Personal finance course

[SecondCor521]

How to do a personal balance sheet: net worth = assets - liabilities.
Appreciation / depreciation.
Risk vs. reward (either in the context of education, career choice, or investments, or all three).

2Cor521

 

[kyounge1956]

I think there's one thing missing from the curriculum, and that's identifying goals. What do I want to accomplish financially? The ten Money Smart modules and most if not all of the suggestions in the thread so far deal with the "how" of personal finance—but if the students have a "why", I think they will be more likely to act on what they learn.

Ideally, IMO, each student would, after finishing the course, be able to write down "this is what I want to accomplish, this is what I need to do to make it happen, and this is how each action contributes to getting the results I want."

 

[chris2008]

You may find some help how to frame your lessons in this blog:
Why personal-finance “experts” continue giving worthless advice | I Will Teach You To Be Rich
At the end of it there are some "good / bad" examples how to teach finance in a meaningful way.

 

[BigNick]

Unless the course is explicitly aimed at people whose heads are above water, I would not plan to include anything about investments, beyond perhaps "once you've paid off your CCs and built an emergency fund, put money into your 401K". For a large number of people, the idea of having $3,000 in cash at the bank and no loans beyond their car is already a huge step forward.

 

[Walt34]

Emphasize the cost of credit, especially the evils of credit card companies. That the only "product" they sell, for a very high price, is immediate gratification.

The importance of having a substantial savings for emergencies and that "Everyone else is going on a cruise and I wanna go too" is not an emergency. A leaky roof or having your car transmission fixed so you can get to work is.

Disability insurance. You break your leg and will be out of work for two months - what is your plan to pay the rent/mortgage/utilities/food? (Not to mention the medical costs...)

I suppose it could mushroom into a full college curriculum but since the audience is vocational school students I'd stick with the most basic items.

 

[Rustic23]

Time Value of Money!
I would include how to use a business calculator, like HP-12c. For me, all investing and savings resolves around TVM. What is money worth today, and what will it be worth tomorrow. What will inflation do to your savings? How much is that car, house, dress. etc. really costing you? Those credit cards, you know the interest rate, payment, but how much extra in cash is it costing.

I did not learn about the business calculator until after I left the Air Force and started in the field of real estate appraising. The power of the HP-12c opened my eyes. Besides, it can take multiple class's to get all this down, and it makes for wonderful testing. In fact, the Appraisal Institute, has a complete book on TVM, I think a complete course.

 

[jIMOh]

Unless the course is explicitly aimed at people whose heads are above water, I would not plan to include anything about investments, beyond perhaps "once you've paid off your CCs and built an emergency fund, put money into your 401K". For a large number of people, the idea of having $3,000 in cash at the bank and no loans beyond their car is already a huge step forward.

I think identifying target audience is #1.

The school does both continuing education for the community as well as vocational school for high school aged kids.

 

[nun]

Start out simply and connect with the students experiences. Ask the students about what they feel they need to know and then fill in the gaps.

Pay checks are a great start as they introduce the concepts of taxation, insurance and saving. Maybe use shopping for cell phone plans and the bills as a way to introduce them to the perils of choice, pressure to buy and cost over time.

Budgeting is really important so drill into them LBYM and the dangers of credit cards. I feel this is the single most important financial lesson/skill. If you can't do that then all the asset allocation and tax loss harvesting etc in the world is "worthless".

 

[Sue J]

Explain saving for an emergency or toward a purchase vs. Investing.

Many people don't keep a check register anymore and they don't reconcile to a monthly statement. Instead we check our accounts online. People need to know that they may have outstanding transactions that do not show up yet in the bank balance that they see online. Don't spend the money twice.

 

[W2R]

Explain saving for an emergency or toward a purchase vs. Investing.

Yes, and unless I missed it I don't think that anybody else so far has mentioned an Emergency Fund - - how large it should be, for example. Suze Orman would be appalled were this omitted, as would I.

 

[jIMOh]

Yes, and unless I missed it I don't think that anybody else so far has mentioned an Emergency Fund - - how large it should be, for example. Suze Orman would be appalled were this omitted, as would I.

this is part of budgeting on the original outline, but I agree it needs to be covered

 

[W2R]

this is part of budgeting on the original outline, but I agree it needs to be covered

Oops!! I missed it. Oh well. Anyway, I'm very glad you included it (and I'm sure Suze would be too, if she knew about it).

