Financial Education 1

When those who determine school curriculums were/are making those decision, why did FINANCE get brushed aside? It is left out until at least post secondary education and not even then if you decide mot to major in a College of Business area. I firmly believe that money does not make anyone happy once it has been used to meet some basic needs. People may use it to keep score, buy more toys, have bigger houses, etc…, but I don’t think more actually makes people happy. It is a very simple fact of life that you can not live without having an understanding of how money affects our lives and society in general. We have to understand money to buy food, cars, clothes, houses, etc… and for those largest expenditures, we have to understand financing, amortization, interest rates, and a number of other more complicated issues. Surveys generally find that respondents do not believe money, in and of itself, will make them happy, but a lack of enough to meet basic needs can cause great stress. I believe that if surveys asked how much of your mental free time is spent thinking about monetary issues, it would be well half or more. The best available study found that each doubling of your income correlated with a life satisfaction 0.5 points higher on a scale of 1 to 10. One study found that in the US, there is no discernible difference in happiness once income reaches $40,000.

graph of happiness and income

I believe this graph is a good representation of money on our happiness; it has diminishing returns the more wealth you have. So, I think it can be established that money is important in our lives to the point that it helps us meet our basic needs. Meeting those needs allow us to be happier than not having them and the better we understand money or finance then the more likely we are able to use our money to meet those needs. BUT, we fail to educate our average citizens on any part of personal finance unless we say that learning math counts; I don’t!

With whatever I have learned, I am going to educate anyone interested some small amount of knowledge that will allow them to, minimally, understand what is needed to survive your personal financial needs. The one basic tenet of finance for the least productive individual to the largest government or company in the world is that expenditures should be lower than income. The vast majority of governments have abandoned this tenet because reducing spending would cost the politicians in power votes the next time they need them. Everyone wants the budget balanced on the back of someone else. This phenomenon exists in families and companies, but those entity’s are generally constrained by their lack of liquidity or ability to borrow money. I think a basic rule for anyone with any income should be to set aside 10% of their paycheck for emergency purposes or the “rainy day”. We then must realize that a new driver for us golfer’s or a Kate Spade bag for the fashionista do not constitute emergency’s. Every individual, family, company and government should have a budget with this emergency fund included. If you can not live without that driver or bag, you need a budget line that sets aside enough to purchase those items without borrowing in the form of a credit card, preferably.

I will delve into credit, interest, delayed gratification, and that part of way too much of our budget for a lot of people, but being uneducated about these issues contribute to the misuse of credit by many people in our society. I would really like for as many 16-20 year olds read this series as have read Khan Academy lessons, but I know that is not going to happen. One, because I am not going to promote it to that extent and then, because there is no class that anyone needs tutoring help for, they would have no real need to read this material. But, I will leave it all for my grandchildren who won’t need it for 8-10 years.

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About garystuckathome

A middle aged guy who has fortunately learned it is not about me, but these three and the generation in between. I have a lot of extra time and enjoy writing and if you like any one thing you read, I have done well! Thanks
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