Kudos to WSJ for asking the question and getting opposing viewpoints on the answer to the question. I am having trouble containing myself so I thought I better get my thoughts down on paper before I explode. First, the newspaper is asking the wrong question. The right question is “Should High School Students Be Required to Take A Personal Finance Course?” College is too late. The biggest financial decision that young people make occurs BEFORE college. Those decisions are “where are they going to continue their education?” and “how are they going to pay for it.” I received way too many calls in my days at Student Lending Analytics from sobbing students and their parents about their predicament of high debt and “I am only a junior.” As we know student debt has a long tail to it and has ramifications far into the future. It is that much harder to course correct several years into one’s college career.
Oops. Meant to get this out on Friday. Here’s what I have been listening to the past week (or hope to listen to soon):
- Bill McNabb, CEO of Vanguard Group (Masters in Business with Barry Ritholtz; over one hour). Vanguard recently crossed $4 trillion in assets under management. McNabb describes why index funds are increasing their market share, how Vanguard’s robo-advising business is growing, and the importance of fees when it comes to investing over the long-term. For those interested in learning more about index investing, this is a great primer! McNabb also shares some valuable career advice that he gained from an unlikely mentor.
The Equality of Opportunity Project released a vast trove of data last Wednesday focused, as its name suggests, on identifying characteristics in communities that foster upward mobility. In looking at over 700 metro and rural areas in the U.S., the researchers defined upward mobility in terms of a children’s chances of reaching the top 20% in income distribution given parents in the bottom 20%.
Here’s the results from crunching lots of data (note the legend that indicates lighter areas as having more upward mobility):
- An obvious question when one looks at a map like this is “what factors drive upward mobility?” Here’s what the researchers found:
Answer: Meh (or about average for OECD countries with about 33% of adults classified in the “High” category).
This Economist article focused on the need for retraining of low-skilled workers as the pace of automation accelerates and many of their jobs go the way of the buggy whip. As for how to accomplish this, Singapore has a promising example:
This is a great example where your knowledge of investing can come in handy for yourself and other teachers in your building. The NY Times story shows what happens when light regulation meets rapacious financial firms. This is why financial literacy is so important! We can wait for regulation or we can arm ourselves with the knowledge necessary to avoid disasters like the story told below. Without knowing the right questions to ask or understanding the alternatives, too many teachers have seen their retirement savings swallowed by excessive fees. Actually one question may have gotten to the core of this scandal: Show me the fees (and persist until you get the answer)!
New regulations are on their way..here’s an FAQ to help you and your students sort it all out:
- How big is the market for prepaid cards and who uses them? (Atlantic):
The market for prepaid debit cards has grown dramatically in recent years: The number of people using the cards in addition to their checking accounts increased by 50 percent between 2012 and 2014. According to a report from Pew by 2014, around 23 million Americans were regularly using reloadable cards, and more than one-quarter of those users were Americans who didn’t have bank accounts and were mostly low-income and black. For all their shortcomings, prepaid debit cards fill an important role for Americans who don’t have access to traditional checking or credit accounts. These services allow them to perform basic tasks, such as paying for goods or services online or taking cash out from a convenient ATM, that many Americans take for granted.