One of the founding principles of Weakonomics is the lack of education the public has in regards to personal finance. I’m sure many readers are either in good shape, or working towards getting their finances in order. Its a subject that already interests you. I do know that many of you wish you could talk to your younger selves, guiding them away from the mistakes you made in the past. We can’t do much for the past; but we can start with the next generation currently in schools. I’ll be putting together a separate post for personal finance on a collegiate level.
Chances are you took art, music, PE, and a wealth of other electives in high school. You also had to learn a foreign language, interpret poetry, and how a bill gets passed into law. All of these subjects serve to make you a better citizen and cultured adult. And you tell me our schools won’t teach you how to balance a checkbook? I think that can make you a good adult. A few schools, many of them private, require a personal finance class. Still others offer it optionally; its a start.
Depending on maturity level, teaching personal finance in high schools can be difficult. At the same time, it could be an easy A for everyone. Once you understand the basics it really starts to fall into place. High schools should require at least one personal finance class for graduation. Preferably, this would be a senior level class, as these students are the closest to being on their own.
So what kind of subjects should be taught in a high school finance class? The best place to start should be the banking system. A brief history of banking, how they make money, and the basic account types is all you need. Compounding interest and stressing emergency savings would be good topics as well. Branching off from banking into the stock market would be a great transition piece. My own mother still does not quite understand why the stock market exists, and I freely admit the S&P 500 sounded more like a NASCAR event when I was in high school.
Remember splitting up into groups? That was always fun, right? Splitting a class up into some teams would be great for a portfolio project. Keep it real simple, each team picking just a few stocks from a short list. That will give them something to track every day. No need to evaluate the stock, just so they can understand the ups and downs in the market. Showing how Microsoft started and where it is today would give them a great idea of how stocks appreciate over time. I’m undecided regarding mutual funds, that might be better suited on the collegiate level or a more advanced high school class.
Keeping with the flow, the next stop should probably be retirement accounts. Everyone wishes they started a retirement account earlier. Keep in mind there will be students not going to college, they will enter the workforce immediately upon graduation and be eligible for employer sponsored retirement accounts. 401ks, IRAs, and all the variations in between. The magic of compounding interest can be easily exhibited here. Showing how saving at age 18 vs 36 can change your life, it did for me. Explaining the tax advantages of each account type would be a good introduction into taxes. I think that subject may be more brief than others.
My final section of the class, and everyone’s favorite, is debt/credit. It could end up being boring compared to others but not if presented well. There’s no shortage of horror stories on the Internet about credit card abuse, a big problem among today’s youth. If a teacher can alter the perception that credit is not free money in just a couple of students, they will save thousands of dollars and make the class worth it. Credit Cards aren’t the only debt out there. Many people at this age are already making car payments. Understanding how to pay off loans early and why a car is a depreciating asset would have kept some money in the pockets of my friends. Remember, these are habits that develop at this age and carried into retirement.
The conclusion of the course could be marked with assistance on college loan applications, a budgeting project, or maybe a research paper. It all would depend on how the class is structured. I really think this could be an easy A. Very little math, no formulas, and basic subjects that are easy to grasp and apply in the real world. If this were a movie the teacher could end the class with something like, “Getting an A in this class was easy, but the true grade will come from how you apply it in the next 10 years.” Something cheesy that’s dismissed and then reflected upon a decade later.
OK wrap it up. There are plenty of subjects that can’t get crammed into a course in just a year or half-year. They are no less important, but require the basic knowledge taught here before they can be understood. Insurance is a big one, and though taxes are touched on, they need their own class! Maybe someday a curriculum could be established. If you know of any schools the require this already, let me know. If your kid’s school doesn’t, talk to the teachers and principals about a class. There are plenty of people in your community capable to teaching the course.