Teaching finance is useless

[FireLane]

I always thought that giving high schoolers a grounding in basic concepts of finance would be worthwhile, but this article throws some cold water on that:

https://www.washingtonpost.com/outlook/2019/04/23/more-states-are-forcing-students-study-personal-finance-its-waste-time/

According to the Council for Economic Education, 19 states now require the study of the subject as a condition for graduating from high school, up from 13 in 2011. The irony is that requiring schools to spend time and money teaching financial literacy is a worse financial decision than any that those high-schoolers are likely to make anytime soon.

That’s because financial education simply doesn’t work. It doesn’t change behavior — as numerous studies have shown. Indeed, the fact that giving people information does not, by itself, change how they act is one of the most firmly established in social science, whether the subject is the dangers of drug use, the value of getting vaccinated or the calories in a restaurant’s bacon cheeseburger. The same is true of finance.

I'm of two minds about this. I don't doubt that high-school finance classes don't have a significant impact on behavior, especially with advertisers spending trillions of dollars trying to undo them. Teaching people to make smart financial decisions is definitely going against the flow in America.

But part of me rebels against the idea that teaching finance is a waste of time. That sounds like throwing your hands in the air and giving up. The writer suggests that there's just too much poverty and inequality in America for good budgeting to make a difference, and maybe that's true. You can't preach individual responsibility as the sole solution to a societal problem. But even if we were to change the tax structure to give poor people more money, wouldn't they need an education in finance to make the best use of it? We have to give people the tools to make good decisions, even if we can't force them to use those tools.

[ixtap]

The same is true of sexual harassment training.

For basically anything that is going to affect your day to day life, it is better to integrate the lessons within other lessons. Include finance in math classes at every level, for example. Instead, we teach percentages with shopping. Example after example of a percentage discount, rather than taxes or interest rates.

[I'm a red panda]

My economics class taught me the stock market was gambling and to stay away. It took me a Long time to trust stocks, because all I saw from our semester long project was most people lost money.

[Zamboni]

Ignorance of basic financial information is a huge problem in this country. I completely disagree with the premise that this type of course is a waste of time. Sure, it won't have a lasting impact for everyone, but some things from it will sink in and eventually make a difference for some of the students, and that is all that matters. It will have a bigger impact than most of courses students take, in my opinion.

My own parents are hopeless with money and I grew up in a low income neighborhood. In the 6th grade (6th!) our teacher set up a mock economy in the class, we got paid monopoly money for "jobs" in the classroom and had to pay rent on our desks, we had to balance our checkbooks for a grade, and we even filled out 1040 EZ tax returns in April. One of our projects during the year was to set aside money for a road trip vacation to the destination of our choice and then plan it with details including how much the gas would cost of the drive and how much the real hotel rooms would cost. No internet! We still called the 1-800 number for hotels and figured it out. It was fun. I stayed at a Best Western on my hypothetical fantasy trip. LOL, DREAM BIG! Most of my friends never got to do anything or go anywhere, so just having them dream about saving up the money first and then driving to the grand canyon or wherever made a big impact on all of us I think.

So, when it came time to file my real taxes, I knew it wasn't hard to do and I didn't need help. I always kept my checkbook balanced. I remember explaining to a college friend about how her plan to "only pay the minimum" on her credit card was costing her a ton of money (this was before the truth in lending disclosures they have on statements now), and I had learned that IN SIXTH GRADE!

The other thing I learned in school that made a useful impact on me are "don't talk to police" other than "I do NOT consent to a search, am I free to go? Am I being detained?" Lol, Mr. Valdez, this one's for you. That and get AAA in case you ever need a tow, illustrated with many entertaining stories from Mr. Valdez's beater car life. Dealing with police and being prepared if your car broke down were all he talked about for an entire semester. I think it was supposed to be a Civics class. 11th grade?

[Cassie]

Your 6th grade teacher sounds awesome.

[mtnrider]

Ignorance of basic financial information is a huge problem in this country. I completely disagree with the premise that this type of course is a waste of time. Sure, it won't have a lasting impact for everyone, but some things from it will sink in and eventually make a difference for some of the students, and that is all that matters. It will have a bigger impact than most of courses students take, in my opinion.

I suspect what's actually being discovered here is that high school students just want to pass a class, not fully integrate the class materials into their lives.  What do you remember from world history class?  (Just to pick on one subject.)

If the students were more motivated, or the class was taught to more mature students who could see the need for financial literacy, I'm thinking that the results would be different.

