Rhode island makes financial literacy classes required for high school students

Remember, these are the people who require your drivers ed instructor to tell you to go 55 on I95 where the traffic goes 85. They're optimizing for covering their own butts while nominally educating people. They don't really care about truly education people so those people can go do to what will result in the best outcome for them.

They'll do something self serving and asinine like tell students you should make minimum payments on high interest debt rather than ask for a financial hardship extension/reduction for government services/fees/fines (which in many cases are legally required to take that into account).

I'd add anger management (though perhaps mental health basics would cover this), practical logical fallacies, sunk costs, and basic law.

media competency - part of history class, including evaluating sources, history of yellow journalism, etc.

scientific method - 6+ years of science class

cui bono - this is apparently a fancy term for motive, which was discussed during history class (specifically explaining the judicial branch)

negotiations, assertiveness, how to deal with bullies - a required part of working on group projects for 6+ years of life

mental health basics, mechanics of addiction - health class

Economics 101 is the only one on your list that was missing, and presumably a financial literacy course would cover this.

Edit: quick google suggests it still exists: https://education.alberta.ca/media/160199/calm.pdf

I'm much more doubtful about the scope of the positive impact it would have.

I think it's roughly the idea that lack of culture is caused by a distribution problem. I think internet more than showed that improving distribution works only up to a limit.

There is a theory - the paradox of abundance - that paradoxally after you reach this limit you actually decrease access to the ones that need it the most.

https://perell.com/note/the-paradox-of-abundance/

None of this content will help if people don't simply learn to appreciate knowledge, and when they do none of the content will matter.

I'm someone who liked school for the most part, and even I treated it as a "just pay attention enough to pass the test" class.

These are all, in principle, taught at most public schools. The problem is students don't learn them.

He was getting up there in age and had horrible skin cancer but still literally sprinted down the halls after truants.

He is my all-time favorite teacher, although I actually don't remember that many life skills from him :)

As an example of this, when I took out student loans they were sold to me as "fixed interest" (literal words used and it was at the typical point where you have the option to pick a fixed interest or variable interest rate). My dad and I had a conversation about fixed vs variable interests and the risks involved. But to our surprise later we found that it was "fixed interest repayment option" and not "fixed interest repayment rate." I wouldn't say my family is financially illiterate, far from it actually. But there's still predatory behavior like this that preys on more "Swiss-cheese knowledge" that a non-expert would have and a lack of understanding all the legalize (and my dad has a JD).

So I do think we should make people more rounded in their knowledge, but we also need to do more and ensure that we curb predatory behavior. The disadvantage of making people more well rounded is that the excuse of "they should have understood" becomes more powerful. But no matter how good you are you're not going to beat a team of lawyers and psychologists that want to implement dark patterns. But then again, I think if people were more educated then this argument would be less contentious and we'd recognize that a single person is always going to be outclassed.

That is absolutely correct!

Alas, let's look at the bright side, learning all those topics you mentioned in you "Life School" are only one google search away, free (monetarily); they only require an investment of time.

People learn complex things like playing Fornite and Minecraft or understanding Baseball/Football and other sports the same way.

Maybe it's a matter of twisted modern darwinism?

This is my issue with these topics. Like most classes kids will do the bare minimum to pass and then forget it all.

What does this mean, exactly?

Do It. I love this idea.

My question is something like, would a non-profit be considered as start up? Think of funding and long term sustainability of an idea.

To teach critical thinking to the students, you need teachers who are critical thinkers.

It does not matter if you are in USA or Zimbabwe, one thing is common everywhere. Smart people who can think critically are not encouraged or incentivized enough to take up teaching as a profession. As a result we end up with this mess of education systems everywhere. It will probably take some generational changes or visionary political leadership to change this.

The course teaches you things like paying your taxes, writing a check, how to vote, etc.

People still complain it doesn't exist. I still have old classmates that make this same "They didn't teach practical skills in school!" posts. They even took the damn class with me. It's maddening.

There are deep systemic issues that stack the deck against the working class financially. There are also plenty of people that make very detrimental decisions when it comes to money and dig themselves into a deep hole, even without any obvious cause.

Both are problems that need to be addressed. The presence of one doesn't invalidate the other, and the solving of one doesn't solve the other. Normally these discussions are people talking past each other as they haggle over the proportion of blame to assign to the individual or system. I say address both simultaneously and let both sides think they're right.

But it’s also important to recognize that it’s difficult to know what you don’t know.

My first year in college I was placed into “math in the real world”—the class for kids that can’t even cut it in a 100-level math course.

In of the first lessons the professor asked us how we might purchase something we don’t have money for. No exaggeration: I was the only person that suggested saving up for the item.

