Monthly Archives: November 2014

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Question of the Day: How Much Money Do You Need to Be Happy?

This might be an interesting question to pose to your students who may/may not have a context to answer it.  Another way of posing the question is to ask what “things” they think they need to be happy and estimate the cost of those items.  I predict you get a wide range of answers; from “not much” to millions of dollars.  This question provides a good introduction to the concepts of understanding needs and wants (see NGPF lesson here) and also the extremely tenuous link between money and happiness.

So, what does research say to this question?

  • CNN survey came up with a median of $80,000 (CNN):

When asked how much would do the trick, just over half of people surveyed in CNNMoney’s American Dream poll said it would take less than $100,000.  Nearly a quarter of the people who took the poll, conducted by ORC International, said between $50,000 and $74,999 would work.

  • Princeton research found a number close to $75,000 and differentiates between life satisifaction and happiness (Kahneman and Deaton):

Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000. Low income exacerbates the emotional pain associated with such

By |November 25th, 2014|Activity, Behavioral Finance, Budgeting, Question of the Day|

Question of the Day: Why Don’t People Give More?

In light of my recent post about generosity at the check-out line and the upcoming Thanksgiving holiday, this NY Times column caught me eye as it asked that basic question.   Might be a good question to ask your students, “Since giving to others makes us feel good, why don’t people do it?” or even ask them what percentage of people give way 2% or more of their income?

Here is the stat that stood out from the research findings:  More than 85% donate less than 2% of their income so only 15% give away more than 2% of their income.  Why is that?  The research comes up with a few explanations:

  • Don’t think of generosity as a moral obligation
  • Don’t have enough money
  • Jobs make us too tired to be generous
  • Give to causes at work
  • Think that poor people should help themselves

So, what’s the downside to being ungenerous?  The researchers conclude the report with the following thoughts:

In the end, however, the fear of not having enough, coupled with an autonomously individualistic lifestyle, nearly always proves to be deeply unfulfilling. Attaining the sort of happiness found in material well-being and security, which the majority of ungenerous Americans pursue without regard for others,

By |November 25th, 2014|Activity, Behavioral Finance, Current Events, Question of the Day|

Activity Idea: What is Financial Innovation?

The pace of financial innovation has quickened which makes it all the more imperative that we teach students how to assess the new products being launched everyday.   I like to ask my college-aged nieces and nephews what they are using since young adults tend to be the early adopters for such services.  That is how I found out about Venmo, which is a mobile payment system which my nephew was raving about.

What better way to engage students in this topic then to have them conduct research on financial innovation by doing a “deep-dive” on a new financial product that is relevant to them.  This deep-dive can include online research, using the app (if the innovation is indeed an app), student/parent surveys, interviews with company management…you get the idea.  The end product will be a five minute presentation that:  1)  Introduces the product  2)  Highlights its product features  3)  Identifies its benefits  4)  Identifies its shortcomings/concerns 5)  Thumbs up/down on the product:  would they recommend to a friend.

So, where to turn for examples of financial innovation?  Here are a few articles that should be helpful in giving students some ideas about the “hottest” financial innovations today:

  • 10 Financial Innovations Changing
By |November 25th, 2014|Activity, Current Events, Lesson Idea, New Products, Question of the Day|

Activity idea: Teaching Students to Be Savvy

Consumer Reports published their Naughty and Nice List for 2014.  It called out companies who had run-ins with regulators due to practices that can be best be described as anti-consumer:  Here’s a sample:

Hearthware Inc./NuWave

Hearthware markets the popular NuWave infrared oven, sold primarily by infomercial (but also at stores such as Walmart and Bed Bath & Beyond). The company has an F rating from the Better Business Bureau for misleading consumers regarding exorbitant shipping fees. We checked out the site and discovered that shipping fees can exceed some of the accessories themselves.

Activity idea:  Have students conduct online research of one of the companies that appear on the Naughty List and document/provide evidence of the practice being cited OR have students do research on their own to identify their own “naughty” companies.  Hint:  Doing a Google search on “consumer fraud” is a good starting place.

