education | Squirrelers

Personal Finance Topics That Should be Taught in School

Feb 112013

As a parent, I’m often thinking about things that kids need to learn as they grow up. Manners, responsibility, making good decision, and things of the like come to mind – among thousands of other things. One of those “other” things would be learning about personal finance. Along those lines, it got me thinking about what personal finance topics should be taught to everyone.

I think this way because growing up, I didn’t get any personal finance training in school. Not that I recall, anyway! The closest thing to it was an economics class, where we had hypothetical stock investments. But nothing about money as it relates to daily life, and how to manage it. So while my education was pretty good looking back, that’s the gap that stands out at me.

What do you think younger folks – let’s say, high school seniors – should learn in terms of money-related topics?

Here is what I came up with: 5 personal finance topics that people should learn about when young:

The reasons why we need to save money (retirement, medical issues, emergencies, etc)
How to make a budget
Smart shopping strategies
How to use credit cards, and why we should avoid debt
The basics of investing

Of course there are far more topics that we should learn as we get older. You can tell that I clearly follow this by the variety of topics I get into here. For example, career, real estate, etc. That being said, for those young and at the beginning stages of learning, what do you think of these topics as a starting a point.

My Questions for You:

What do you think of these topics as basics for people who are just learning about personal finance?

Do you have any more to add?

Not Everyone is Special

Financial Philosophy 23 Responses »

Jun 112012

In our own unique way, each of us is a super special person, right?

Well, that didn’t seem to be the message conveyed in a speech given by a schoolteacher in Massachusetts. According to this article on Yahoo, he delivered a commencement speech that seemed to be an ego deflating discourse that essentially conveyed to the high school graduates that they aren’t so special or remarkable, and are just a number in the grand scheme of things. In other words, in the big picture, they are one of but millions of people similar to themselves.

The idea is that many kids are coddled and pampered, and told that they are truly special. But, if everybody is told that and ends up believing that, then who isn’t special? In other words, it’s just not realistic to think that everyone is a star. Not everybody truly achieves special things, and not everybody wins or becomes wealthy – no matter how much parents want to believe their kids are the greatest and want them to feel special.

I’m guessing that this type of message wouldn’t sit well with some parents. Many people wouldn’t like to hear their kid being told, in a speech, that he or she is truly not special.

Believe it or not, I like the message! The reality is that it’s true. Not everybody is special.

I bring this up here because the message resonates with me, but also because I can see a money angle to this. If a kid is told that he (or she) is special, and deserves a good quality of life, comforts, and fun experiences, then he might start expecting that. Which may not be such a bad thing to some degree, as I do believe our expectations can help shape our success in life.

However, it’s also treacherous to some degree as well. When people think they are special, and are entitled, they risk making decisions that don’t fit their reality. You know, like wanting a flashy new car as a young person instead of a more appropriate car for a teenager. Or, when older, buying a home that fits your needs, instead of buying an unaffordable home that you simply want. Such types of moves, when taken in aggregate, can impact a person’s life in many ways.

The bottom line is that I like the message conveyed in that speech, as it was described, and based on how it ultimately relates to personal finance. If we realize that we are not special and not entitled, and that we have to personally earn our lifestyle, we will be in a position to make more sound financial decisions and lead a more fulfilling life.

To the extent that this idea is conveyed early in life, that’s all the better!

What Do You Think?

Do you like the idea that the teacher made these proclamations to the students in a commencement speech?

How would you react, as a parent, if you watched this speech happen with your kid being one of the graduates?

Do you agree with the notion that when some people think that they are special “just because”, it could lead to entitlement and perhaps some less than realistic financial decisions?

Public or Private Schools

Family and Money 22 Responses »

May 212012

Often times, the notion of a “private school” brings to mind the notion of exclusivity. You know, where private means “not public”, so that not everyone is automatically eligible to go there unless they pay up and also get admission.

Does this mean that as a general rule, private schools are better than public schools?

