Teaching personal finance:always value laden

[iris lilies]

It's the beginning of the new year when people want to get right with money and their weight.

Several threads here and over on that other website (MMM! :D) has me thinking about a canard that I disagree with to a large extent.

It is this thought: Personal finance should be taught in public schools.


I'll post more later since here I Have to fight with my
IPad. But consider, and discuss.

[ApatheticNoMore]

What could you teach anyway? Compound interest, well sure. That credit cards are dangerous. They are. But that a student loan will be expensive? Yea but that still really says nothing about whether or not it's better to take on a student loan or not as the education it pays for might also have some real future value (not if just as good is available from the state school, but maybe it's not, and maybe you need to take out a loan even to afford the state school). To invest in the stock market? Noone can really predict that.

[razz]

Define teach personal finance first.

We put our girls on a monthly budget throughout their teens in which they had to pay for their own clothes, school 'pizza' lunches etc., weekly fees for organizations like Girl Guides and church with the balance for their variables like music. We did pay for winter boots, coats and major items like music lessons, instruments.
One daughter saved like mad and then blew her savings on a music record that her friends envied. Think she only did that once as she had to do without for quite a while. She is usually careful as an adult almost a tightwad.
,
The other daughter was fairly careful until she got a credit card with minimal monthly payments; she lost control and had to work hard (years) to get back on track.

They were given all kinds of advice and information with no rescuing ever available. They lived with the consequences. They are both smart and capable women.

They had to learn things the hard way as both DH and I did by suffering the consequences of poor choices and the importance of values that were their own.

The perception of many younger members seems to be to want what the parents have gained over decades when they graduate and debt will never be paid off so don't worry about it. The low interest rates have enabled this.

Not sure what public schools can teach that we did not. What will be sacrificed to include personal finance?

[Tradd]

How about:

*Student loans - they MUST be paid back and they are not dischargeable in bankruptcy (US - not sure about other countries)
*How to do a budget (you get X amount of money each payday, deduct shelter/transportation/food/utilities first and then "fun money")
*How to write a check/pay bills online
*Credit cards - not free money
*Car loans - difference between buying and leasing, how with leases there is a mileage limit and you may have to owe at the end for even minor damage
*How not paying debts on time can really affect your credit score, which can then affect your ability to rent an apartment, get a job, etc.

[rodeosweetheart]

I was thinking the same thing as Tradd. Have juniors and seniors in high school learn about student loans. My one son, I swear, did not understand his student loan situation until after he graduated, and was married, and paying it off.
I think every point Tradd brought up is incredibly important and could help them keep from getting badly burned. I used to work with a young girl at IKEA that ran up 10k in credit card debt her first year in college and had to drop out and work at the store. Maybe the class could have helped her.
Another son wanted me to co-sign for his college apartment. I said no, but the dangers of co-signing would be a good one to add to the list.
Same son took out private loans for college after I told him he needed to transfer to a state school. Ten years later, he and his wife are still paying off student loan debt.

[Tradd]

I was thinking the same thing as Tradd. Have juniors and seniors in high school learn about student loans. My one son, I swear, did not understand his student loan situation until after he graduated, and was married, and paying it off.
I think every point Tradd brought up is incredibly important and could help them keep from getting badly burned. I used to work with a young girl at IKEA that ran up 10k in credit card debt her first year in college and had to drop out and work at the store. Maybe the class could have helped her.
Another son wanted me to co-sign for his college apartment. I said no, but the dangers of co-signing would be a good one to add to the list.
Same son took out private loans for college after I told him he needed to transfer to a state school. Ten years later, he and his wife are still paying off student loan debt.

I would consider teaching "all debt is bad" to be value-laden. But if you simply educated on the realities of personal finance (such as student loans must be paid back), I think that would go a long way. I remember reading lots of stories during the Great Recession about young folks with very large amounts of student loans and they seemed shocked they had to pay the loans back.

I'd also add that going to an expensive school for low-paying fields (teaching, social work, etc.) is a very bad idea. The math just doesn't make sense. Also would include that going to community college for the first two years can be a very good idea. Plus, alternate ways to pay for college (such as programs for teachers working in a rural or low income area for X number of years and your loans are forgiven).

Rodeo sweetheart, mention of the dangers of cosigning would be a very good addition.