Every single person in that class was competent enough to understand basic financial literacy. But somehow they made it 18-20 years before learning about savings, compound interest, etc.

It gets more difficult, too. I bet most people don’t know that overdrawing and other “bad” behavior can lead to you getting blackballed in Chex, making it really difficult to open bank accounts elsewhere. How do you even search for that?

I’ve had to stop and remind people that when you transfer money from a tax-advantaged retirement account you need to make sure to transfer it directly—withdrawing it into your bank account can cause a taxable event.

Stuff like that is easy to look up. People should look it up. But how do you know you need to look it up?

I know fairly smart people who understand calculus but just cannot accept that there is a problem with paying interest on all of their purchases.

They simply do not understand that eliminating high interest debt as soon as possible (or never acquiring it in the first place) is essential to ever having financial security.

Honestly it sometimes feels like the normalizing of financial illiteracy is intentional, although I'm willing to accept that the lenders of high interest debt are just taking advantage of the situation they've found.

To understand loans, I taught students how to determine the monthly payment for a loan using a blank spreadsheet. For students who were intimidated by spreadsheets, we'd start the process on a whiteboard. Just a simple spreadsheet with columns like month, current principal, payment, towards interest, towards principal, new principal. Then guess-and-check to see what the payment needed to be in order to pay off the loan in a specified time period.

That was great, because it let everyone see how loan payments are calculated in the first place. Then it let curious students explore the impact of paying above the minimum, making lump sum payments at various intervals, different interest rates, initial no-payment periods, and other loan "features". We also looked at cumulative interest and other long-term aspects of a loan. Students could do their own projects about car loans, home loans, business loans, and more. Every time I've taken out a loan in my life, I've done this myself, and it's made the experience better every time. Just doing this once lets you talk to a loan officer on a much more eye-to-eye level. This is education as consumer advocacy, fighting back against predatory practices one class at a time.

For taxes, I just had students either bring in their own pay stubs or W2s, or work with a sample set related to a field they were interested in working in. Then I had them fill out a 1040 by hand. They had to start out with the simplest 1040, and they could choose to try a more complex version after that. I had them repeat the process for several income levels; most students had no idea what a "tax bracket" actually is. I'd start with a question like "You're making $__k/yr, and you're offered a $1k raise. The raise will bump you into the next tax bracket. Should you accept the raise?" Many students said no, because they had no concept of incremental tax rates.

You have to present this material carefully. If you tell a whole class of math students, "Okay, everyone's learning to analyze loans this week!" they'll hate it. If you say, "We're learning to analyze numerical patterns, and one of the patterns you can analyze is how banks determine the monthly payment for the car or house loan you might want in a few years", they'll jump on it.

Because the purpose of high school and basic university mathematics is to make people smarter. Algebra or calculus deal with abstractions and concepts that are hard to master. They are like lifting heavy weights. A course on statistics and finance is easier and hence like lifting light weights.

This has independent of the fact that high school teachers and underpaid, overworked, undertrained, and are forced to teach to the test, and so unable to really teach mathematics as they students deserved

The more practical math and the less abstraction the less critical thinking.

Calculus on the other hand is bit too beautiful. At high school level at least, you get all these smooth curves, everything has a nice closed form answer, and you start to think that maybe these beautiful shapes describe the universe. It's actually not that easy to do, it just happens that we found some examples where it works quite well, and they are just the kinds of things we teach in physics in those same years.

When we then get to an economics class, it unravels. There's a whole menagerie of calculus assumptions that creep into the minds of credulous students. Lets assume Cobb-Douglass production function. Let's say the utility must be this shape. Oh look at what beautiful conclusions we get.

there was a 7 week segment some time in high school that discussed economics, but it was a sort of math-free intro to macroencomics, as i recall. ("here's what the fed does", "the stock market exists", etc)

An actual home economics course - one that covers compound interest, net present value, discounted cash flow, different asset classes, efficient market hypothesis, supply & demand, and reading financial statements - would be hugely valuable to kids.

In my area (Fairfax County, VA), home ec class in the 90s was cooking and sewing. The "economics" part disappeared from the curriculum sometime before I entered high school.

Also, many college-bound students weren't allowed to take the class. It was a known waste of time - counselors actively pushed students towards more useful courses. In my case, that was a year of Latin as a senior (on top of 4 years of French).

An real home economics class - with personal finance as a primary focus - would be very useful, IMO. I'm sure we covered interest rates somewhere in high school math, but it was purely academic - not taught in terms of useful life skill.

Unfortunately the financial literacy we learned in home economics was limited, mostly around budgeting. We had some other classes that covered other finance/life aspects more but they were non-mandatory and post when many people left school in those days, probably would have been better off incorporated into home economics.