I say no. Now, sometimes private schools just might be better, and there are clear examples where a local private school might be a much better fit academically and in terms of values than a public school. However, that’s not a given, and isn’t the case everywhere.

This comes to mind as someone I know was telling me about how he’s thinking of sending his kids to private school as an investment in their future. This would be at the elementary school level and possibly beyond. The thought process he had (not mine, by the way) is that the kids there would likely have parents that could afford to send them there, and are therefore more likely to be professional and high earners. Thus, they might be more likely to get encouraged at home. This guy, to his credit, personally works with his kids on “extra” homework most weeknights, and he genuinely cares a lot about their future.

The thing is, he lives in an area that’s known for a very good public school system. So my thought is, why waste money on the private schools, when you can send your kids to a public school system for a good quality education at no additional cost? His real estate taxes are probably contributing to the cost of the schools anyway, so why not get what you’re paying for by living there anyway?

Now, I could see a few cases where a private school might be a much better choice:

One is if the local public school system is inferior to the private school. If there’s a noticeable difference, it might be worth paying the extra money, or moving to where the public schools are better.
A second type of situation where a private school could potentially be better is if it offers a religious/values-based education that you personally really want for your kid. I can respect that, realizing that it’s important for some and not for others, and either way is okay.

However, in the absence of those two factors, wouldn’t a public school be a better choice? In other words, if the public schools are high performing and safe, and you don’t require a faith-based education, why not just send the kids to public schools and save the money? That money saved could help you in your retirement! Or, it could be applied to help them with their college education or even graduate school! After all and as we have discussed here, education impacts wealth.

I’m curious what you think.

My Questions for You:

What do you think of the friend’s notion that he wants to send kids to private school even though the local public schools are high-performing?

What type of schooling did you have – public or private?

Which type of schooling would you (or did you) choose for your family, and why?

Student Loans and Senior Citizens?

Debt Reduction 14 Responses »

Apr 092012

Don't carry those loans late in life

Those of us who are interested in personal finance are aware of notion that student loans can be that proverbial monkey that people want to get off their back. A loan taken when young can take years to pay off, and keep a person in debt for a while.

We’ve talked about the value of college in debates on college vs. entrepreneurship, as well in a discussion on how education can increase wealth. One of the other factors in the equation, which we touched on in those posts, is the reality that student loans can be a real burden. Thus it’s important to choose schools and programs wisely, and consider ROI.

A recent article in the Washington Post actually brought this last point to light in a way that certainly caught my attention. According to the article, there are many people in their 50’s and even 60’s who are paying down student loans. That’s right: student loans can be a burden for senior citizens!

A chart in the online article indicated that of the student loans that are past due as of the 3^rd quarter of 2011, 12.1% were for people in their 50’s, and 4.8% were for people in their 60’s!

That’s really something else. Those debts just don’t go away. Now, to be sure, some of those people might have taken on loans later in life upon returning to school. That doesn’t make it any less unpleasant to have debt later in life though. But more eye opening is the notion that some people are still dealing with their initial round of loan obligations as they near retirement eligibility!

While I think that it can be said that a lot of debt is bad, student loans can be a more tolerable version of debt since it is being used to invest in one’s future and potential earning power. That’s different from buying an overpriced house or car. However, this goes to show that not all student loans are smart, and good loans can become bad if the repayments aren’t managed properly over the years.

To avoid such a situation, it seems like a good idea to strongly consider ROI when picking out a school and program. Unless a school is a world renowned name brand, such as an Ivy or Ivy equivalent, it seems like a really good state school might be a better investment than an expensive private school without the name brand. Does that make sense? Also, majoring in underwater basket weaving or some similar non-marketable endeavor is sure to wreak havoc with that ROI as well.

The big thing I see is that getting a good foundation of financial knowledge when growing up, from a parent or guardian, can be invaluable to people. Signing up for significant debt shouldn’t be considered a rite of passage for everyone, when the idea for many of us is to work toward financial freedom.

