Author Topic: Help me teach financial sanity to college students  (Read 10812 times)

universalset

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Help me teach financial sanity to college students
« on: September 18, 2015, 03:41:53 PM »
Hello everyone!

I am a professor at a nonselective small liberal arts college.  One of the classes I'm teaching this semester is a math-for-liberal-arts-majors course (basically no prerequisites beyond high school algebra), and I'm doing a unit on basic financial math.  I have things mostly planned out, but I thought I'd ask here to see whether anyone had some brilliant ideas I could incorporate that I may not have thought about yet.

I'm planning on covering the following topics: Budgeting, compound interest, savings, loans, basic introduction to investing, and planning for retirement. (I'll spare you the details; I don't mind if someone suggests something I've already planned on including.) The goal is to get them comfortable with the math behind savings and loans so that they can navigate various financial pitfalls, and to inspire them to live frugally and manage their finances wisely in order to live better lives.

Possibly relevant background about the school:  the students largely come from lower-middle-class backgrounds.  Tuition is cheap for SLACs but more expensive than state universities.  Many students work through college, and most end up with substantial, but (relatively) not enormous student loan debt (typically about 30k after 4 years). 

Also, it's a Christian college, so it might not be wise for me to directly link them to any swear-filled MMM articles.

So, mustachians -- is there anything you think I absolutely have to say?  Any particularly great examples I should use to get them engaged and excited?  Anything financial-math related that you really wish you had known when you were in college or just out of college?

shanesauce

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Re: Help me teach financial sanity to college students
« Reply #1 on: September 18, 2015, 03:50:53 PM »
I am 23 years old and one thing that blew my mind is the power of compounding interest and how your really can make your money work for you.

If there is one thing that you should really pound into their head is that they DO NOT have to slave their life away for a pension or until social security age. Once I figured out it was possible and the whole process wasn't very complicated it lit a huge fire under my ass. I WISH that someone would have laid it out for me back in high school.

So honestly I would preach heavily about:
1) How easy long term investing is (set and forget)
2) How big of a deal compound interest is
3) Working until your 60's to pay for "stuff" really sucks

MDM

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Re: Help me teach financial sanity to college students
« Reply #2 on: September 18, 2015, 03:51:19 PM »
Anything financial-math related that you really wish you had known when you were...just out of college?

That paying 5.75% front end load plus high annual fees does not guarantee outperformance vs. no-load low-fee index funds.

calimom

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Re: Help me teach financial sanity to college students
« Reply #3 on: September 18, 2015, 03:54:04 PM »
I heard this on my NPR station the other day.  It's geared toward twenty-somethings; should be completely adaptable to college students.


http://www.kqed.org/a/forum/R201509151000


And the mp3, if you can download it:


http://www.kqed.org/.stream/anon/radio/forum/2015/09/20150915bforum.mp3

Kris

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Re: Help me teach financial sanity to college students
« Reply #4 on: September 18, 2015, 04:31:17 PM »
Thirding the compound interest thing and related topics. And the importance of starting as early as possible.

I know that my 22 year-old stepdaughter really sat up and took notice when I told her the math about how a person who invested x amount of dollars every month throughout her twenties and then stopped investing after that would end up with more money than a person who started at thirty and put the same amount of money per month away until she retired at 65. 

My SD asked me to help her open a Vanguard index fund the next day.

AllieVaulter

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Re: Help me teach financial sanity to college students
« Reply #5 on: September 18, 2015, 04:43:12 PM »
Thirding the compound interest thing and related topics. And the importance of starting as early as possible.

I know that my 22 year-old stepdaughter really sat up and took notice when I told her the math about how a person who invested x amount of dollars every month throughout her twenties and then stopped investing after that would end up with more money than a person who started at thirty and put the same amount of money per month away until she retired at 65. 

My SD asked me to help her open a Vanguard index fund the next day.

This.  Most definitely this. 

Also, have them take a look at how much they would need to save up to retire based on different lifestyles. 

And possibly taking a look at how interest will affect the cost of things they buy with loans.  They think they're buying a car for $20k, but if they're also signing up for a 7 year loan with 10% interest it adds another $8k. 

MrsPete

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Re: Help me teach financial sanity to college students
« Reply #6 on: September 18, 2015, 04:47:22 PM »
You've gotta make it real for them.  The reason students don't retain this information from high school (and, yes, it taught) is that it seems so distant, so unrelated to their lives, so much less interesting than who made cheerleading and who has that new smart phone. 

You've had some great ideas already:

- The real cost of student loans (and/or credit cards)
- What does it cost you to postpone starting to save 1-2 years? 
- Compound interest -- your best friend, your worst enemy

I'd add to the list:

- Scams are everywhere
- Budgeting for college expenses AND transitioning into an adult budget
- Thrifty meal planning
- Ethical financial choices
- Your credit score -- does it matter? 

FrugalWad

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Re: Help me teach financial sanity to college students
« Reply #7 on: September 18, 2015, 05:03:39 PM »
The greatest financial education I had came from the pages of Your Money or Your Life and The Millionaire Next Door. Given the nature of the school, something by Dave Ramsey might be appropriate.

The time consideration of buying things. You see something that's $100 that you want to buy, you think OMG I need that thing and I have a job so I can afford that. But then you have to realize that's ten hours of your life, gone, just to buy this one thing. Is it worth it? Plus, it's longer than an hour you have to work, because you also have to pay the sales tax.

At grocery stores, it can be hard to figure out which brand of something is the better deal based on size and price; it's easier to go by the per-weight price often printed in tiny numbers beside the overall price.

