Financial Literacy – Did You Learn This At School
One of my most enduring memories from high school is that in almost every class I attended, it didn’t matter what the subject was, there was always some smarty pants who would say to the teacher “I just don’t see how this will help me later in life”. Its funny how the teachers never really gave them a satisfactory answer.
I would really love to go back, and review the subjects I learned back then just to see how insightful those kids were. To see how much of what I learned back then has helped me get to where I am today. I won’t though, rather I want to look into a slightly different topic. I believe that there is one subject that everyone should be taught at school as it would be invaluable in helping you make your way through life, no matter what background you come from, or where you are going. This subject is never on the curriculum though. I don’t understand why. It is Financial Literacy.
Financial Literacy as a subject in school would be a course examining the impact of certain decisions on your finances, encompassing major and minor decisions. Basically, the goal would be to arm students with enough knowledge of the financial world that they wouldn’t go out and make the foolish mistakes that drive so many people to financial ruin every year. The curriculum would go in the following direction.
Week 1. Is that a scam? How to recognize scams and not get involved in them. All they are, are people stealing your money.
Week 2. How much can you borrow? This lesson would teach you to calculate how much money you can borrow for personal or business purposes, on a variety of mediums. This would include credit cards, personal loans, business loans and mortgages. It would mainly concentrate on cash flow issues, but also touch on the tax effectiveness of some of the different loans.
Week 3. What type of assets do you own? In this lesson, different assets would be explained. For example, an appreciating asset would be compared to a depreciating asset. Similarly a consumable would be compared to an earning asset. These assets would be compared over time, so you can see the impact purchasing different items has to your net wealth over time.
Week 4. How should you invest? The different types of risk involved with any investment would be explored. With so many possibilities for going right and wrong with an investment, students would get an idea about how to spot a dangerous move as opposed to a promising opportunity. Making investments that work can lead to success, and vice versa.
Week 5. How should you leverage investments? Working with investment portfolios, students would be instructed on the process of leveraging. Tax concerns would be part of the lesson, as there are significant tax breaks available when taking out a loan for an investment.
Final phase. At the end of the course, the student would try and make it all come together. There would be a layout of common mistakes and how to avoid making them. The ways to use the law in your favor and how to protect yourself would be covered. Finally, there would be suggestions on how to work with whatever types of finances you have to create the maximum amount of wealth.
Damian Papworth acknowledges that you do not need mutual fund investments. Having learned some simple strategies, you are capable of being your own investment manager.
