suspect it is not realistic for most readers and therefore neither is the goal. Having said that, I love the self-sufficient message and the focus on reducing cost and his blog is educating and inspiring a lot of people.
Best regards,
Guy
Echoing Roshawn, in order to teach the principles of personal finance effectively and convincingly it’ll require teachers who have grasped the concepts themselves, so maybe schools aren’t the best starting place for this.
More importantly, maybe nationwide advertising on better personal finance by private companies, groups and institutions with a vested interest would be better? I sense you’re going to grumble that it shouldn’t be hijacked by profit motives etc, but worse still I wouldn’t like to see a state controlled monopoly or censoring of would does and doesn’t constitute proper personal finance education for schools. After all, us lot argue about it all day and we’re supposed to be specialists, so who’s going to decide what’s correct and what goes on the syllabus? Politicians? While it’s a noble and well intentioned idea, and I really applaud Lee and Rob, I think it’s best left private, to give people the chance to make their own minds up rather than have youngsters indoctrinated by ideas still well open to debate.
I totally agree; financial education should be a must for our kids at school.
It is irresponsible of our teaching curriculum that money management is not being taught.
I wrote an article on my Blog “Moneyography” on this some time ago:
http://moneyography.com/financial-education-for-our-kids-is-a-must
Anyway, keep up the good work.
Nice informative blog
Mike
This is what I’m thinking about when I’m talking about a better approach to personal finance in schools. This is the realities of the world in the here and now:
“There were also major cultural differences when teenagers were asked about why people succeeded at school.
“North Americans tell you typically it’s all luck. ‘I’m born talented in mathematics, or I’m born less talented so I’ll study something else.’
“In Europe, it’s all about social heritage: ‘My father was a plumber so I’m going to be a plumber’.
“In China, more than nine out of 10 children tell you: ‘It depends on the effort I invest and I can succeed if I study hard.’
“They take on responsibility. They can overcome obstacles and say ‘I’m the owner of my own success’, rather than blaming it on the system.””
http://www.bbc.co.uk/news/business-17585201
I’ve never seen a few lines of text that better sum up the problems I think are the root of the problems we have with personal finance and education.
School is primarily for teaching kids how to think. Once they have that skill they can learn the other skills needed in adulthood. I don’t want schools wasting money and time teaching kids how a checking account works any more than I want them teaching how a washing machine works or how to floss your teeth. We’ve gotten away from teaching kids how to think and now we just teach them skills (which are always in danger of becoming obsolete).
If schools want to teach kids about personal finance they should put more emphasis on teaching economics and history.
In the past when we learnt maths we were expected to figure out how this relates to money on our own. Education needs to develop with the times and some subjects like maths may be more easy to understand if it was related to real life situations.
We were thinking that, although it is definitely true that children need to be educated about personal finance before it’s too late, so do a considerable number of adults! And how can children be taught if the adults don’t even know what they’re on about? We did a blog post on this just a couple of days ago, check it out at https://www.moneyontoast.com/financial-education-in-schools—but-should-we-be-educating-the-adults-as-well.aspx.