Buying food in bulk to do meal prepping to have food on-hand instead of going out to eat, and the associated math with the cost per meal broken down from the initial cost, versus the much higher costs of eating out.

The importance of low-cost fees from something like Vanguard compared to the outrageous fees of some places for investing.

Before thinking about wanting the fancy cars and working toward a McMansion, the math of added cost over initial purchase for maintenance.

LiveLean

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Re: Help me teach financial sanity to college students
« Reply #8 on: September 18, 2015, 06:36:03 PM »
I always liked the story of the rich guy who walked up to Jesus and said he wanted to follow him. JC responded by telling him to sell all his possessions and come aboard. When the guy hesitated, JC said "it's easier for a camel to pass through the eye of the needle than for a rich man to enter the Kingdom of God."

What I like about this story most is that when I think about the happiest times in my life - backpacking for five weeks through Europe, going on six-week "business trips" in my twenties (I was a baseball writer) the common denominator was that I was traveling with so little that I would not have needed to check a bag. And yet I felt like I could continue indefinitely.

Tell your students to focus on experiences and building liquid wealth/freedom and not to worry about becoming part of the American nightmare of consumerism. 

Tig_

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Re: Help me teach financial sanity to college students
« Reply #9 on: September 18, 2015, 06:52:47 PM »
I actually attended a webinar today that talked about financial literacy/wellness for college students.  They highlighted some of the resources that IU has developed - http://moneysmarts.iu.edu

They have a podcast "How not to move back in with your parents" that is some basic info re: the topics you are covering.  They won't be adding any more content to this. They've recently started another podcast MoneySmartsU that sounded that it will take students form all over the nation and do financial case studies, but it's brand new.  They also had some other interesting stuff on their site for students, short web-based modules and the like. 

Just some other ways you might deliver the content you are already planning on teaching (plus introduce them to the habit of regular personal finance education outside the classroom with life-stage appropriate material for beginners).  Some times student affairs colleagues can help out with a thing or two.  ;)

Good luck!

Rural

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Re: Help me teach financial sanity to college students
« Reply #10 on: September 18, 2015, 07:20:31 PM »
Posting to follow since we haven't started this unit in my first-year course yet. Thanks, Tig, for the IU link; I think it will help me.


I have discovered, working with these students, that I will need to teach some basic arithmetic. Most of them can't do an average.

universalset

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Re: Help me teach financial sanity to college students
« Reply #11 on: September 19, 2015, 08:25:17 AM »
Thanks for the input everyone -- keep the suggestions coming!  I'm getting the impression (from this and Rural's thread) that some dramatic graphs about the impact of compound interest (on saving and debt) and a lot of "how does this directly affect you" activities will keep them better engaged.  I was already planning on doing some of that, but I usually don't do the pretty-pictures-on-the-projector-screen thing, and I'm thinking that this might be an area where doing so will create a bigger emotional impression and get them more interested.  I TAed for courses that covered compound interest when I was a grad student, but the students never seemed to care much as it was just presented as a giant list of formulas they had to know... not really the best way to make an impact.

Another query for anyone who has taught budgeting to students before (or for whom budgeting and saving doesn't come naturally) -- what do you think are common difficulties that people have when budgeting?  Is it not bothering to draw up a budget at all?  Failing to keep track of actual spending and so not knowing where the money is going?  Lack of willpower to keep spending within bounds?  Something I'm not thinking of?

(The curse of being a math professor: being good at math means you have to explicitly learn all the ways that other people have trouble, because you never had the kind of trouble they did.  I've taught math for a while so I've learned a lot of this, but I've never taught financial skills, and I'm getting the feeling that budgeting will be the same way.)

pbkmaine

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Help me teach financial sanity to college students
« Reply #12 on: September 19, 2015, 08:32:58 AM »
http://www.cashcourse.org
This is from the National Endowment for Financial Education (NEFE), which evolved out of the College for Financial Planning. It's specifically for college students. Cornell University links to it.
« Last Edit: September 19, 2015, 08:39:28 AM by pbkmaine »

Kris

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Re: Help me teach financial sanity to college students
« Reply #13 on: September 19, 2015, 08:44:38 AM »
Thanks for the input everyone -- keep the suggestions coming!  I'm getting the impression (from this and Rural's thread) that some dramatic graphs about the impact of compound interest (on saving and debt) and a lot of "how does this directly affect you" activities will keep them better engaged.  I was already planning on doing some of that, but I usually don't do the pretty-pictures-on-the-projector-screen thing, and I'm thinking that this might be an area where doing so will create a bigger emotional impression and get them more interested.  I TAed for courses that covered compound interest when I was a grad student, but the students never seemed to care much as it was just presented as a giant list of formulas they had to know... not really the best way to make an impact.

Another query for anyone who has taught budgeting to students before (or for whom budgeting and saving doesn't come naturally) -- what do you think are common difficulties that people have when budgeting?  Is it not bothering to draw up a budget at all?  Failing to keep track of actual spending and so not knowing where the money is going?  Lack of willpower to keep spending within bounds?  Something I'm not thinking of?

(The curse of being a math professor: being good at math means you have to explicitly learn all the ways that other people have trouble, because you never had the kind of trouble they did.  I've taught math for a while so I've learned a lot of this, but I've never taught financial skills, and I'm getting the feeling that budgeting will be the same way.)

