The Best Investment Ever
What if you told your school administrator that a one semester course could increase the average student's lifetime wealth by over $100,000? Wouldn't the next words out of their mouth be "What are we waiting for?" Unfortunately, we're still waiting. The facts are:
- Only 1 in 6 students graduate from high schools that require a personal finance course (1 in 12 in low income districts)
- Only five states (UT, MO, VA, TN and AL) currently require ALL students to complete a personal finance course (WI will soon be added to that list).
- A key finding of CEE's Survey of the States found that "Since 2016, no additional states have added personal finance to their K-12 standards or requirements."
- Champlain College's 2017 report, Is Your State Making the Grade?, gave 27 states a C, D or F based on their efforts to produce financially literate students.
The next question, your administrator might ask is "How did you ever come up with this $100,000 number?" Your response back might be along the lines of "Let me just count a few of the ways that personal finance courses increase student wealth...."
- Managing checking accounts will save them the "beginner's curse" of overdraft fees ($34/each)
- Seeing the power of compound interest can get students interested in saving when they are young (and allow more years for their savings to compound)
- Investing in low-cost, diversified index funds will save them 1% or more per year in investment costs
- Understanding how credit scores work will lead to higher credit scores and therefore lower borrowing costs over a lifetime
- Avoiding financial pitfalls (payday lending, rent-to-own, dodgy investments) saves dollars and heartache
- Creating a financial plan/budget on how to pay for college (BEFORE going to college) can lead to lower student debt levels ($1.5 trillion and growing) as better college choices will be made
- A lesson on philanthropy demonstrates how students can see money as a vehicle for giving back to causes they believe in and think beyond themselves to societal needs.
My intent was not to create a listicle and this is clearly not a definitive list (I didn't even get to the value of "making better career choices," another important contributor to wealth) Back to the $100,000 number, here's your back-up:
- Applying these skills listed above would save students on average $1,000 per year (turns out there's some research to suggest that is about the right number)
- The beauty of these savings is that they compound over time. For example, an investment fee avoided is not a one-time event but a recurring one.
- Assume that $1,000 in annual savings compounds at 5% over 40 years...that gets us over $100,000 in wealth created from just...one....course!
When friends ask what my best investment has been, I tell them Next Gen Personal Finance. With our curriculum being used by 5,000 educators reaching 400,000 students, over $40 billion in societal wealth is being created. Two thoughts to conclude: Who wouldn't make that investment? and Let's mobilize ASAP to reach the 5 in 6 students not getting this wealth-building opportunity!
Thanks to Brian Page for sharing this chart showing that students taking a personal finance are almost 2X more likely to invest too:
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.