Giving capital to people who are not financially literate will likely end up with that capital quickly moving out of their hands to people who are financially literate.

$100 initial capital invested at 50% annual returns becomes $330K after 20 years. This is like a successful startup on its growth curve, or some of the very best hedge funds (eg. Medallion). It's less than most cryptocurrencies (eg. Bitcoin has returned about 70% annually over the last 7 years).

$10K at 20% annual returns becomes $383K after 20 years. This would be a very good active investor or someone who hits a hot company. Most FAANG stocks have returned about 25% over the past 10 years.

$100K at 7% annual returns becomes $386K after 20 years. This is a typical index fund return.

$250K at 2% annual returns becomes $371K after 20 years. This is a typical high-yield savings account return.

$1M when you lose 5%/year becomes $358K after 20 years. This is typical of somebody who holds mortgages or student debt where their asset value & income isn't increasing, or someone who has credit card debt equal to a quarter of their net worth.

Most people underestimate the power of compound interest and exponential growth, which is one of the things that a financial literacy course really needs to teach.

Additionally, credit cards are a way of buying things where the actual cost is wholly disconnected from the purchasing activity.

Purchasing something for $1 using a credit card feels (and acts) identically to purchasing something for $2000 using a credit card. The only difference is the size of the number being added to the balance, so buying "more than one can actually afford" via credit cards is far too easy, because for many it does not feel like "spending". I.e., there's no "physicality" of having to count out cash bills and seeing the pile grow.

As well, credit card payback rates as calculated by the banks are structured such that the principal is paid down as slowly as legally allowed, which naturally increases the banks profits at the detriment of the individual paying the bill (as most of the payment goes to interest, not principal, if paying the "minimum payment" calculated by the holding bank).

So it is simply very easy to obtain plural credit cards, and to use them to fuel an instant gratification lifestyle well beyond ones means without considering the consequences of loading up 20k or 30k or more onto credit cards on a take home salary of 2-3k/month.

And, once someone has gotten themselves dug into this deep pit of debt, it is extremely difficult to climb up out of the hole.

Then you show up at college, and on your way to class on day 1, you are accosted by various banks handing out credit cards (or at least this was the case in the late-90s when I was at UVA).

Then, you finish college, and because real wages haven't changed in 40 years, you borrow more money to pay rent, pay back student loans, etc.

Americans have an unhealthy relationship with consumerism and credit. Doesn't help that credit is currently cheap, so buy-now, pay-later is the norm.

It's completely crazy, no disagreement. But, it's been this way for decades.

* Student debt. University costs a fuckton of money in the US, and you can pretty much find some way to cover it in debt. For young people this is probably the #1 category of debt.

* Mortgages. Basically, of all the debts, mortgages are the ones that don't really "count," since it's generally acquired for the purpose of specifically obtaining an asset and its bottom line on your net worth is going to be around 0. Also, there's some tax advantages to mortgages, so it's not really an issue to have mortgage debt.

* Medical debt. Yeah, this sucks.

* Personal debt, primarily credit card debt. Credit card debt is something that is likely to really screw financially literate people over: it tends to be very high interest, it tends to be marketed heavily to suggest that you're not being screwed by high interest (e.g., cash-back rewards!). The minimum payments are pretty low, so it's pretty easy to cut back on paying the card if finances are tight, without realizing just how much you're being screwed by the interest.

The end result is the entire working class is enmeshed in debt all the time just to stay even with where they would have been if the interest rates weren't so low.

It's astonishing how effective the upper class was at coming up with this policy to endebtify the entire middle and lower class without ever once talking with each other about how to do this or coordinating any actions to produce this result. It just sorta happened. Neat for them.

My parents helped me with school a little bit, and I was before the recent increases, so I think I graduated with maybe 25k in debt for 5 years of college. I paid it off quick as I had an amazing job out of college and sold the business I built.

I've watched my sister who is 13 years younger have a lot more debt and facing a really long march to pay it off. It is doable as she has a masters in a great field with great pay, but it is still a many year process...

https://en.wikipedia.org/wiki/List_of_countries_by_household...

It is dreadfully easy to get lines of credit as a college student, and the banks specifically target students because they are a good combination of financially naive and likely to have high future earnings potential. My first week on campus I was handed over a dozen credit card applications.

Drowning people in debt is kind of what American society is optimized for.

> As a 24yo European I never had more than 5k € of debt at any point in my life.

Europe is...not America.

“The average loan debt for a bachelor’s degree among the class of 2019 was $28,950.” [0]

[0] https://www.nerdwallet.com/article/loans/student-loans/whats...