I think it is partly the initial dread because it seems boring and also scary to have to think all of that stuff through (the process going from not having any idea how much you spend on a certain area per month and actually sort of not wanting to know, to pulling the bandaid off and looking at the reality), and then after that the anticipated drudgery of having to keep track of it all going forward.  Add into all of that, the fact that many or most people think of budgeting as deprivation, and... *shrug*

pbkmaine

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Help me teach financial sanity to college students
« Reply #14 on: September 19, 2015, 09:01:11 AM »
I used to be a financial planner, so I have dealt with the budgeting issue a lot. Most of the resistance is along the lines of: "It's too much trouble." We don't like delaying gratification in our culture.

Having said that,  DH and I don't budget ourselves, except in the most general way. Nor does MMM. What we did, when we were working, was save off the top. We would have savings goals, and once we reached those, we did whatever we wanted with the rest of our money. When others were budgeting, we were optimizing. We bought used. We learned how to make our favorite restaurant dishes at home. We carried lunch to work. We went to Europe when DH went for work and tagged on a vacation. We paid for airfare with frequent flyer miles. We sent the kids to public school and state universities.

For people who do not like to budget, I recommend what we do: track spending for a number of months, then analyze. Identify problem areas and adjust. If, in the future, savings goals are not being met, repeat.  Our "budgeting", such as it is, attempts to forecast major expenses over the next decade or so.
« Last Edit: September 19, 2015, 09:07:30 AM by pbkmaine »

Bracken_Joy

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Re: Help me teach financial sanity to college students
« Reply #15 on: September 19, 2015, 09:07:11 AM »
Thanks for the input everyone -- keep the suggestions coming!  I'm getting the impression (from this and Rural's thread) that some dramatic graphs about the impact of compound interest (on saving and debt) and a lot of "how does this directly affect you" activities will keep them better engaged.  I was already planning on doing some of that, but I usually don't do the pretty-pictures-on-the-projector-screen thing, and I'm thinking that this might be an area where doing so will create a bigger emotional impression and get them more interested.  I TAed for courses that covered compound interest when I was a grad student, but the students never seemed to care much as it was just presented as a giant list of formulas they had to know... not really the best way to make an impact.

Another query for anyone who has taught budgeting to students before (or for whom budgeting and saving doesn't come naturally) -- what do you think are common difficulties that people have when budgeting?  Is it not bothering to draw up a budget at all?  Failing to keep track of actual spending and so not knowing where the money is going?  Lack of willpower to keep spending within bounds?  Something I'm not thinking of?

(The curse of being a math professor: being good at math means you have to explicitly learn all the ways that other people have trouble, because you never had the kind of trouble they did.  I've taught math for a while so I've learned a lot of this, but I've never taught financial skills, and I'm getting the feeling that budgeting will be the same way.)

For me, it's the emotional minefield. I have a hard time separating math from it's implications in my life. Yes, reducing my restaurant budget from $250 to $100 gives room for a $250 car payment (for example; I've never had a car payment), but the numbers have so much emotion- the restaurants are FOMO, the car payment is is social status, reflecting on both can make me feel socially isolated, etc etc. To manage my finances, I had to learn to manage my emotions so that I could see the numbers clearly.

Personally, what really helped with this is doing the case studies for other people. That way it wasn't MY numbers, or MY excuses. So maybe bring them an example from another student, or one of your friends, or ask for a volunteer's budget, something. That way, they don't have to dive straight into their OWN budgets, which can be overwhelming and is laden with meaning past the simple math that underlies personal finance.

Hope that helps! What you're doing is really, really awesome.

rockstache

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Help me teach financial sanity to college students
« Reply #16 on: September 19, 2015, 09:09:30 AM »
I think one of the most important life lessons to learn at that age is that everyone wants your money. Teach them to see commercials for what they really are: ploys to get your money. One of the obvious ones to me is the rebranding of ugly gems that couldn't be sold into "chocolate diamonds," that they want you to think you want. Teach them to see what's really going on in marketing, and you will be giving them a lifelong gift.

Eta: As far as budgeting, I think you have to show them how they can do it with technology. Kids these days aren't using cash and the envelope method is awkward and outdated for some people to relate to. Mint, YNAB and other personal finance sites are much more user friendly, and being able to download a free app to budget with could make all the difference.

Sent from my iPhone using Tapatalk
« Last Edit: September 19, 2015, 09:12:56 AM by rockstache »

FrugalWad

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Re: Help me teach financial sanity to college students
« Reply #17 on: September 19, 2015, 09:27:41 AM »
Another query for anyone who has taught budgeting to students before (or for whom budgeting and saving doesn't come naturally) -- what do you think are common difficulties that people have when budgeting?  Is it not bothering to draw up a budget at all?  Failing to keep track of actual spending and so not knowing where the money is going?  Lack of willpower to keep spending within bounds?  Something I'm not thinking of?

Ease of use when it comes to budgeting. You Need A Budget might be a worthwhile expense for some students. Making a budget spreadsheet for me was useless, because it was boring to keep coming back to, and just having a budget for a month didn't really help me see a bigger picture. It wasn't until I created a spreadsheet with 12 tabs (one for each month) where I created equations that would link the balances of last month's end total in checking and savings to the next month's balance to carry over that I really got into it. That way I could project out to a year worth of budgeting, and see how each expense knocks down the total amount I'll have for myself by the end of the year.

Thinking about the long-term is one thing, but being able to actually interact with that future to see how changes create positive or negative results is a lot more eye-opening.

SwordGuy

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Re: Help me teach financial sanity to college students
« Reply #18 on: September 19, 2015, 09:34:47 AM »
I would suggest you teach them about the 50-30-20 budget that Elizabeth Warren et al came up with.  It's easy to understand (except by columnists about financial topics - they don't actually seem to grasp the details).

I suggest it for two reasons.  One, it really is easy to understand with a few examples.  Two, there's very little drudgery to it.