Another one I thought of: how if you're in the military and have too much debt, it can endanger your security clearance/make you not eligible for deployment (Dave Ramsey mentions this a lot).

[rodeosweetheart]

Right, I think understanding how debt works could be taught values free, although most of the kids would probably come to their own conclusions about how debt works and how it tends to take advantage of ignorance.

Tradd, good point about the military and debt--I knew Marines that had to straighten their finances out in a hurry, to be deployed.

[SteveinMN]

I can see a lot taught about personal finance -- how compound interest works, loan payback at minimum amount, budgeting, the effects of inflation, co-signing, etc. -- that absolutely does not have to take on any kind of "agenda". But, then, lots of people don't believe anything can be taught to our kids without personal values being reflected -- an objection which seems to go away when it's their own personal values being reflected.

Maybe the best thing would be to become a teacher and show 'em how it should be done. :)

[iris lilies]

I can see a lot taught about personal finance -- how compound interest works, loan payback at minimum amount, budgeting, the effects of inflation, co-signing, etc. -- that absolutely does not have to take on any kind of "agenda". But, then, lots of people don't believe anything can be taught to our kids without personal values being reflected -- an objection which seems to go away when it's their own personal values being reflected.

Maybe the best thing would be to become a teacher and show 'em how it should be done. :)
Thanks for playing, and you are right that I do not think personal finance issues can, in the general, be taught without infusing someone's values into the lessons. Unlike the person you are describing, I however understand that my own values would be put forth in teaching money issues. That's why I made this thread.

for instance, I think that the concept of "budgeting" is a value. It speaks to ways to allocate your income. Is assumes that there "should" be limits on what you spend. It assumes that there "should" be minimums on what you spend. In essence it is dictating what you "should" spend on and that's a value judgement.

[razz]

Where would all this be fitted into a busy schedule?

[iris lilies]

....
I'd also add that going to an expensive school for low-paying fields (teaching, social work, etc.) is a very bad idea...
Well, this is spectacularly a value judgement.

note that it's one I agree with, but it speaks to what one values and how much that "should" cost in relation to how we should value it.

[iris lilies]

Where would all this be fitted into a busy schedule?

Yes! This is yet another reason why I do not get behind the "we must teach personal finance in schools" idea.

that said. I believe I had a section on household budgeting in Home Ec back in the day. I know that we completed a 1040 tax form in 8th or 9th grade.

Neither exercise stuck in my brain.

[Tradd]

Well, this is spectacularly a value judgement.

note that it's one I agree with, but it speaks to,what one values and how much that "should" cost in relation to,how we should value it.

Not if you base it on the math. If you take out loans of $100K for a degree and you're in a field where you start out at $25K a year, does that make financial sense?

If your parents have the cash to pay for the expensive school or you get grants, then it doesn't matter how much the degree costs if the student doesn't have to worry about paying it back.

[iris lilies]

Not if you base it on the math. If you take out loans of $100K for a degree and you're in a field where you start out at $25K a year, does that make financial sense?

.....

Yes it makes financial sense with caveats: if one loves the work and one stays in it for 40 years and is very good at it and climbs the ranks in the employer's organization so that end career salary is $95,000, it may well be worth it both in a financial sense and in a personal sense.

Here "worth" considers non-tangible factors such as love of work and ideas of self worth. Those are values.

even if someone doesn't pay off the loan for 40 years it may be personally worth it in terms of job satisfaction.

[freshstart]

Well, this is spectacularly a value judgement.

note that it's one I agree with, but it speaks to what one values and how much that "should" cost in relation to how we should value it.

I teach this to my kids but did the opposite. Went to small private school for nursing when I had a free ride, including room and board to a big state school. I wrote to the President of the the private school, basically stating the value of a nurse's education at a small school with small classes, etc is good value to society but more financial aid would be needed to get these types of nurses educated, I wrote it better than that but that was the gist. He called me and offered me a financial aid/scholarship and grant package I would've been foolish to turn down. What wasn't covered, I was able to cover from saving since I started mowing lawns at 12 and some reasonable amount of help from my parents.

The odds of this happening now a days is probably slim but I don't think it's a bad idea as long as you don't walk out of that private school with tons of debt. I think when it can be done, it should, I value what teachers, social workers and similar fields have to offer and they deserve the same respect education-wise as other majors. Also, just because a school is expensive, doesn't make it good.

