I graduated from high school with an average financial IQ compared to my classmates. Unfortunately, my financial IQ was near zero. I knew what debt was, but the ability of even moderate levels of debt to shackle your future was foreign to me. I could not tell you how to buy a stock, or what a dividend actually was. To this day several in my family and my coworkers know very little about investing, and assume debt is a normal part of life. Many of these people are extremely bright and highly educated in other areas. Yet they spend most of their time trying to earn money and very little time deciding how to manage what they already have. I feel the strong emphasis on higher earnings (and higher spending) is fostered from birth, along with complete apathy toward financial planning
My high school spent more time teaching me the rules for playing kickball than the basics of investing or financial management. There simply was not a place in the curriculum for such material, let alone an actual class devoted to it. How is it that a subject matter that is guaranteed to have a lasting lifelong effect on every student is overlooked and ignored?
What is the most important piece of knowledge for an incoming college student to have? Judging by Kentucky’s public school curriculum a person would have to assume it had something to do with english, history or science. But I contend the most important knowledge an incoming college student can have is the dangers of any form of debt. Most importantly excessive student loans and credit cards.
High school seniors should be required to take a class that covers the basic financial management they will need to know upon entering college or the workforce. The course should cover a wide range of the most fundamental knowledge an adult should have. This should include everything from the back breaking interest rates charged by credit cards to saving a minimum of 10% of your take home pay. Then the course should analyze the various ways to invest earnings and the effect compound interest will have on their future.
In college all majors should require a financial management course as a prerequisite. This course should build on what was taught in high school. There should be a major emphasis on not going into extreme debt on student loans. One of my coworkers bemoans having over $100,000 in student loan debt. Which requires a monthly payment larger than her mortgage. A debt that will never go away through bankruptcy. A debt that if she ever defaulted on it, would mean the complete loss of her job. As a person working in the healthcare field can not be employed by a company who bills medicare or medicaid if they default on a federal student loan. Thus, crippling her financially.
Also the course should emphasize the importance of participating in their future employers 401K plan. If a person who graduates making six figures, and maxes out their 401K plan from the beginning, they will not miss the cash their investing. If they wait and become accustomed to their full check they are much less likely to begin full investing in their plan in the future.
Everyone who takes these classes will not follow their lessons through their lives. Many will go on to spend every dime as soon as they get it, some spending their money long before they get it. The local Cadillac dealer won’t go out of business. There will be plenty of people wanting to make sure their coworkers know “how well they are doing”. But if even a small percent change their money habits that would not have otherwise, their lives will be forever changed for the better. Isn’t having a profound effect on a person’s life the goal of any secondary or post-secondary course?