It should have been set up as the 50-20-30 budget because it's easier to explain that way, and it would also help reinforce the concept of savings better.  I'll explain the costs in 50-20-30 order.

50% (max) Needs and Committed Expenses
20% (min) Savings and Early Debt Repayment
30% (max) Wants.

Needs and Committed Expenses

You need food, medicine, clothing and shelter.  Those are needs.   Steak, caviar and lobster are not needs, they are wants.
A McMansion is not a need, it is a want.   A $500 purse and $1500 shoes are not needs, they are wants.

Commited expenses are those things that you are contractually obligated to repay - regardless of how smart or foolish the decision to commit to those payments was.

Savings and Early Debt Repayment

Savings is just that, putting money in the bank, stocks, bonds, rental property, etc.

Early debt repayment is payment of a debt faster than you are contractually obligated to do so.  Example: You have a car payment of $200 a month.  You decide to pay $300 this month.  $200 goes under committed expenses, $100 is classified as early debt repayment.

Wants


Anything you spend money on that isn't in the other two categories.


So, what category does setting aside $50 a month for a fun trip go?

It's not a need, and it's not a contractually obligated amount.   You are "saving" it, but you aren't saving it to save it, you're setting it aside to spend it.   That makes it a want.

How about setting aside $1000 a month for a downpayment on a house?  Is that a want or savings?   It's savings.  But you're setting it aside to spend it, just like you did for the fun trip?  Why is it different?    Because when you buy a house, you are swapping your cash for equity in the house.  In theory, you can sell the house and get the money back.  (Maybe a bit more, maybe a bit less, but we'll ignore that because we can't predict it any more than we can guarantee the stock market will be up when we need it to be.)

Let's assume a car is a need, simply because your students will freak if you tell them otherwise.  An inexpensive car is a need, a fancy car isn't.  FYI, a fancy car is anything over $15,000.  The median new car price in the USA is about $32,000, which is higher than the median student loan debt so many students are whining about.  Do tell them they can't post complaints on Facebook about student loan debt being debt slavery and also post "Wow! Look at this expensive car I just bought on credit!" happy posts too. 


Here's why this isn't a drudgery-based budget method.

First, they need to do an assessment of their current expenses and income, and assign the money to the correct categories. 
They will need to review this monthly for the first few months to make sure they didn't forget something.

Once this process is done the first time, they only need to do it again if their income changes, or their committed expenses change.
The savings portion should be put on auto-pilot so that's easy.

If they write it down, it's very easy to decide whether they can purchase something on payments.  If the new payment puts them over the 50% limit, they don't buy it.  If it doesn't, they can buy it.   (Maybe they shouldn't from an MMM perspective, but that's a different discussion.)

If their current needs and committed expenses are over 50% (and for many of them they will be), they need to refuse new optional purchases until they get under 50%.   A side hustle or selling off unnecessary items will help them out here.
Dave Ramsey does a good job of helping people understand how to do this, particularly religious folks.

There's a blog about No More Harvard Debt that covers one student's progress toward paying down their student loans really fast.   What I liked most about the blog wasn't that he did that!  In the process of doing this he turned into a real man and that was really nice to watch happen.




minority_finance_mo

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Re: Help me teach financial sanity to college students
« Reply #19 on: September 19, 2015, 10:18:17 AM »
Honestly, I wouldn't have been blown away by a class on budgeting and compound interest as a college student. You REALLY have to sell it. The old saying about a horse and water definitely applies.

I would have them read "Richest Man in Babylon" as required reading. A bit unconventional for a math class, but I don't know how you top that. The minute I read that book (and it's short, too), I was sold on the power of investing. Good luck!

Cwadda

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Re: Help me teach financial sanity to college students
« Reply #20 on: September 19, 2015, 10:54:16 AM »
There was discussion some time ago about this topic. I attached a document a user wrote for a personal finance class. I don't remember who made it, unfortunately. But it covers a lot of financial topics so I saved it and will hold onto it for a while.

Yankuba

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Re: Help me teach financial sanity to college students
« Reply #21 on: September 19, 2015, 02:47:42 PM »
Honestly, I wouldn't have been blown away by a class on budgeting and compound interest as a college student. You REALLY have to sell it. The old saying about a horse and water definitely applies.

I would have them read "Richest Man in Babylon" as required reading. A bit unconventional for a math class, but I don't know how you top that. The minute I read that book (and it's short, too), I was sold on the power of investing. Good luck!

+1

I would have been a little miffed if I had to learn about budgeting in a college course. But compound interest is a good thing to cover - we didn't learn about it in college until junior year and I was a finance major.

Maybe you can explain interest rates and why banks don't pay any interest today. That's kind of interesting especially since we are in uncharted waters right now and it's not intuitive what is going on.

KarefulKactus15

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Re: Help me teach financial sanity to college students
« Reply #22 on: September 19, 2015, 03:23:51 PM »
What an opportunity you have.  You have the power to change the financial outlook for an entire classroom of individuals for life.  No pressure.........

solon

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Re: Help me teach financial sanity to college students
« Reply #23 on: September 19, 2015, 05:24:29 PM »
I'm going to put in a plug for the swear-filled MMM posts.

I'm a Christian, and I went to a small Christian liberal arts college. These students are no strangers to swearing. But nearly all personal finance advice is dry, stuffy, boring. When these Christian kids hear MMM's language, they will sit up and take notice. A guy who makes personal finance interesting, but has a few swear words? Yes please!