[Jenny Wren]

I'm a long time out of high school, but we had a personal finance class. It was a one trimester program as part of home ec (which was required for males and females in my early 90s high school).

It worked to make me terrified of debt, which is a good thing.

Where it failed was that my main take-away as a teen was no matter what I did, I would be working until 62 or 65, when I would receive social security. If I saved, then I would have extra money to have fun in retirement, otherwise I'd just get my SSI. As a 15 year old, I saw this as a damned if you do, damned if you don't scenario. Why bother saving to have fun when you're old, when you could just do the minimum of saving and have fun your whole life and then live quietly on the SSI once you are too old to have any fun anyway?

It's the style of the education that sucks, in part. If young people were taught that saving when young (teens, twenties, thirties) provides more options WHEN YOUNG, then perhaps the message would seem a bit more important. Unfortunately, the ones designing the curriculum and teaching the curriculum were likely raised on the same hum-drum retire when you are in your 60s+ bullshit, so the cycle repeats.

[Zamboni]

^Yes, if HS teachers can make learning about driving boring as hell at a time when kids can't wait to drive, then just about any topic can be wrecked. Still, my own kids did manage to learn a bunch in that boring to tears driver ed course.

Personally I think the textbook for any HS personal finance class should be the great classic "Millionaire Teacher."

Your 6th grade teacher sounds awesome.

Yep. We were also encouraged to read Stephen King short stories for book reports. He actually cared about us, even the kids with a history of serious behavior problems, and his caring shaped everyone up somewhat.

[ysette9]

The message I get from this is not that it is a waste of time to teach personal finance, but that it is insufficient in if itself to change behaviors to the degree that we as a society would like. So we need to add in creative programs and incentives. I know freakonomics has had some podcasts on nudges and similar ideas to encourage saving and other good behaviors.

[Montecarlo]

In the 6th grade (6th!) our teacher set up a mock economy in the class, we got paid monopoly money for "jobs" in the classroom and had to pay rent on our desks, we had to balance our checkbooks for a grade, and we even filled out 1040 EZ tax returns in April.

In high school we had a wheat trading day in economics.  I sold all my wheat for $1 at a massive lost and got in trouble.

[DadJokes]

I think that, like everything else in school, more is learned at home from parents than in school. Enact finance at home by giving your child hands-on experience. If you are relying entirely on schools to raise and educate your children, then you will miss the greatest opportunities for them to actually learn.

[exterous]

That article is off base. There have been certain indicators that teaching finance does work but that it has to be done in ways not easily compatible with traditional curriculum. There are at least two types of financial education that have been shown to work: Just in Time and Repetition over years. Unfortunately both of those are hard to do in school. Just In Time doesn't work well for anything other than college because high schoolers are (usually) too far out from a mortgage or their first retirement plan for the lessons to really stick. Repetition over years is tough to integrate across grades, teachers and schools not to mention into the already packed list of mandatory subjects.

I also take issue with a stance of "We kinda tried a couple of things. They didn't work. Even though figuring it out would be of value trying anything else is obviously a waste"

[Sugaree]

I think that, like everything else in school, more is learned at home from parents than in school. Enact finance at home by giving your child hands-on experience. If you are relying entirely on schools to raise and educate your children, then you will miss the greatest opportunities for them to actually learn.

Some of us learned what NOT to do from our parents.

[Montecarlo]

I think some of probably comes in the presentation and a poor job of explaining to the students “what’s in it for me?”

When I was out processing from the navy there was a 1 hour finance lecture.  They brought in this overweight guy with pants almost up to his nipples and a pocket protector to explain to a bunch of 20 year olds that if they made coffee at home, the could save almost $1,000 a year.

Needless to say I don’t think anyone way swayed.

If the message was “you can live a pretty fancy lifestyle and retire to Costa Rica before your LPO makes Senior Chief,” I bet that would have gotten a lot more attention.

[Just Joe]

I think that, like everything else in school, more is learned at home from parents than in school. Enact finance at home by giving your child hands-on experience. If you are relying entirely on schools to raise and educate your children, then you will miss the greatest opportunities for them to actually learn.

Unless you have children who are resistant to learning and can't see the point of it all... That condition changes so much.

[Parizade]

I've read many articles in the Washington post about the effectiveness of sex education in schools. Their opinion seems to be "teaching absinence doesn't work, comprehensive sex education does." I don't see why financial education would be any different. A poorly designed program that simply tells them "don't overspend" will probably fail where a comprehensive financial education program that begins with basics in grade school and is reinforced year over year through high school might make a difference.

[Zamboni]

^Yes, this.

