Comment by wat10000
17 days ago
There’s an interesting difference between learning how to do taxes and learning how to evaluate an auto loan, in that the latter is often adversarial. Thousands of highly-paid experts spend their days figuring out how to get you to take on more debt and pay more fees and interest. With taxes, you might have Intuit or whoever trying to get you to buy prep services you don’t need, but it’s small potatoes by comparison. You can at least get unbiased tax info directly from the source. Nobody from the IRS will try to upsell you on a seat massager option that’s only $10/month more (and it extends the loan term by two years but let’s just gloss over that).
I’m not sure exactly what it means here, but I think there’s a big difference when it comes to teaching people how to learn things that powerful vested interests want them not to know.
Agreed. And the article talks about that some:
>Most personal finance math is basic arithmetic – the same arithmetic that most of our students currently struggle with. The hard part is everything else: impulse control, peer pressure, status anxiety, and the fundamental uncertainty of the future.
>Teaching teenagers about compound interest won’t help them resist the urge to keep up with their friends’ spending any more than teaching them about calories will stop them from eating junk food.
Still, you can at least separate out those skills as being independently worth teaching: how to figure out the impact on your budget, and the social dynamics driving your options.
I don’t think this is right. Teaching compound interest will help them resist that urge. What it won’t do is guarantee success, but there’s enormous benefit in just helping. This sentence mixes “help” with “stop,” suggesting that either something is useless or it’s bulletproof.
People can and do modify their choices based on their knowledge of the consequences. Yes, even teenagers, sometimes.
But for these examples, I think you also need to teach them that they’re doing battle with people who want them to make bad choices. People who spend their lives studying how to get them to make bad choices. Don’t just teach them about compound interest. Tell them how credit card companies try to trick you into suffering from it. Tell them how car salespeople will focus on the monthly payment and do their best to obfuscate the total cost. Tell them how junk food makers abuse psychology to make you want their product.
Teenagers love being contrary. We should take advantage of this tendency. The other guys certainly are.
> Most personal finance math is basic arithmetic
Most personal finance is understanding that anyone offering you financial services wants to make money with your money, no matter what they say or how nice they seem.
In some cases, they won't actually reduce the amount you have claim to (like banks holding your money), but will make their money with your money. In other cases, they will take some (hopefully) small percentage of the gain in value of your money, supposedly (and sometimes rightfully) as compensation for the work they claim to have done. In the worst cases, they will gamble with your money in a way that ensures that they never lose, but you may.
Understanding these human factors in real world personal finance comes, in my book, before anything else.