ChrisLansing

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Re: Help me teach financial sanity to college students
« Reply #24 on: September 20, 2015, 07:34:21 AM »
I don't have anything particularly useful to suggest as far as subject matter, but there is a problem I'd raise, and just being aware of the problem is the first step towards dealing with it.   

The problem is this - for most of your students this will be their first exposure to financial planning, and their last.    You can hope to inspire a few of your students to take a lifelong interest in their finances, but for most of the students this is just one more course to get through.   When it's over, many will not remember much about it say 5 years later, and they won't apply the lessons.   They'll need repetition of the concepts and practice at applying the concepts, but where will they get this repetition?   

You don't take one math class then you're set for life, you take a series of math classes, if you want to be somewhat proficient at math, and much of what is covered is repetition of info learned in prior classes.     Your  students need additional personal finance classes, not so much to gain detailed knowledge of "higher level" finance concepts, but just to review and re-emphasize the importance  personal finance.     

I don't know what you can do to deal with this problem, maybe nothing.   You should feel great that your giving them some finance lessons that most people never get.   But don't be surprised if you run into students 10 years later and they are deeply in debt, spending to keep up appearances, saving little and working until they are old to pay for their "stuff".     Exposure is important, but internalizing it is what really makes the difference.   

Zamboni

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Re: Help me teach financial sanity to college students
« Reply #25 on: September 20, 2015, 10:28:47 AM »
It seems like the math that liberal arts majors need the most is financial math. So it is tempting to add financial examples to every single concept that allows it to try and get enough repetition that it will sink in.

Also, I would have them do a couple of projects applying the math they are learning to financial scenarios.

Good luck!

Jakejake

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Re: Help me teach financial sanity to college students
« Reply #26 on: September 20, 2015, 10:49:52 AM »
Short problem solving worksheets on compound interest can be eye opening - but also really dry and not feel relevant. One of the things I do with high school students is give them the food stamp challenge to work with, in excel. I bring in real store circulars so they can find prices, they have to plan a week's meals. For college, I would maybe up it to a month.

They can buy things out (latte's, whatever), but it goes in the food budget spreadsheet.  Then I link them to some coupon blogs, and tell them that's fair game also.

Some years I am secretly doing the food stamp challenge for real while they are doing it on paper, and at the end of the week, I physically bring in all the food I bought during the week, with receipts.

It's not that I expect (or want) them to all turn into extreme couponers. But I want them to see if they buy coffee out every day they have spend more just on that alone, than I have spent on enough food to feed myself and my husband really well for a week.

I know food is just one part of a budget, but it's so easy for people to blow through 10 times what they need to be spending and it's something everyone has to buy on a regular basis, so it is something they all can relate to.

nereo

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Re: Help me teach financial sanity to college students
« Reply #27 on: September 20, 2015, 11:04:49 AM »
Lots of great suggestions here, especially the value of compounding.

Two that haven't been mentioned (or perhaps I skipped over them) - Opportunity cost and the fungibility of money.

After grasping the concept of budgeting, and how powerful compounding can be over several decades, 20-somethings should understand that by purchasing one thing they are loosing the ability to invest/purchase/pay-down something else, and they should be able to calculate how much the opportunity cost would be.  Also, when you get a windfall (e.g. inheritance, birthday cheque from family) it's not 'free money' or that 'this money isn't taxed'. It's all the same money, so you should do what's best for you regardless of the source.

nereo

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Re: Help me teach financial sanity to college students
« Reply #28 on: September 20, 2015, 11:07:34 AM »
...also... adding this under the "importance of compounding" just because it was so important to me in my young developing mind...

show them how simply maxing out their IRAs every year will make them a millionaire before they turn 60.  It shouldn't even be optional to anyone working full time.

Mr Dorothy Dollar

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Re: Help me teach financial sanity to college students
« Reply #29 on: September 20, 2015, 11:19:54 AM »
Maybe have them fake shop for a mortgage or car loan to understand the different language used.

MrsPete

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Re: Help me teach financial sanity to college students
« Reply #30 on: September 20, 2015, 11:31:50 AM »
I used to be a financial planner, so I have dealt with the budgeting issue a lot. Most of the resistance is along the lines of: "It's too much trouble." We don't like delaying gratification in our culture.

Having said that,  DH and I don't budget ourselves, except in the most general way. Nor does MMM. What we did, when we were working, was save off the top. We would have savings goals, and once we reached those, we did whatever we wanted with the rest of our money. When others were budgeting, we were optimizing. We bought used. We learned how to make our favorite restaurant dishes at home. We carried lunch to work. We went to Europe when DH went for work and tagged on a vacation. We paid for airfare with frequent flyer miles. We sent the kids to public school and state universities.

For people who do not like to budget, I recommend what we do: track spending for a number of months, then analyze. Identify problem areas and adjust. If, in the future, savings goals are not being met, repeat.  Our "budgeting", such as it is, attempts to forecast major expenses over the next decade or so.
You sound very similar to my husband and me.  However, when we were younger and newly married, we DID budget.  We needed the structure of a budget at that point in our lives.  As time went on, we internalized the budgeting, we reached agreements on what's okay/not okay to spend ... and now it's automatic. 

Most people will need the structure when they're just starting out /learning.
Some people will ALWAYS need the structure.
For me, it's the emotional minefield. I have a hard time separating math from it's implications in my life. Yes, reducing my restaurant budget from $250 to $100 gives room for a $250 car payment (for example; I've never had a car payment), but the numbers have so much emotion- the restaurants are FOMO, the car payment is is social status, reflecting on both can make me feel socially isolated, etc etc. To manage my finances, I had to learn to manage my emotions so that I could see the numbers clearly.