I think earlier is better than later, and that it has to be sustained. And, obviously, there has to be something in it that truly motivates the learner.

I can imagine high school finance classes that would be horrible! It's actually pretty easy to imagine. I can also imagine classes that would be pretty great . . . maybe I'll make this my post retirement job, lol. They could read MMM blog posts during class time for their "book reports". No homework, just come to class, pay attention, discuss blog posts with your little friend group during class, and make a good faith effort on what we are doing each time and you get an A. Oh, and where do you want to go???

[Psychstache]

^Yes, if HS teachers can make learning about driving boring as hell at a time when kids can't wait to drive, then just about any topic can be wrecked. Still, my own kids did manage to learn a bunch in that boring to tears driver ed course.

The difference is that you don't need to make DE interesting or engaging, because the kids are there because they have to be to get a license. There is built in motivation to go through the course, no matter how boring or useless, because they would rather suffer through the requirements to get the thing that provides immediate, powerful benefits (ability to escape parents, ability to hang out with friends, access to work). ''

Personal Finance doesn't have that same draw. There's nothing to gain* from learning the information.

Also, I believe your anecdote proves a more important point: High School is too late to start. 18 year olds** on the verge of going to college don't listen to anything or anyone (on average). 6th grade is certainly better, but embedding it across the curriculum in age appropriate ways early on is better.

*obviously, there is a lot of valuable information to gain from a PF course, but that is not going to be the perception.

**A course like this sounds pretty clearly like it would be shoehorned at the end of the alignment in math courses.

[Lanthiriel]

I was introduced to the concept of compound interest around the age of 15 and it really stuck with me. I probably didn't get my financial life together until about 10 years later, but I at least managed to stay out of credit card debt and opened retirement accounts before then because of that one lesson. Even if only 10% sticks, it's better than nothing!

[M5]

From my own experience in taking personal finance is HS ten years ago, it's the information taught that's worthless. All I remember was being taught how to calculate assets and liabilities, write checks, and balance a checkbook. Pretty pointless for teaching you anything you actually need to know to be financially successful.

I think that, like everything else in school, more is learned at home from parents than in school. Enact finance at home by giving your child hands-on experience. If you are relying entirely on schools to raise and educate your children, then you will miss the greatest opportunities for them to actually learn.

I completely agree. Most people don't care about finances until they get slapped in the face with the real world after they move out on their own. My mom is a teacher and from what I understand, parents are relying more and more on schools to teach their children everything. SMH

[ixtap]

I think that, like everything else in school, more is learned at home from parents than in school. Enact finance at home by giving your child hands-on experience. If you are relying entirely on schools to raise and educate your children, then you will miss the greatest opportunities for them to actually learn.

Unless you have children who are resistant to learning and can't see the point of it all... That condition changes so much.

Or parents who do t know certain things.

[DadJokes]

I think that, like everything else in school, more is learned at home from parents than in school. Enact finance at home by giving your child hands-on experience. If you are relying entirely on schools to raise and educate your children, then you will miss the greatest opportunities for them to actually learn.

Unless you have children who are resistant to learning and can't see the point of it all... That condition changes so much.

Or parents who do t know certain things.

None of that changes the fact that children learn more at home than they do at school. In many cases, they are learning bad habits, but thinking the schools are going to teach them how to be functioning adults is a pipe dream. Even if they try, it's not effective, as the only way to teach these things is hands-on experience.

[ericbonabike]

My 7th grade daughter took a "Money, Money, Money" class last year. 

I had very high hopes for it, but they mostly watched Dave Ramsey videos she reported.

They had to do one assignment which did have an impact:

1) Pick out the best college in america for your career of choice.  Figure out how much will cost.
2) Pick out the best college in your state for your career of choice.  Figure out how much will cost.

The difference was staggering even to a 13 year old.  $500,000 to attend out of state college, versus $200k for out-of-town instate.  (she wants to become a vet).


When she got home we talked about it, and I asked her to price out how much it would cost to attend a local community college, transfer to a nearby 4 year school for bachelors, and then complete vet training.  Cut the final number by quite a bit. 

So, yeah, I think its possible to educate SOME young people.  But, their mind has to be receptive to the simple but hard rules that most of us mustachians live by.

[RetiredAt63]

My 7th grade daughter took a "Money, Money, Money" class last year. 

I had very high hopes for it, but they mostly watched Dave Ramsey videos she reported.

Have them watch Gail Vaz Oxlade's 'Til Debt Do Us  Part" and they would learn something.   ;-)  It would be reruns, but so what?  Excellent what to do and what not to do in her shows.