[freshstart]

oh and I believe basic personal finance should be taught in the slot previously reserved for home ec or whatever crazy name it has now. I can teach my kid how to iron, make a basic meal and shop by unit price. I can't teach him to sew but I would sacrifice that to get personal finance teaching.

[rosarugosa]

I definitely think PF should be taught in public schools. Kids are already being taught to use condoms to prevent STDs. I think teaching kids to use budgets to prevent financial disaster is a less controversial value-laden minefield than sex education. Even the pope is probably OK with budgeting. ;)

[iris lily]

I definitely think PF should be taught in public schools. Kids are already being taught to use condoms to prevent STDs. I think teaching kids to use budgets to prevent financial disaster is a less controversial value-laden minefield than sex education. Even the pope is probably OK with budgeting. ;)

I equate the teaching of personal finance in public schools to the teaching of personal birth control options in the public schools. None of the teaching will be values-neutral.

[rosarugosa]

I'm OK with that. Of course, not having any kids makes it easy.

[SteveinMN]

Thanks for playing, and you are right that I do not think personal finance issues can, in the general, be taught without infusing someone's values into the lessons.
Well, then there's really nothing that anyone can learn that does not come with a value attached, is there?

Maybe I've spent too long around computers, but in my world numbers have values, not value judgements. It should be possible to show people the steps involved in calculating compound interest or how much of a mortgage is interest or how much money one has left over for Twizzlers or classic books each month after buying food and shelter and other expenses -- without defining borrowing or home ownership or buying Twizzlers as "good" or "bad". Here are the steps; here's where to get the numbers to plug into the formulas. Done. The steps don't change; it's how this thing is done. The information gained from the exercise -- well, that's up to others.

[rosarugosa]

Well said, Steve. Like with Tradd's example of the expensive school for the low paying field, it makes me think of the payback period of replacement windows. There can be other variables involved, but if you have the tools & understanding to do the calculations and look at the facts, you're likely to make a better decision than you might otherwise.

[pinkytoe]

It's an interesting question. If there were some way to keep it practical without imposing values, I would be all for it. I think understanding how loans and interest work would be useful. DD did get a SW grad degree (combined with business minor) from an expensive private college rated #1 in that field. So far, it has served her well. She got her sea legs working for a nonprofit for a few years (on the business side) and then jumped to a prestigious private position where they value her social work background and insight. It is not always a bad idea. She had scholarships but unfortunately was talked into loans by college reps which ended up paying living expenses more than anything. They aren't huge but like so many young people, she did not grasp the long-term implications.

[jp1]

I agree with Steve. Values neutral budgeting can be taught, much the same way YMOYL doesn't tell people how to spend their money, but rather to look at where the money went each month and decide for themselves if the amounts for each category were reasonable.

Of course this type of course will never be taught. The banks have invested far too much money in politicians for them to allow anything that would infringe on the banks' current business model's reliance on people making stupid financial decisions.

[freshstart]

Of course this type of course will never be taught. The banks have invested far too much money in politicians for them to allow anything that would infringe on the banks' current business model's reliance on people making stupid financial decisions.

I didn't think of this

[iris lilies]

I didn't think of this

Because it's not true.

[rodeosweetheart]

Who is tle?

[iris lilies]

Who is tle?
Typo, Can't fix it.

[rodeosweetheart]

Oh, sorry, I thought it was a person, my bad

[jp1]

Because it's not true.

So you don't think the changes in the bankruptcy law a few years back were the result of lobbying and political donations made by banks and bankers?

And if you don't think the banks are trying to make money off of lending money to people who can't afford to pay them back then why do you think they were offering subprime loans where they made all their money from fees on the front end of the loan instead of the steady repayment of those loans over time? My guess is that they'd run out of "good credit risk" customers and realized the only way they could expand their customer base was by making loans to "bad credit risk" customers and were only willing to do so by setting terms that allowed them to profit up front so it wouldn't matter when the customer defaulted.

Or why they will give credit cards to anyone with a pulse, regardless of the fact that many of these people have poor credit scores which presumably indicates the likely inability to pay back the amounts charged? If they truly didn't have a business model of profiting off of people who will have difficulty paying them back they would be using credit scores to deny credit not to offer people credit cards with high interest rates and large fees.