Personally, what really helped with this is doing the case studies for other people. That way it wasn't MY numbers, or MY excuses. So maybe bring them an example from another student, or one of your friends, or ask for a volunteer's budget, something. That way, they don't have to dive straight into their OWN budgets, which can be overwhelming and is laden with meaning past the simple math that underlies personal finance.

Hope that helps! What you're doing is really, really awesome.
About the eating out vs. saving:  You have to find the sweet spot between saving what you ought to be saving for TOMORROW ... and also living a life that's comfortable and rewarding TODAY.  For one person, that might mean eating out occasionally, for others it's an expensive car or an expensive house.  Some people set their budgets too low, fail, and then throw their hands up, saying, "I knew it was impossible!" 

The folks who humble-brag on this site and put down anyone who's ever spent a dime that wasn't absolutely necessary fail to realize that most people aren't going to "make it" long term on a Spartan budget that allows for no unnecessary spending at all, and it's better to encourage a realistic budget. 

I also agree with your suggestion to analyze other people's budgets.  It's easy for me to see that you're overspending on this or that.  It's harder for me to recognize that I can't afford -- oh, whatever item. 
I think one of the most important life lessons to learn at that age is that everyone wants your money. Teach them to see commercials for what they really are: ploys to get your money.
Good idea.  A surprising number of people simply aren't tuned into a business mindset /can't see the reality behind the pretty commercial. 

Something that comes to mind:  I was reading a vacation website not long ago, and a certain company was offering a hotel discount /vacation package to teachers.  Someone wrote in saying that the company should be offering such a package to some other profession -- I'll say it might've been fire fighters.  This person could not understand that the company wasn't trying to reward teachers (though they made it look that way in the adverts); rather, they were marketing towards a group that would probably be planning vacations in the upcoming summer months.  Far from being a gift, it was an attempt to sell, but a BUNCH of people were so short sighted that they couldn't see that. 
It should have been set up as the 50-20-30 budget because it's easier to explain that way, and it would also help reinforce the concept of savings better.  I'll explain the costs in 50-20-30 order.

50% (max) Needs and Committed Expenses
20% (min) Savings and Early Debt Repayment
30% (max) Wants.
Yes, I've always thought that plan is a good "starting point" for a young person, and it's what I've been teaching my own two children.  It works for a new adult who isn't used to having a real paycheck:  You want that top-of-the-line new cell phone?  Sure, you can have it, but once you sign the contract, it becomes a committed expense ... so when you agree to that spend, you're lessening what you can pay for your first apartment and your car.  My soon-to-be-nurse daughter will genuinely need scrubs and shoes with good support, but going-out-on-weekends clothes should come out of the wants category. 

I think this plan is ideal for a young person because it allows them some of their wants, because it forces them to address their priorities (for today and for tomorrow), and because it gives them a sense of control over where they spend.  And it "grows with them":  As their pay increases, so does the amount they deposit into savings. 

Some people will need to keep this chart in front of them all their lives, while others can use it as a learning tool and then begin to "wing it" as they become adept at budgeting.   
I'm going to put in a plug for the swear-filled MMM posts.

I'm a Christian, and I went to a small Christian liberal arts college. These students are no strangers to swearing. But nearly all personal finance advice is dry, stuffy, boring. When these Christian kids hear MMM's language, they will sit up and take notice. A guy who makes personal finance interesting, but has a few swear words? Yes please!
I disagree.  I find MMM's writing (and perhaps his personality) rather off-putting.  He's arrogant and foul-mouthed.  I don't think I'd like him on a personal basis.  I totally agree with his ideas, but they're hardly unique:  Plenty of other writers have addressed the same material -- his is biased towards early retirement, a topic that isn't likely to resonate with college students (after all, they're working hard to get into the work force -- few of them are going to throw themselves heart and soul in to that PLUS the idea of leaving early).  I'd suggest offering a variety of reading options. 

Two books come to mind right away -- I enjoyed them both, though they are so different: 

- Nickel and Dimed by Barbara Ehrenreich.  This author set out to prove that a person earning only minimum wage simply cannot make it in America today.  She details her several months-long experience working at Walmart, as a waitress, and at a nursing home.  In each case, she found that her minimum wage job did not pay enough to allow her to stay in a cheap-o hotel and eat fast food value meals each day.  When she became sick, she cheated on her plan and took out money from her before-experiment savings account to get medical care.  She proved her point:  She could not survive on that pay. 

- Scratch Beginnings by Adam Shepherd.  A college student read the above book, didn't believe it, and he set out to show that he COULD "make it" at minimum wage, without the benefit of his college education.  After graduation, he left his hometown on a bus and went to a new city with $25 in his pocket.  He lived in a homeless shelter, worked as a furniture mover, sought out opportunities for free food, and took extra work whenever he could find it.  Within a year, he had amassed enough for an apartment and a vehicle.  He learned to cook, and when he injured his foot, he kept working in spite of the pain.  He proved his point:  He could make it on that pay.

You could do a great class exercise by having half the class reach each book (both are quick reads and entertaining, though Nickel and Dimed is quite whiney), then discuss WHY each one failed /succeeded.  My own college daughter read something about Scratch Beginnings and was thrilled to learn that I already owned the book.  She was then motivated to read the other book as well. 


« Last Edit: September 20, 2015, 11:35:48 AM by MrsPete »

Monocle Money Mouth

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Re: Help me teach financial sanity to college students
« Reply #31 on: September 20, 2015, 11:40:57 AM »
I didn't have a chance to read the entire thread, but knowing how an amortization schedule works would have been very helpful for me when I was younger. I had a vague notion that I would pay more in principal than interest as a loan progressed, but didn't know how the math worked and I don't think our bank gave us one with our mortgage. Having those numbers in font you can be very helpful, and keep you from signing up for a large loan that will charge more in interest than the original principal amount.