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Check out the NGPF Lesson on Scams, Frauds and Identity Theft

By |November 25th, 2014|Activity, Financial Literacy, Identity Theft, Lesson Idea|

Financial Literacy: In the Schools

Round-up of activities happening around the United States:

  • Students in Eau Claire, WI area participated in Real Life Academy recently (WEAU.com):

Kristan Motszko with the Eau Claire Area School District says no matter how much money students make when they are older they are still going to have to deal with money.  “I don’t think our financial literacy problem is going away, if anything statistics show it’s getting worse. More and more Americans are living pay check to pay check,” said Motszko.

  • Econ teacher, Pat Curran at Mandarin High School (FL) noted how technology has increased the importance of financial literacy (WJCT.org)

“I think it has become more important over time because the financial literacy has gotten more complex,” he said. “Technology is making financial institutions much faster because of the technology, knowledge is power. If the kids are not prepared when they walk into a bank, if they haven’t done their research, it makes it more difficult

By |November 25th, 2014|Current Events, Financial Literacy, Personal Finance|

Investigate: Millionaire or Not?

The story appeared a month ago and I read it, scratched my head, wondered if it was true and moved on.  The headline “A 27-year-old millionaire reveals how he built his wealth” made for effective “click bait” given the public’s fascination with millionaires (check out my list of best selling personal finance books and you get the idea).  Well, it turns out it wasn’t true.  I thought it might be fun to have your students play forensic accountants to see if they could find the errors in the story.  This case study is a good one because it incorporates concepts such as investing, net worth, mortgages, rental property, savings rates and “you can’t always believe what you read.”

Here is a summary of the financial facts presented:

  • First job at 15; worked three years at Subway and saved 100% of his earnings; had saved about $10,000 when he graduated high school.
  • Worked from 18-20 in administrative jobs; unsure how much he earned or saved.
  • At age 20 (say 2007) joined Navy earning $55,000/year as electronics technician
  • Saved 60% of his earnings at Navy and did freelance jobs for $15,000 – $20,000/year saving $40,000 – $45,000 per year
  • Didn’t sell during downturn
  • 2009:  put down
By |November 25th, 2014|Activity, Case Study, Current Events, Investing, Personal Finance, Savings|

Video Resources: Credit Cards

Given the popularity of video among high school/college students, I will start featuring informative and short videos that are timely too.  Videos also serve as a great way for students to get familiar with financial product “lingo.”  This week the videos below deal with the right time to give kids a credit card, Apple Pay and technology changes coming to address security shortcomings with credit cards.

  • Checking and credit cards for teens (WAVY.com, 4.5 minutes)

Your teenager may think they’re responsible enough for a checking account, or perhaps a credit or debit card too, but is it a good idea? Lewis Smith from BayPort Credit Union discussed how to help your teenager get a smart start with money management, and shared some of his personal experiences.

  • Pitfalls of getting credit card for a child (CBS, 1.25 minutes)

But a question that will almost always come up when shopping and spending money with a teenager is this: What is the right age or time for a student to get their first credit card?

  • What is safer?  Apple Pay or credit cards? (Denver 7 News, 2.5 minutes):

Apple Pay has a chance at changing the mobile payments game completely. And experts in

By |November 21st, 2014|Checking Accounts, Credit Cards, Video Resource|

Chart of The Week: Why Do Millenials Fear Stocks?

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Fascinating chart from WSJ shows one reason that Millenials may not be so enthused about stocks.  For a millenial born in Jan. 1980, the stock market return (S&P500) adjusted for dividends and inflation was basically flat for the 12-year period from their 18th to their 30th birthday.  Contrast that with those born in 1970 (dating myself here, but I am just a few years from that date) who saw $1 turn into $5 during that 12 year period (1988-2000 was a heck of a bull market!).

From WSJ article that accompanies this chart:

But when left to our own devices, many of us are terrified of investing in stocks.  Last year, a Wells Fargo survey showed 52% of millennials are “not very confident” or “not confident at all” in the stock market.  When we invest on our own, we put 59% of our assets in cash and bonds, and 28% in stocks, a recent survey by UBS Wealth Management found.

“This is directly counter to traditional long-term investment allocation advice,” which is that younger investors can afford to take greater stock risk when investing for retirement because they won’t