Denmark, the Netherlands, Iceland, Norway, Switzerland, Ireland, Sweden, Portugal, Finland, Spain, Greece, Belgium, and the UK all run higher household debt than Americans -- much higher in the case of the ones earlier on the list.

Source: https://www.oecd.org/sdd/fin-stats/statisticalinsightswhatdo...

Switzerland Australia Denmark Netherlands Canada Norway Cyprus New Zealand South Korea Sweden

But you as a European can't understand how people can have so much debt. Well maybe you don't understand that Europe is not homogeneous and vary a lot. So maybe your comment is relevant for a country but it's definitely not for Europe. Saying that you're European tells us nothing since it's to diverse.

Necessity is a hell of a motivator.

Don't mistake the standard practices of a 100k/yr single person for what everyone is doing. People who are living on easy mode won't develop the same skills people living on hard mode will.

You have enough money to hire a financial advisor, if you care. They can usually give you much better advice than random resources online (since their advice can be specific to your situation--things like taxes can be a bit complicated).

For your savings, M1 Finance offers 1% interest, which is better than nothing. IMHO it is a difficult time to start investing your non-retirement money because that the market has gone up a lot recently and bonds are at all times low. I wouldn't feel bad about staying out of things right now until you can learn a lot more.

I would recommend reading everything written by Lyn Alden if you want to learn about all the macro forces effecting finance.

At first, I used a fairly cookie-cutter "three-fund portfolio," as recommended by the Boglehead community. I choose VTI ("Vanguard Total Stock Market"), VEU ("Vanguard All World ex US"), and BND ("Vanguard Total Bond Market") as the three ETFs. In retrospect, I would probably pick VXUS ("Vanguard Total International Stock") in lieu of VEU. But that basic structure is still a good starting point for a new investor.

Most brokers these days have features such that you can set up auto deposits from your bank account, and invest them according to a pre-set asset allocation. So say you want 15% in BND, 15% in VXUS, and 70% in VTI. If on the day of deposit your account is at 14% BND, 13% VXUS, and 72% VTI, then only BND and VXUS shares would be purchased, to make the allocation as close to the desired goal as possible. Likewise, any dividends received can be automatically reinvested.

Another commenter mentioned M1 finance, which I have not used, but from what I have read, looks like a great platform.

I hope they also teach the kids that "stonks" and crypto are no better than gambling. There should be a fictional Lamborghini dealership in this software, to teach the kids that buying a super expensive car is a waste of money.

Hah, writing this makes me wonder why I am lusting for an Alfa Romeo Giulia...

what do you think _can_ be taught to people (K-12 students) who have no practical knowledge of anything?

I doubt the 20yr old me would've listened anyway.

I, too, racked up some CC debt (nothing crazy) in my early 20s. I knew most concepts outlined above but it's really about dealing with temptations when you finally making real money with full-time work.

How did you rationalize building up big credit card bills? You knew you'd have to pay them back some day.

Were you spending without thinking about the bills? Did you not understand what interest was?

Could you afford the monthly payments, and think that if you could everything must be fine?

Looking back, I think it was about as effective as one could hope for when teaching bored fifteen-year-olds how to calculate interest compounding. Which is to say mostly not very.

Of the concepts you listed, I think I understand compounding, at least the one pertaining to interest rates. The others are a mystery to me. I'm in a stable 6-figure career and in my 40s.

Tons of people on WSB understand these concepts. I am not saying to emulate the behavior of WSB, but these are not concepts that are out of the grasp of a typical teenager.

a student going through this class will make fun of it with their peers, but then be completely shocked at how useless and poor the decision making is from people outside their school.

we subject students to learning about stuff few of them care about. what's the argument for keeping all of that material, but rejecting this?

> Without "hooks" like actually paying rent, electric, etc. it feels so abstract that nothing sticks well.

what are the hooks for getting other high school material to stick?

Detailing how compound interest works and how easy it is to begin investing in the free market with a small bit early that can turn into much more 25 years down the road, for example. FWIW I had a similar class in high school and loved it. Learning about markets as well as basic things like managing a checking account were fun and felt empowering. It was a very practical course and I'd agree with you that avoiding the abstract is probably important.

Kids, and many adults, really do not understand the relationship between money and time and what time is better to teach people about that than when they have a lot of time left?

I think it's important to champion capitalism and free, public, markets, as it is our proven way of life, and teach young people how they can choose to participate in it without much to start with. Much better than trends in teaching kids it is hopeless and we need to socialize everything.

yeah because they find other subjects more captivating? May as well replace one boring subject with a boring one that at least has more applicability to real life.

The idea that actually useful information should be excluded to maintain ideological purity is both stupid and surprisingly prevalent.