If I had seen the amortization schedule for my mortgage and understood what it meant, I would have put a much larger down payment on my house and gone with a shorter term. I would have saved thousands of dollars. I learned my lesson the hard way.

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Re: Help me teach financial sanity to college students
« Reply #32 on: September 20, 2015, 12:45:13 PM »
So many good points - the reality of leaving a lot of money on the table ^^^ if you simply do not know.

If you teach them nothing else show them the importance of setting a goal and having a plan now - that plan that uses compound interest to their advantage. Without laser focus using the convenience of automatic bill paying - automatic savings and automatic investing, nothing will happen - it is like the Nike slogan - JDI - just do it already and in three to six months you will see improvement.

The two biggies in life are a roof over your head and food on your table - challenge them from day one with things like a real budget, getting a mortgage and why driving a paid off used car makes sense.
Challenge them to a grocery shopping competition - maybe set it up in groups.

I am a visual learner and math is not my forte, but give me a pretty, colorful circle graph and suddenly it all makes sense. Give me red for debt and green for income and golden yellow for my goals - numbers guys are fine with just the numbers, but I need visual aid first, then the numbers on the spread sheet start to make sense and actually mean something to me.

A lot depends on your own personality (frugal or spendypants) and perspective (money is evil-money is freedom) about money and the "truth???" about money that you learned at home from your parents - if at all.
Make that a discussion - show them the possibilities and the beauty of FU money.




Left

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Re: Help me teach financial sanity to college students
« Reply #33 on: September 20, 2015, 01:07:48 PM »
not sure it would be in a math class... but if possible, teach them to buy based on intended usage

budgets suck, i hate them and do t use one. i dont spend a lot though, i just dont budget. if i want a shoe, i figure out what i intend to use them for, ie running shoe? can i use sneakers? boots? sandals? i run in all of them now figure out where i want to run, woods,beach,paved roads? do i want one that can be used for other things? anyways, this helps me buy one pair instead of two if i can get mixed use out of it. works in other aspects of life too, ie do i want a truck for the space or just towing ability? can i add towing to my car that i have if all i want is to tow a few times? do i need a house or do i just want land to garden on? do i want this degree because i want to work in that field or am i just interested in the subject, and if so can i just audit the class to save money?

pretty much teach them that they dont have to get the most expensive/featured items if they wont use it later on, if they will, i have no problems with them buying it. or not buy it just because it is on sale and you end up with an item you will toss out in a few months.

yes i end up buying somethings that are expensive, but i use it for life, or until it breaks. but i buy for quality more than quantity of features/items. seems to save me money like a budget would because i just dont shop often.

budgets to me are i end up with 20x$1 items instead of 1x$10 good item that lasts longer than the 20. or i feel like i deprive myself of something because it isnt budgeted, then i just end up not using said budget. but maybe i iust earn enough to not need a budget so my view is off.
« Last Edit: September 20, 2015, 01:15:23 PM by eyem »

nereo

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Re: Help me teach financial sanity to college students
« Reply #34 on: September 20, 2015, 02:49:22 PM »
Two books come to mind right away -- I enjoyed them both, though they are so different: 

- Nickel and Dimed by Barbara Ehrenreich.  This author set out to prove that a person earning only minimum wage simply cannot make it in America today.  She details her several months-long experience working at Walmart, as a waitress, and at a nursing home.  In each case, she found that her minimum wage job did not pay enough to allow her to stay in a cheap-o hotel and eat fast food value meals each day.  When she became sick, she cheated on her plan and took out money from her before-experiment savings account to get medical care.  She proved her point:  She could not survive on that pay. 

- Scratch Beginnings by Adam Shepherd.  A college student read the above book, didn't believe it, and he set out to show that he COULD "make it" at minimum wage, without the benefit of his college education.  After graduation, he left his hometown on a bus and went to a new city with $25 in his pocket.  He lived in a homeless shelter, worked as a furniture mover, sought out opportunities for free food, and took extra work whenever he could find it.  Within a year, he had amassed enough for an apartment and a vehicle.  He learned to cook, and when he injured his foot, he kept working in spite of the pain.  He proved his point:  He could make it on that pay.

You could do a great class exercise by having half the class reach each book (both are quick reads and entertaining, though Nickel and Dimed is quite whiney), then discuss WHY each one failed /succeeded.  My own college daughter read something about Scratch Beginnings and was thrilled to learn that I already owned the book.  She was then motivated to read the other book as well.
I had a knee-jerk reaction when you mentioned "Nickled and Dimed" because I hated that book, and found that her entire exercise and conclusion to be false.  Then I kept reading and liked that you compared it to Scratch.  I like your idea that - based largely on our preconceived notions, attitudes and choices one can either succeed or fail just about anywhere.  So ultimately I love your suggestion.

Interesting that your read on MMM is one primarly of arrogance.  I can see how some things he writes could be interpreted as such, but I see a lot more humbleness in there - particularly his self-depreciation and his constant comments about how in this community he's kind of a lard-ass compared to many here.  Ultimately his constant message is that anyone can do this.  I've never met him either (but seen several interviews) so I'm interested how he would be IRL.

Kimchi Bleu

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Re: Help me teach financial sanity to college students
« Reply #35 on: September 20, 2015, 03:30:07 PM »
I love how my credit card bill shows me how much interest I would pay by not paying my bill off in full.  It might be worthwhile to show the students how much their student loans are costing them by not paying them off as early as they can.

