Comment by freddie_mercury
18 days ago
Financial literacy has tons of fallacies but this article really only covers one of them.
The research I've read on the subject, experts nowadays are tending towards preferring "just in time" teaching. If you learned about mortgages and 401ks in 12th grade, that's not much help if you don't get a 401k until you're 22 or a mortgage until you are 25.
And that shows another issue: what does anyone even mean by "financial literacy". Does it include lessons about individual stock picking? About claiming Social Security early? About optimising taxes? About checking for better insurance every few years? About college savings plans for children?
How much ground do we need to cover?
I think the biggest fallacies is 100% seperation of "there is school, then there is work".
It's stupid to think that after school no more teaching is needed. I hate that after leaving university it is difficult to find out what is taught current students, what are the new theories and tools that have been introduced in the last 10 years.
It would be much better to start working alongside being in school, so you can learn about taxes and compound interest while earning money.
People also have much better ability to learn math when they can use it for solving problems outside of the classroom: https://www.reddit.com/r/TheWire/comments/1it269l
> I think the biggest fallacies is 100% seperation of "there is school, then there is work".
A agree very strongly with this. Not so sure about your solution if pushed too young
School level education should focus on mental development and learning how to learn. Given this, applying this to learning practical skills is a lot easier.
I think that link is interesting because a lot of people are taught things, maths in particular, in ways that leave them unable to apply it. People say they never used the maths they were taught in school, but that is because they do not have the grasp of it required to apply it to real life problems. Of course, going back to my earlier point things taught in school do not have to be directly useful (funnily enough no-one suggests kids should not be taught art or literature because they are not useful) so there does seem to be a particular issue with maths.
> hate that after leaving university it is difficult to find out what is taught current students, what are the new theories and tools that have been introduced in the last 10 years.
Or to learn new subjects and fields. IN the UK it has become a lot harder than it used to be - distance learning is a lot more expensive and adult education has been cut back.
I wonder if it's because art and literature are better at teaching one how to think in and derive abstractions from more complex ideas. Math should most definitely do this as well, but I don't think is taught that way. Most of the time is spent in math classes are on procedural practice and connecting that work to think about it in an abstract way happens infrequently.
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Sure, you don’t need to know the exact details. But you should absolutely leave high school knowing that you need to think about retirement savings sooner rather than later, or you won’t have shit. I remember seeing a chart in high school related to compound interest and how much more someone who started saving earlier had by retirement. That chart was easy to grasp.
And for mortgages, you should definitely learn that renting savings you money compared to owning in a lot of situations (even after accounting for selling the house), especially if you don’t know you’ll live there more than a few years.
Like… where the fuck else is someone going to learn this if they don’t have parent smart enough to teach them that. It’s not like college covers this.
Exposure early doesn’t mean you’re an expert at managing finances when you hit adulthood. That won’t happen. But it can do enough to make you broadly aware of what you should be thinking about — which then means you can look it up more later.
But if you go by comparing yourself to others, you might think it’s normal and good to rack up credit card debt to have nicer clothes or something. You should be aware at how costly credit card debt is, and how easy it is to avoid that.
Like we’re not talking about small optimizations. There are a lot of things that can be extremely expensive and stressful for you if you don’t even know to think about those things.
Also, for topics like compounding, it can be used immediately in life. Money is a nice example, but small increments everyday leading to big changes is a foundational life lesson.
Idk, I can't help but conclude lots of the things I learned in school were actually quite helpful. As a child for example I learned about insurance theory and that stuck with me. I didn't actually insure anything myself for at least another decade, but the theory stuck. Which is that an insurance company just smooths over the costs of a rare event that happens to one individual, by spreading it out over many individuals, none of whom know whether they will or won't be confronted with said event. And that the average cost of insurance (in a competitive market) is therefore tracking closely the average cost of the event, plus some profit and admin fees of the insurance company. Which means for most people it's not worth insuring events that you can easily cover yourself (e.g. losing your phone).
I learned these things at age 15 or so. Sure I could've learned them later, but there's something about knowledge is that it builds on earlier building blocks and compounds. When certain things 'click' in your head, they open the door to new knowledge and areas of learning. There is power in learning early, because knowledge is cumulative and compounding to some extent. It's the reason why a 40yo is a more valuable employee than a 20yo, on average.
That's not to say that every topic must come as early as possible, or that education is perfect. There's certainly better and worse ways and timing to teach personal finance for example. But I am quite happy I was introduced to some concepts sooner than later. Even just to prime myself such that, when I am reintroduced to the topic later, I feel somewhat familiar and confident to dive into it again.
Certain topics don't really connect with everyone. Virtually everything I learned as a child in Chemistry was useless because it didn't resonate with me. While my gf went on to study biochemistry, and is clueless about finance. But neither of us know whether chemistry or finance would resonate with us, before being taught the subjects. Schooling for children also has a discovery function in that sense. It's not just about teaching what sticks, it's about discovering what sticks, and what is interesting. That's why a wide breadth of subjects can be a good idea, even if a significant portion doesn't end up being meaningful to someone at that age.
My 11 year old knows about mortgages. The longer you understand something, the better use you can make of it. Just in time delivery of mortgage math learning is borderline predatory.
When I was about 4 there was a financial downturn here. Lots lots their jobs and mortgage rates were quite high.
I still quite vividly recall watching the news with my parents, and there was a family crying in a hallway as some officials locked up the door to their apartment. Not understanding what was going on, I asked my parents why they were crying, and they said because they couldn't pay their mortgage and so they had lost their home.
Lets just say I didn't need any more lessons regarding mortgage payments.
If you are an American I think learning about what a 401k is, why it is good, how to calculate why it is good is really important to learn ahead of time. Then when it comes time to get a 401k, you can check and understand why it is still valuable and you can understand whatever new thing might be available. But you know what’s going on. That’s the “financial thinking”.
How about basics like : who will have better a retirement outcome at 60?
1) Bob who invests $1000/mo from age 20 to age 30, then nothing afterwards
2) Alice who starts investing $1000/mo from age 30 all the way to age 60.
3) Johnny whose mum invested $200/mo from his birth to age 18, then nothing afterwards.