[iris lilies]

So you don't think the changes in the bankruptcy law a few years back were the result of lobbying and political donations made by banks and bankers?

And if you don't think the banks are trying to make money off of lending money to people who can't afford to pay them back then why do you think they were offering subprime loans where they made all their money from fees on the front end of the loan instead of the steady repayment of those loans over time? My guess is that they'd run out of "good credit risk" customers and realized the only way they could expand their customer base was by making loans to "bad credit risk" customers and were only willing to do so by setting terms that allowed them to profit up front so it wouldn't matter when the customer defaulted.

Or why they will give credit cards to anyone with a pulse, regardless of the fact that many of these people have poor credit scores which presumably indicates the likely inability to pay back the amounts charged? If they truly didn't have a business model of profiting off of people who will have difficulty paying them back they would be using credit scores to deny credit not to offer people credit cards with high interest rates and large fees.

I do not believe that the path to controlling tiny minds is this direct:

evil banks-------->school curriculum

[jp1]

I do not believe that the path to controlling tiny minds is this direct:

evil banks-------->school curriculum

But regardless of whether we should care whether educating people might actually reduce the number of people who stupidly get themselves in debt, I was responding to your disbelief that the banks knowingly loan money to people who won't be able to repay it. They obviously do.

[iris lilies]

But regardless of whether we should care whether educating people might actually reduce the number of people who stupidly get themselves in debt, I was responding to your disbelief that the banks knowingly loan money to people who won't be able to repay it. They obviously do.
I didn't respond to the idea that banks loan money to people who can't pay it back. That's not something I'm discussing here, but you may because I never mind when topics meander in other directions.

[jp1]

Of course this type of course will never be taught. The banks have invested far too much money in politicians for them to allow anything that would infringe on the banks' current business model's reliance on people making stupid financial decisions.


I didn't think of this


Because it's not true.



I didn't respond to the idea that banks loan money to people who can't pay it back. That's not something I'm discussing here, but you may because I never mind when topics meander in other directions.

So what did you mean when you said "Because it's not true"

[Williamsmith]

Big problem. Higher education fails to produce an income generating asset.

One of four defaults on loans. One half are accruing more interest than they are reducing the balance.

So temptation is to call for subsidized loans and consolidations. The real crisis is that colleges suck at producing increase wage earners and graduates. It's a college excellency problem.

Educate students. Publish a ranking of crappy schools based on outcomes. Get rid of the fluff. Quit supporting systems of teachers and professors and administrators who produce nothing useful to society yet receive pensions supported by debt on students who have no asset and default.

Over a half of colleges and universities should have their accreditation stripped.

[ToomuchStuff]

How about:

*Student loans - they MUST be paid back and they are not dischargeable in bankruptcy (US - not sure about other countries)
*How to do a budget (you get X amount of money each payday, deduct shelter/transportation/food/utilities first and then "fun money")
*How to write a check/pay bills online
*Credit cards - not free money
*Car loans - difference between buying and leasing, how with leases there is a mileage limit and you may have to owe at the end for even minor damage
*How not paying debts on time can really affect your credit score, which can then affect your ability to rent an apartment, get a job, etc.

Love to add some of the terminology; example what DUE DATE, means (one kid springs to mind that thinks everything has a grace period).
Like to see a lot more on investing then what I remember getting. (very basic class, where we were given pretend $x, and had to buy stock and track it. I was one of two in the class to make money, but they didn't cover types of mutual funds, bonds etc)

Also, the order in which things are taught, will come into play in the other answer below.


Thanks for playing, and you are right that I do not think personal finance issues can, in the general, be taught without infusing someone's values into the lessons. Unlike the person you are describing, I however understand that my own values would be put forth in teaching money issues. That's why I made this thread.

for instance, I think that the concept of "budgeting" is a value. It speaks to ways to allocate your income. Is assumes that there "should" be limits on what you spend. It assumes that there "should" be minimums on what you spend. In essence it is dictating what you "should" spend on and that's a value judgement.