Can you imagine not being able to buy a grandchild a toy, because you had to pay off your own student loan?

My Questions for You

Does this surprise you at all, that there are people out there in their 50’s and especially 60’s that are still paying off their own student loans?

What do you think a solution can be for these types of situations to be avoided?

Did you have any student loans at any time, and how long did it take to pay off? Or, if you still have them, when do you envision getting them paid off?

5 Ways Education Can Impact Your Net Worth

Income Growth 26 Responses »

Mar 262012

Education and Wealth Go Together

Most of us have probably heard some variation of this advice before: “Get a good education so you can get a good job and have a successful career”. It’s been a standard approach for years, where many well-meaning parents and other elders encourage younger people to build their foundation with a solid education.

However, the tried and true advice about getting a good education has been questioned of late. We discussed this in a post on college vs. entrepreneurship, debating the notion that college might not be worth it these days, it’s not for everyone, and that many people could be fine without it in this current environment.

Clearly, based on what I wrote in that post, I don’t agree that college has become less necessary. Rather, I believe that a good, solid formal education has become more important than ever, and included it as one of the top ways to grow and protect your net worth.

Sure, some people are entrepreneurs that strike it rich based on risk taking and innate business sense. And yes, some people do burden themselves by going to unnecessarily expensive schools that offer a poor potential for high ROI. Nevertheless, I think its great advice for a young person by recommending they focus on getting a good formal education.

Here are 5 reasons I came up with to support the notion that a good, formal education is worth investing in:

College graduates make more money. This has been documented over the years. Over a lifetime, this can truly add up to a substantial difference in net worth.
A college degree is required for many jobs. Many white-collar, professional jobs simply require an undergraduate degree as a minimum screening criterion. If a person doesn’t have a degree, they probably won’t get a chance to enter certain fields at all. Often, the requirement is to have a graduate degree as well. If you don’t have a degree, you might not get a chance to play the game – and might hit an early, low plateau even if you do get an entry-level chance.
A college degree helps shape your personal brand. Where you go to school can – for better or worse – play a role in getting into graduate school, getting certain jobs, and connecting with other people. It helps tell a story about you, and gives people a base level of confidence in your ability to show ambition and hustle.
A formal education teaches you how to critically think. Often times, the specific skills we learn in school are never used, but we develop the skills of critical thinking and learning how to keep on learning. I had a former college friends mother ask me, years ago after I graduated, if I was using the specifics I learned in college in my first job. I said no, maybe 5% of the skills carried over, but I’m so glad I had the education. She looked at me puzzled, like I was crazy, and asked me how I could be glad for the education if I don’t use the skills I learned. I told her that I wasn’t applying very many skills I learned directly in college, and learned most things new on the job. However, without my college education – even though there was minimal transfer of skills from my degree and stuff was all new – I never would have been able to be prepared to do this job without my degree and education. She didn’t get it, as she clearly didn’t understand the concept of learning to learn and having intellectual context.
You form a network of other professionals. It doesn’t matter what you do, nor does it matter if you aspire to make a lot of money. The bottom line is that the people you meet in school, as well as other alumni from your school, can help open opportunities to network, learn, bounce ideas off each other, and possibly find work.

Overall, the way I see it, it’s important to convey to younger people that a good, solid, formal education can help put them in a better position to grow their net worth over the course of their lives.

My Questions for You:

Do you agree with the notion that a formal education is truly necessary in this day and age?

Do you think that those who dismiss college for entrepreneurship are being shortsighted and caught up in get rich quick hype, or do you think that things are changing?

How has your level of education impacted your career, income, or other aspects of your financial life?

Keep Learning in Order to Keep Making Money

Financial Philosophy 14 Responses »

Feb 152012

Let's use that brain and keep learning every day!

Have you ever met anyone that’s especially closed minded, and resistant to change? Someone who can’t handle bigger changes in work, technology, or society – who pines for the way things “used to be” with respect to most things?