 

[dex]

1) Income- sources like W-2 vs 1099 and the pros and cons of each
2) Budgeting
3) debt management
4) financing things vs paying cash
5) investing (buy something which goes up in value)
6) knowing risks
7) investing in the stock market and bond market
8) retirement and financial independance
9) Income taxes (personal income taxes)
10) the impact of investing on taxes (IRAs and similar)
11) small business (s corps, LLC and similar and how they impact all of the above)

In addition, please list any PROBLEMS which are common and people need to solve

Like
a) pay down mortgage or invest
b) which debt to pay off first
c) how much money will I have after X amount of time
d) How do I open an account

I didn't read the responses - so I may be duplicating some suggestions:

- Cash Flow
- Net worth
- Opportunity cost
- Excel modeling and projections

 

[jIMOh]

This was a helpful post- thx
FDIC: Money Smart - A Financial Education Program

I urge anyone with about 30-45 minutes of spare time to go thru one module of this and review it. I went thru 2 over my lunch hour (first one on banking and one on saving/investing).

They make for good discussion because there is some "mis information", but overall I thought they would supplement the course material I create quite good.

I will be taking lots of the posts here and making a detailed course outline shortly. I won't do that until I find out how long course is (5 week, 10 week, 1 hour per session or 2 hours per session etc...)

 

[halcyon]

Did anyone read the comments at the end of the "iwillteachyoutoberich" blog post? Some excellent points here....

"Couldn’t agree more. I’ve often thought that until the Personal Finance industry gets better at Marketing, they’ll always be on a losing streak. The likes of Apple, Nike et al are light years ahead of the PF industry and will always have instant gratification on their side. Delayed gratification is never going to be sexy.

But wait….how do people in the PF industry make their money, is it actually on the number of people who become better at managing their finances or the number of products they sell to them that promises to deliver this? Let’s not forget that a world full of financially literate people would soon stop borrowing, getting into debt and buying all of the cr@p that they don’t really need. The Govts of the West are very worried about this as it will halt economic growth in its tracks….hence very low interest rates to encourage borrowing, Quantitative Easing (printing money), etc.. The fact remains that the Govts of the West (and the big banks that fund them) want most people to be financially illiterate to encourage our mismanagement of money and keep borrowing and spending recklessly to keep the economy buoyant.

Unfortunately it will all end in tears sooner or later as even a child can tell you that you can’t solve a debt problem by spending more money!

Ramit – I wish you luck in your continued quest to open people’s eyes about the proper management of their finances (albeit wrapped up in a nicely Marketed IWTYTBR package). I do feel however that bigger powers are working against you….not that this is any reason to stop."

 

[Rustward]

I think identifying target audience is #1.

The school does both continuing education for the community as well as vocational school for high school aged kids.

You have already gotten a lot of good suggestions, so I won't try to add any.

After the target audience has been identified, you need to try to think like the majority of the audience. I would think that the needs and interests of, say, a post high school audience would be very different from those of baby boomers. If you get too heavy with investment, financial independence, and retirement topics you may lose the younger ones, while boomers might not be interested in, say reconciling a check register (well, maybe a bad example as there are a lot of boomers that don't, for whatever reason, reconcile).

At 23, one year into my second job, I was invited to the "retirement plan enrollment" party and was told it was very possible for me to be a millionaire by the time I was 65, and retire. Yeah, right. #1 I thought I would never get old, #2 I thought I'd never retire. Thinking ahead 42 years was something I was just not capable of. Enrolled anyway. First job was in the public sector and enrollment was required.

 

[jIMOh]

Did anyone read the comments at the end of the "iwillteachyoutoberich" blog post? Some excellent points here....

"Couldn’t agree more. I’ve often thought that until the Personal Finance industry gets better at Marketing, they’ll always be on a losing streak. The likes of Apple, Nike et al are light years ahead of the PF industry and will always have instant gratification on their side. Delayed gratification is never going to be sexy.

