Help Your Family FULLY Understand Financial Education

Dear Reader,

There’s a funny joke that goes around every year right around April 15th…

It goes something like:

“I’m so glad I learned about parallelograms instead of how to do taxes in school. It’s really come in handy this parallelogram season.”

It’s funny because it’s true – how many lessons on taxes did you get in your perfunctory education?

And how many years did you spend on things that turned out to be not so important after all?

That’s not to say that geometry isn’t important – of course it is.

But you know what’s much, much more important?

Personal finance.

This one topic touches so many parts of our lives. What kind of house you live in, what kind of college you go to, how you raise your family, and what you’re able to do in your retirement – personal finance affects it all.

This Goes Beyond Balancing Your Checkbook

Preparing your taxes, planning investments, choosing the right insurance – these are all potentially life-altering topics, and yet, again, none of it is ever discussed in primary education. You’re lucky to get some of these topics in secondary education – financial literacy just isn’t a high priority for educators.

There may be an insidious reason behind this knowledge gap – we’ll touch on that more later this week.

For now, though, let’s focus on this question: what could change if we began to teach financial literacy in schools?

And, if there’s no change in the curriculum, how can we educate our kids, grandkids, and future generations on our own?

First, what could we change?

If schools offered courses in financial literacy, kids could graduate with a working knowledge of what it takes to create a living budget.

They could understand the merits of using credit and the ramifications of abusing it.

They could make more informed decisions about their future education. Rather than buying into high level, but inadequate degrees because of a pie-in-the-sky idea about making enough to pay off their student loans “someday”, more young adults might opt for trade schools or substantive degrees in high paying fields.

With even more training, they could learn what it takes to get a loan for a home or a vehicle, and how to recognize a good offer from a bad.

They could learn about investments and retirement, too – it’s never too early to start planning, after all.

With proper application, this simple change in education could lead to an entire generation of more prosperous, financially sound people, and that, in turn, could bolster the entire economy.

Let’s face it, though. This kind of broad-scale change is hard to create. And there would undoubtedly be some schools and districts that wouldn’t offer it at all…

What Can We Do On Our Own, as Parents, Grandparents, and Trusted Elders?

The first step is to demonstrate good habits of our own. It’s all very well and good to teach a lesson, but children model the behavior that they see.

When we show restraint in our spending habits, or demonstrate an interest in working towards increasing our income, kids view that kind of behavior as desirable. Conversely, when we spend foolishly and complain about our measly savings, they take that to heart, too, so make sure the example you’re living is a good one.

Next, create open conversations about money. In past generations, money was something of a taboo topic at home. Maybe your parents told you that talking about money was crass and you still feel that way, but think about this: if kids aren’t learning about finance at school, and they’re not learning it at home, why wouldn’t we expect them to fail? Without a source to learn his complicated topic from, they’re almost doomed from the start.

Having very clear discussions about spending, saving, investing, and giving. You don’t have to give them exact numbers; just share your general philosophies on what rules are important to follow and why.

Once the line of conversation is open, talk to them about ideas to make money of their own. Maybe you offer an allowance, maybe you don’t, but they should have some concrete ways to earn money of their own. After all, it’s easy to make bad choices when you have no skin in the game. When it’s money of their own that they’ve worked for, they’ll learn to be more judicious with how they use it.

Guidance is Key

On that topic, give them guidance so they can have an idea of how much to spend, save, and give, and then go one step further. Talk to them about the opportunity cost involved when they do part with their money. It’s very easy for young children to spend their cash quickly, and then feel disappointed when they can’t afford a “big” item like a new bike or a video game. Let them know about this disappointment on the front end – they may choose to delay their gratification when they know what a quick thrill will really cost them.

Give them something to work towards. When they’re working toward a little income, suggest bigger goals for them. Instead of buying something for them, why not let them know how many lawns they’d have to mow or hours they’d have to babysit to afford it? Then let them put in the work – it will mean much more when they’ve got a big goal in sight.

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Brian Rose

Brian Rose is an MIT graduate, with a degree in engineering. Upon finishing school, he immediately began working on Wall Street. An advanced technical trader, Brian was trading a book of $100 million at the age of 22. He spent years on Wall Street, working in New York, Chicago and London. He made millions, but...

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