Those days aren’t coming back. Neither is the slower pace of change that may have been a part of things in an era gone by. It sure seems as though the velocity of change keeps accelerating each passing year that goes by. Heck, it’s probably more like each passing month or week that goes by. Technology, frameworks, processes, and communication platforms are changing rapidly. This isn’t like the telephone was invented, and then decades went by before cordless phones were the “cool thing” for years. Change seems to be happening faster and faster all the time.

Along those lines, I think it’s more important than ever to focus on continual learning. I had included continual learning as one of 15 ways to grow and protect net worth in a prior post. If we instead keep the mindset of people who just like things “the way they have been”, and are slow to adopt different changes, we risk getting left behind. If we don’t keep up, somebody else somewhere is. Not only that, but others are driving change. Thus, it’s best to keep our head in the game, be flexible, and stay with the changes.

In addition to technological changes, I’ve come to believe that it’s probably a good idea to try to learn from any situation and any job you have. You might be in a job you don’t like right now, and it might seem like what you’re doing is not aligned with your true interest. Fair enough.

Thing is, not sure about you, but I’ve come to find that I’ve learned lessons from every job I’ve had over the years. Yes, even a few that I had all the way back in high school. One thing is that I don’t ever want to be in that type of job again:) Other than that, and more practically, I learned some communication skills and how to handle customers. One high school job I had was as a customer service representative. At first, I was taken aback by the angry customers who came in to complain; that’s pretty much who I dealt with. However, after a while, I began to learn strategies to handle them, and resolve issues while making them feel like they got something out of the deal. It became a fun challenge to try to turn a skeptical and irritated customer into a happy one. These foundational skills have come in handy over the years, successfully dealing with certain people in my professional career.

Also, I’ve learned to keep in mind that when you try to learn and do your best, someone is often looking. Your reputation in a job that might seem entry level can carry a lot of weight with people who can open doors for you to better jobs. An approach of continual learning can pay off in numerous way.

Why do I say all this? Well, I think that when I was much younger, I didn’t always try to be an early adopter. Rather, I would get comfortable with a certain way of doing things, or a certain job environment, and be content. It took me some time, but I’ve come to see that my own successes have come by actively trying to learn from every situation, and improve even in some small way as a result.

If change is inevitable, we might was well take an approach of active learning, intellectual curiosity, then and adapt and/or better ourselves each passing day.

What Do You Think?

Do you try to take an active approach to learning from your experience each day?

Do you also think that it’s become more important to embrace continual learning each passing year?

Have you also noticed an accelerating rate of change in our jobs, technology, communication platforms, etc?

College or Entrepreneurship?

Career 34 Responses »

Nov 142011

With the current economy, are we entering a new era of education? Meaning, is the model of getting an undergraduate degree (or even a graduate degree), and then entering the job force going the way of the dinosaur?

In other words, is it a better investment for younger people to skip college and go the route of entrepreneurship?

That’s the argument put forth in an article I recently read on U.S. News. Essentially, proponents of this view tend to suggest that a college degree isn’t always worth the investment. Basically, the reality that these days many people take out big loans for their education, yet struggle to find suitable jobs in their field, is what makes college seem like a sketchy investment. Instead of pursuing such a traditional path, the idea is that people in business, technology, and the arts should go the route of self-employment. That’s the argument in a nutshell.

This is a position that’s been picking up steam of late. Even here on Squirrelers, there was a guest post in June 2011 that covered the topic of whether or not college is right for everyone. I thought the guest poster made some very good observations on how the idea that college is practically a “right” for middle class Americans might need to be revisited. This in light of the employment market and high level of student loan debt.

Personally, I still lean toward the more traditional route. That is, upon graduating high school, a kid goes to college and gets an undergrad degree. Personally, I obtained an MBA, which I can tell you was definitely worth the investment, as I was one of those people underemployed before business school. I realize that things are continuing to evolve in the market and economy, but it seems to me that it’s good to have a solid education.

