Sunday, February 1, 2015

The Best Way To Teach Your Children About Money, More Math?

Here we go again, an academic trying to make a name by sharing “study” findings that make their point.  I’m talking about Shawn Cole, Professor of Finance at Harvard Business School.  In this video The-best-way-to-teach-children-about-money, Professor Cole tells the WSJ’s Tanya Rivero that academia has not been able to establish a relationship between financial education and financial literacy, and especially how these translate to financial behavior.

So he’s basically saying that teaching finance, investing, etc. has no correlation with a student becoming financially literate.   Really?  Wow.  Isn’t that the story of every subject course taught in high school?

How many of you can speak Spanish or French today?  Well, didn’t you take three years in high school?  How many of you can tell me about the Ideal Gas Law with clarity?  But…didn’t you take chemistry?

Okay, Professor Cole, so far there’s nothing going on around here.  Everyone keep moving.

Professor Cole then asserts that our policymaker’s benevolence in funding financial education, in response to our Great Recession, has been well intentioned but misguided.  It’s true.  Politicians like to just throw money at things in reactionary style.  I’ll give Professor Cole this one.

Over 40 states in the nation require high school students to take some sort of financial education course.  Cole states,

“…And what we found really surprised us, is that people who are exposed to these financial education courses had no better financial outcome then the people who didn’t have to take the course.”

Well then, Professor Cole, should we just stop teaching financial education?  I can assure you that my teacher peers all across this great nation would tell you different.  They would tell you that some of their students went to college and majored in Economics, Finance, or Business Administration.   And you would tell me that they got into college because they had the necessary math coursework.  And we would both be right about something: There is no substitute for great teaching!  Regardless of the subject matter.

An extra semester of math, you say, makes all the difference.  Of course it does!  Since you do not work at a high school, I’ll let you in on something: Kids struggle in math.  The majority of them want no more than their graduation-required load.  Math is a gateway to college, and it keeps many of our low socioeconomic students from making their A-G course college requirement.  College, as we know, is a gateway to better economic prospects for a person.

Like most of us, Professor Cole has no idea what actual financial literacy skills need to be taught.  He suggests students need to understand interest rates and compounding interest.  I agree.

Then Professor Cole insults the layman, saying that he, as a scholar, thinks about things more rationally and carefully than the typical person.  I’d like to see Professor Cole’s personal investment performance over a ten-year period.  The typical person may not understand, for example, the menu of options from a mortgage.

Seriously?  Professor Cole, the reason the average American doesn’t understand the menu of options for a mortgage is because they are written in difficult to understand language, sold by shady banks and lenders, and pitched by commission hungry loan officers. 

Did you know that in some cases, loan officers are paid entirely on commission?  Some get base salary plus commission.

In addition, having been burned by the real estate bubble, the average American is now more cautious when applying for a home loan.  They may not all know what to look for, but they are more leery, that’s for sure.

Professor Cole concludes by saying that he does talk to his daughters about finances, but only before dinner.  After dinner, he’s helping his daughters hone their math skills.  Well of course he is!  He wants them to go to Harvard.

Thanks for Reading!

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