But wait….how do people in the PF industry make their money, is it actually on the number of people who become better at managing their finances or the number of products they sell to them that promises to deliver this? Let’s not forget that a world full of financially literate people would soon stop borrowing, getting into debt and buying all of the cr@p that they don’t really need. The Govts of the West are very worried about this as it will halt economic growth in its tracks….hence very low interest rates to encourage borrowing, Quantitative Easing (printing money), etc.. The fact remains that the Govts of the West (and the big banks that fund them) want most people to be financially illiterate to encourage our mismanagement of money and keep borrowing and spending recklessly to keep the economy buoyant.

Unfortunately it will all end in tears sooner or later as even a child can tell you that you can’t solve a debt problem by spending more money!

Ramit – I wish you luck in your continued quest to open people’s eyes about the proper management of their finances (albeit wrapped up in a nicely Marketed IWTYTBR package). I do feel however that bigger powers are working against you….not that this is any reason to stop."

I read the blog, and part of my theme when teaching a class like this is that

it is OK to get biased advice, just know that its biased all the time, find out why, and ask if you can live with that bias. No advice is truly objective.

Financial planners cannot make a living doing planning unless LOTS of clients come to them- once a person has a financial plan, its not like that person needs another plan in 6 or 24 months, so that well is not a deep one, better have lots of clients... so you better believe that advice won't be out there for free.

 

[kaudrey]

The FDIC has a program called MoneySmart that covers lots of these topics. You can get it for free. I use it in my volunteering to teach personal finance to people that are part of county housing assistance programs (i.e. low-income people who would otherwise be homeless).

You can read about it and get it free here:
FDIC: Money Smart - A Financial Education Program

 

[jIMOh]

The FDIC has a program called MoneySmart that covers lots of these topics. You can get it for free. I use it in my volunteering to teach personal finance to people that are part of county housing assistance programs (i.e. low-income people who would otherwise be homeless).

You can read about it and get it free here:
FDIC: Money Smart - A Financial Education Program

this was linked earlier in thread
makes for good use for out of class work

not the best or fastest paced material for in class, though

 

[FinanceDude]

Financial planners cannot make a living doing planning unless LOTS of clients come to them- once a person has a financial plan, its not like that person needs another plan in 6 or 24 months, so that well is not a deep one, better have lots of clients... so you better believe that advice won't be out there for free.

Most hourly planners I know have either quit their business or allied with a wealth management group. Hourly planners that don't get compensated any other way will be extinct in 5 years.

 

[mickeyd]

Suggestion~ Write "LBYM" in large letters on the board (if they still have these in the classroom) but do not reveal what it means until the end. This way you will build up suspense and assure that you will have 100% attendance for the entire term.

Without LBYM all financial models fall apart.

 

[JanetCK]

You say it's a vocational school. Does that mean some will be going into contracting?

If it looks like it, some of them may work 1099 or even as a cash business. I would hit hard on things that a big-employer job makes easy for the rest of us and a pain for people on their own and that trip them up big time, like:

Saving for estimated taxes, keeping records;

Getting disability insurance, life insurance, medical insurance (kids aren't going to think that they need 'em, so scare them a little);

Reporting a reasonable percentage of their income for taxes (I know, I know), because otherwise they won't be able to qualify for a mortgage or earn Social Security, etc.

I've talked to a bunch of contractors nearby who over the years have declared little of what they earned and then say they can't invest because it would be a red flag. It's a justification I've seen contractors in their 50's kicking themselves for, because even though they were earning plenty they are finishing up with little saved. What were they going to do, keep cash in the mattress?

And of course the ol' if you invest from 21 to 31 vs from 31-65 thingy. That may make them sit up a little.

 

[Free To Canoe]

Interesting subject. I have thought about doing it but have not taken action.

I haven't seen any mention of [-]basic[/-] math skills that will be needed. This is a stumbling block for many who are in need. It is much like illitercy in that it has a stigma and people will hide it. Will you list the math proficiency needed in the course description?

Free to canoe

 

[dandan14]

If you have time, I would suggest teaching them how to work problems using a financial calculator (like the HP 10bII which can now be bought for <$30). Once they have this skill, they can calculate the answer to almost all of the financial "whether it is better to do x or y" or "how much interest..." type questions life will throw at them.

 

[kumquat]

Some excellent ideas from former Vanguard folks:

The Elements of Investing