I realize that it’s easier than ever for people to make money through entrepreneurship, particularly online. Enterprising new grads might be able to make more money right away on their own than they could through the traditional job route. However, being an entrepreneur isn’t for everyone. Sure, we can all bounce back from failures, but it helps to have a foundation on which we could build off.

Getting a college degree today, for younger people, is like a high school degree in a prior generation. It’s an entry ticket, a requirement for those in their early 20′s who want to get access to jobs. And about jobs – they aren’t obsolete. Not by a long shot. In my view, it’s imperative for a young person out of high school to go to college and at the minimum, get an undergraduate degree.

Don’t tell me about how Bill Gates, Steve Jobs, or other business superstars dropped out of college and succeeded big time. Most of us aren’t going to be multi-billionaire tycoons, and those guys are anomalies. Kids graduating high school need to think of higher education. I think that the idea of skipping college is founded on shaky ground, and not a fit with overall trends over the last 40 years.

Now, in terms of where a kid goes to college, that’s a big deal now. Realistically, there are probably a number of schools that are very expensive yet offer little appreciable advantage over schools that are much cheaper. Just because a university is private, doesn’t mean it’s going to be better than a public school. I think that the idea of people just going to the highest rated school they get into is very outdated. Rather, kids should pursue a college education – but choose a school by giving plenty of thought to the financial side of the return on investment. I say this knowing that not everything about personal growth can be numerically quantified. However, a mistake in choice of colleges and potential loans could stay with a kid for many years. Choose wisely!

My Questions for You:

What do you think? Are you with me, thinking that college is vital for new high school graduates, or do you subscribe to the movement that questions the need for college for business and other majors?

Do you think that people spend enough time looking at the financial return side of the equation when choosing a college?

Tips for Freshman Year

Guest Posts 10 Responses »

Sep 022011

The following is a guest post by Robert from The College Investor, a personal finance blog tailored to college students and young adults.

Congratulations on starting your first year of college. That is a huge milestone. As you start selecting classes and choosing a major, I want to throw out some advice from the graduate world: remember why you are going to college – to get the skills you need to be successful in your chosen line of work. For many this includes education, but for EVERYONE it includes common sense job skills. To accomplish this, I recommend that every college student should have a job.

Many people may be surprised by this, but I can tell you how frustrating it is as an employer to have some highly educated people that lack common sense basic job skills. By working an even quarter-time job in college, students can gain basic skills, and can have something on their resume when they graduate.

Getting a Job as a Freshman

I can tell you from personal experience that working and going to college is not easy. It requires time management and planning. You need to find a job that will work with you, and you need to be able to select a school schedule that will work with your job. There are so many options out there though: retail, food, internships, etc. Don’t think that any job is below your means. You are there to make some money and get some skills.

There are also usually many jobs available on campus. You can work at the library, as an aide, or in the administration offices.

The bottom line is that getting a job will give you valuable time management skills, and it will highlight to your future employer that you can plan and schedule. It will also teach you how to behave in a workplace, how to work effectively on a team, and, if you get something like an internship in your field, it can really open your eyes to what you will be doing on a day to day basis.

My Story

When I entered my freshman year at a top tier university, I was already working as a cashier supervisor at a major retail store. This job required a minimum of 32 hours per week, but they were flexible on how I worked it. I essentially worked every weekend, and three nights a week. While working almost full time, I started my undergraduate education in computer science. I also got an internship over the winter at a software firm, and it didn’t work out. I hated it! I hated programming, was stressed for time, and I was on academic probation after my first quarter of school. Yikes!

First lesson learned: I liked leading a team and moving around, and I hated sitting in a computer lab programming for hours.

So, I changed my major to economics (there was no business school), and continued to focus on my career and school. The major change was life changing. I really enjoyed the subjects I was learning, and I was getting A’s in my classes. I was also working 32+ hours per week at the retail store, leading the cashiers (sometimes over 20 at a time). During the summer, I got an internship at an Investment Brokerage. I had a passion for investing, and I thought it would be a great experience. Well, it wasn’t. It turned out to be all about selling and not about doing what was right for the client (and this was at a big 5 brokerage).