The idea of money (working for things you need to stay alive), is a value. Don't eat, die.
Budgeting was taught better, in (don't remember the name of the class), where we had to "run" a business. There was no credit, so their WAS limits (only can spend what you have). There were things you HAD to have (supplies to stay in business), so there was minimums. You could just call it a widget (our teacher did) that x widgets make a dohicky, which is the product you sell.
After teaching that budgeting, then you could get into the credit/loan stuff, and cover late payments/fees, rate hikes, etc. I don't really see how that would be a value, but basic math.

Honestly, I think some of this can be taught, but because of the value arguments your making, instead of being in one class, you will see it more in lessons (math lesson, learn to balance a checkbook, find the math error and correct total, show work). The bad part is that doesn't mean they (the students) connect the dots, then.

[iris lilies]

So what did you mean when you said "Because it's not true"

Sigh, this is when the written word shows itself to be inadequate.

I started this thread about teaching the subject of personal finance in the schools.

You said "of course this type of course will never be taught" because the banks won't allow it.

freshstart said she had never thought of the idea that banks control teaching in schools in America.

I said she didn't think of it because its not true (it's preposterous.) Banks are not the school board, the state board of education, or any number of curriculum determining bodies that set up what is taught in the public schools.

That's how I interpreted all the above.

[kib]

But you know ... I could see backlash if we suddenly had Suze Orman 101 as a standard class, like Geometry. Corporate interests have pushed for years to be in schools, I doubt they'd take kindly to a class focused on the fact that a snack a day from the vending machine is poor money management (which is precisely where I'd start, if I were Queen; teaching kids on a small scale about their own money choices.)

[jp1]

Sigh, this is when the written word shows itself to be inadequate.

I started this thread about teaching the subject of personal finance in the schools.

You said "of course this type of course will never be taught" because the banks won't allow it.

freshstart said she had never thought of the idea that banks control teaching in schools in America.

I said she didn't think of it because its not true (it's preposterous.) Banks are not the school board, the state board of education, or any number of curriculum determining bodies that set up what is taught in the public schools.

That's how I interpreted all the above.

Fair enough, and I do agree that the written word can be inadequate. I took your "because it's not true" to mean that you didn't believe that the banks business model is based on preying on people who don't have basic money/math skills.

I would, however, moderately disagree with this post. While indeed banks aren't the school board, etc, it's absolutely true that various outside interests push their agendas. It typically isn't corporate interests, usually it's religious folks, but there's no reason that corporate interests couldn't or wouldn't get involved if they saw something coming along that posed a serious threat to their interests. We do, in fact, see that with agriculture interests getting involved in that stupid food nutrition tower. I'd be willing to bet you a subprime loan with a low teaser interest rate and a big reset that the banks would get involved if a serious push for financial education was made.

[rodeosweetheart]

there are actually is actually much more cooperate involvement in pushing agendas than religious. I have experienced first hand much cooperate manipulation and absolutely no attempts by religious groups to manipulate curriculum, both in K-12 and higher ed.

[iris lilies]

Fair enough, and I do agree that the written word can be inadequate. I took your "because it's not true" to mean that you didn't believe that the banks business model is based on preying on people who don't have basic money/math skills.

I would, however, moderately disagree with this post. While indeed banks aren't the school board, etc, it's absolutely true that various outside interests push their agendas. It typically isn't corporate interests, usually it's religious folks, but there's no reason that corporate interests couldn't or wouldn't get involved if they saw something coming along that posed a serious threat to their interests. We do, in fact, see that with agriculture interests getting involved in that stupid food nutrition tower.

Yes it is true that societal values shape school curriculum. But I would bet that middle class ideas* of educators sitting around the conference table to draw up curriculum are stronger influence than the any other body including politicians bought by the banking industry.

* middle class values such as "budgeting" and "buy a house, best way to build equity and wealth and that tax break is great!" and "don't take out payday loans, the interest is crazy" and etc.

[jp1]

there are actually is actually much more cooperate involvement in pushing agendas than religious. I have experienced first hand much cooperate manipulation and absolutely no attempts by religious groups to manipulate curriculum, both in K-12 and higher ed.

I was thinking of the efforts to destroy the science curriculum, first with creationism, and after that was shot down by the courts with the euphemistically renamed creationism "intelligent design".

[jp1]

And abstinence only sex ed.

[rodeosweetheart]

I never experienced any pressure from any religious groups or witnessed it as a parent.

I did experience pressure both as parent and educator from cooperate players.