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Re: Help me teach financial sanity to college students
« Reply #36 on: September 21, 2015, 12:02:56 AM »
Not so much content-related, but I think it would be so cool to do a pre and post test with them at the start and end of the unit. It's the same test and you get to see how much they've learned (awesome for stats an figures for you too). Questions about their current student loan balance,
Interest rate, and what their repayment rates will look like post-college, plus a range of their in-course content. Make them sit it the first day, see how little they know, and how much better they are by the end. Have fun, sounds like it'll be a great  Experience!

gecko10x

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Re: Help me teach financial sanity to college students
« Reply #37 on: September 21, 2015, 05:01:16 AM »

Ease of use when it comes to budgeting. You Need A Budget might be a worthwhile expense for some students.

If no one has mentioned, YNAB is actually free for students. Maybe require them to try it out?

HipGnosis

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Re: Help me teach financial sanity to college students
« Reply #38 on: September 21, 2015, 08:51:49 AM »
More on the financial sanity slant than the financial math, in no particular order;
Inflation - my first FIRE goal (though I didn't know that term yet) was $500K.  I thought I would be able to live like a King Duke on $30k/yr for the rest of my life.
Market and inflation cycles - I'm surprised that so few finance and investment books don't have learning the current (and inevitable next) phases of these as one of the first steps.   
Credit - It's a tool / weapon.  They can use it to their advantage or others will use it against them. 
Credit Score - What it is, how it's used and how much they can effect it.   I 'had' to get a car loan to get my first mortgage, and the mortgage was >10% interest.
Insurance - a special tool because you can't wait until you need it to buy it.   I feel blessed that I learned (and adopted) 'buy term and invest the rest' early in my finance education.  And I took 'being self insured' as a challenge.
Emergency fund - I personally know someone that went bankrupt twice because she didn't have an emergency fund.  Something happened (as they inevitably do) and her finances spiraled down the drain (quite quickly).  She's smart, an engineer.  She actually went thru bankruptcy a third time; I assume because it became 'normal' for her.  I think of emergency fund as an umbrella living-life insurance. Life happens...

Apples

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Re: Help me teach financial sanity to college students
« Reply #39 on: September 21, 2015, 10:26:16 AM »
I want to add that in a professional readiness course my major required, the professor gave us an actual blank budget with all of the categories.  My parents had already drilled into me the power of compound interest, investing, and paying off loans.  But when I moved out on my own, the most difficult part was remembering all the things money was supposed to go to.  (Oh yeah!  Car insurance every 6 months!  I can't just pay my mom back whenever for that anymore...) (Moving expenses to get to the job!  Oh duh...)  (Parking fees if I move to a city!  Wow that makes sense...).  The biggest hurdle for making adult budgets was actually figuring out what all the line items should be.  Even though all of my friends and I were working and managing rent, food, utilities, going out money, insurances, etc. in college...there were still a few surprises for us in the adult world.

And tell people how to figure out how much rent they can afford.   That salary looks really big if you're used to $15k a year in school with really low rents then move to a city.  Especially if you're considering living on your own.  And our prof gave us a rule of thumb that you can expect to bring home about 2/3 of whatever the gross salary is.  While obviously this can vary wildy, it was great to help figure out how much money would be coming in each week.

I realize this is a math class, but seriously the budget and rule of thumb rocked my world when I moved out on my own, and I know a lot of people that referred to them in their job searches.

wintersun

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Re: Help me teach financial sanity to college students
« Reply #40 on: September 21, 2015, 10:35:26 AM »
If I could go back in time to tell my 20 year old self anything it would be to save and to learn about investments.  The stuff I have wasted money on is horrendous to look back on.  Eating out and junky types of food are probably the biggest waste category for me. 

I would share the beauty of compound interest.

I would definitely share the joy of early retirement.  Definitely link them to all the early retirement sites.

And most of all share some of the first hand stories on here about people getting into debt with second degrees which do not have great earning potential.  Share the real yearning in older people's hearts to have learned about saving early and share the tales of early retirees.

Good Luck!

Rural

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Re: Help me teach financial sanity to college students
« Reply #41 on: September 21, 2015, 07:44:41 PM »
Found a good video on compound interest from the federal reserve bank of St. Louis today and loaded a link into the LMS.

MrsPete

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Re: Help me teach financial sanity to college students
« Reply #42 on: September 21, 2015, 08:44:35 PM »
I had a knee-jerk reaction when you mentioned "Nickled and Dimed" because I hated that book, and found that her entire exercise and conclusion to be false.  Then I kept reading and liked that you compared it to Scratch.  I like your idea that - based largely on our preconceived notions, attitudes and choices one can either succeed or fail just about anywhere.  So ultimately I love your suggestion.

Interesting that your read on MMM is one primarly of arrogance.  I can see how some things he writes could be interpreted as such, but I see a lot more humbleness in there - particularly his self-depreciation and his constant comments about how in this community he's kind of a lard-ass compared to many here.  Ultimately his constant message is that anyone can do this.  I've never met him either (but seen several interviews) so I'm interested how he would be IRL.
Oh, I disliked the premise of N&D as well.  I knew it was false:  I not only survived but put myself though college on not much more than minimum wage -- not that I lived well, of course.  I kept talking to the book, saying, "Why are you doing this or that?  Can't you see that an actual poor person would _____ instead?"  But you can learn from something you dislike.  And I did enjoy the book in a train-wreck type of fashion. 
« Last Edit: September 21, 2015, 08:46:27 PM by MrsPete »