Second lesson learned: I loved leading people, I liked business and finance, but I was not cut out to be a salesman.

I ended up graduating with a major in Political Science and Economics, and I was promoted to a store manager at the retail company I worked at. I was one of the youngest store managers ever, and it was due in credit to both my experience and education.

Moral of the Story

The main takeaway I want to share with college freshmen is that you can learn even more about yourself outside of the classroom, and working is a great way to do that. It allowed me to really discover what went on in various jobs day-to-day, and it also allowed me to find my true passion of leading people.

I also took many of the skills I learned in college and still apply them – I do run a website about personal finance (see the techy and investment side coming through?).

Also, as an employer that hires lots of people each year – please do us a favor and get some real world experience. People need practical applications of what they learn in school, not just the theoretical. I have an acquaintance who went to undergraduate, then went for and MBA, and is now getting a JD. She has never worked a day in her life, and will graduate at 28 with all these degrees and no real world experience. She will still get base pay somewhere, but not anywhere near what she was expecting, simply because there is no experience to back the education up.

Discussing the Merits of College for Everyone

Guest Posts 7 Responses »

Jun 032011

The following is a guest post from Squirrelers reader “The Bean Man”. My Editor’s Comments will follow.

I’m an avid reader of Squirrelers. And over the last few months my conversations with a co-worker have altered my thought process on one way to best prepare for the future – don’t get a college degree.

Throughout this past year, my co-worker has been updating me on his daughter’s college selection process. As a family they have evaluated over 12 public universities (in state and out of state) ranging from Colorado to University of Wisconsin. I was literally shocked to hear how much tuition is at each of the schools! However, being a bright student it was likely that she would end up with at least a partial scholarship to help offset costs. However, in the end her total annual tuition with scholarship funding still costs > $30K!

The thing that surprised me most about my conversations with my co-worker is how much a typical college education has risen since I went to school. A college education has almost been considered a given right for anybody in the middle class or above. But I wondered – is this about to change?

According to the US Dept of Education, the average annual cost of tuition and living expenses has risen from $7,600 in 1990 to $20,400 (in 2010 dollars). On the surface it appears worth it because the difference in annual salary between high school graduates and college graduates is approximately $20K. These numbers suggest that the payback time of a college education is 4 years ($80K total college expense / $20K annual salary differential). However, I feel that this is misleading at best and it may be better not to attend college at all.

1) The average salary of non-college educated people ($22K) is weighed down by minimum wage workers. $22K equates to under $11 per hour – barely above minimum wage. What would the average wage be if one only looked at the segment of workers who had the ability to go to college but chose not. This segment would include skilled trades such as carpenters, welders, chefs, seamstresses, small business owners, etc. Surely this group is making more than $11 per hour! I would go further to say that many in this group are earning much more than the average college graduate wage of $22 per hour.

2) The debt burden of the average college graduate is on average $24K – taking years to pay off. Imagine the debt levels of those graduates hat don’t have parents to fund the costs? Those without college debt are free to invest their savings quicker and accumulate wealth faster.

3) With unemployment at 9% many freshly minted college graduates are floating sideways at best. While the same can be said of non-college graduates, at least they haven’t accrued tens of thousands of dollars in debt and given up four years of productivity.

I know that many will disagree with my thoughts on whether college makes sense. However, one thing we can probably all agree on is that a college education is no longer the slam dunk decision most of us have considered a right.

Editor’s Comments: What do you think of the guest poster’s premise? Personally, I am in the camp that thinks college should be a goal for just about everybody, and that a college degree is now what a high school diploma was a generation ago. That being said, I agree with The Bean Man’s theme of college being expensive and potentially a big source of debt that takes a long time to pay off. Accordingly, I think prospective students and parents need to be sure not to make a decision that creates a massive financial burden for years to come, and instead choose wisely and consider ROI.