What inspired Money 101?

Shortly after graduating college, I stepped out into the real-world and landed in a small heap of debt. Whether it was moving into and furnishing an apartment, replacing the old clunker that somehow got me through school, or buying new clothes for work, the cost of life’s basic necessities quickly added up to a sizeable chunk of change. Strangely, though I took macro and micro economics in school (and earned high marks in both) I quickly discovered that these classes don't provide students the financial skills and confidence they'll need to thrive as newly independent adults. 

Though hard work and scholastic achievement will generally improve one’s lifetime earning potential, there's a lot to be said for knowing how to competently manage the economic power that a steady paycheck provides. Regrettably, this isn't taught in school and, for many students, this type of financial acumen is seldom acquired at home. Remarkably, young adults recieve sex and drug education. They spend years in a classroom setting studying history, math, science, art and english. To obtain a driver's license at age 16, students must pass a lengthy written examination and demonstrate their proficiency behind the wheel of an automobile. And yet, though teens and twentysomethings receive extensive training in these areas, they're summarily thrust out into the real world and expected to responsibly manage their financial lives without any formal personal finance training whatsoever. 

Clearly, financial choices matter. They're important because, over time, they profoundly influence one's prospects in life. With hindsight and thoughtful introspection, few adults would argue the validity of this point. Regrettably, a lifetime of poor financial choices can easily overwhelm the advantages that a pricey education and a lofty income afford. Reflecting on my first few years out of school as a newly minted professional, I was too enamored with the newfound joys and responsibilties of independence to be distracted by the mundane details of my financial life. Luckily, I was able to make ends meet and (at least initially) that was enough. Over time, however, as I adjusted to the pace of the work-a-day world, I somewhat begrudgingly recognized two facts: 1) An income is a temporary solution to a long-term problem, and; 2) It's impossible to make meaningful economic progress if you're living paycheck-to-paycheck. To be sure, these weren't comfortable discoveries; but they forced me to drastically rethink my lifestyle, examine its many component costs, and fine-tune my economic behavior in ways that would more productively allign my income and expenses. This process marked the beginning of a slow painstaking journey that, somewhere around the age of 30, propelled me to a net-worth of exactly zero. Comparing my financial views and attitudes as a naive adolescent to my economic world-view today, I'm horrified by just how costly my lack of financial savvy early in life could've been.

Though students tend to acquire the academic credentials to graduate college or enter the workforce, none receive as a formal part of their scholastic training the economic life skills they'll need to survive on a fixed budget while in college or to make meaningful progress as newly employed professionals thereafter. In my view, this is bad planning on an industrial scale... For young adults who're rapidly coming of age and on the cusp of their peak earning years, proficiency with money—the very lifeblood of their labors—will profoundly influence their future prospects, easily as much as whether or not they go on to attend their school of choice, GPA at graduation, or how much they'll eventually earn in the workplace.

As spiraling home foreclosures and mounting household bankruptcies somberly attest, financial illiteracy is expensive. Our information-age economy underscores a growing need to provide young people the fiscal life skills they'll need to avoid disastrous money mistakes and excel later in life. Nowadays, financial literacy is essential to students' well-being because—in a capitalistic society where creditors greedily solicit debtors and money can be as easily minted with a signed loan application as it can from our Treasury’s printing press—maklng smart financial choices has never been more difficult, or important. Because establishing and growing a personal balance sheet requires the continual and patient application of sound fiscal judgment to economic choices in everyday life, students who're about to swap the rigors of academia for the joys of the work-a-day world must practively develop the financial know-how to overcome the challenges they'll face throughout their financial lives. In practical terms, this means being able to: 1) create a budget and control personal spending; 2) accumulate and grow savings and competently manage investments; 4) establish and enhance one's good credit to minimize future borrowing costs; 5) combat inflation's wealth eroding effects; 6) balance a checkbook; and lastly, 7) understand how State and Federal taxes (which are determined based on information supplied to employers on IRS form W-4) determines the difference between "net" and "gross" pay.

Proficiency in all of these areas is fundamentally necessary if young people are to overcome the gale-force economic headwinds they face: student-loan and credit-card debt are worrisomely high; the spectre of inflation is a lifelong economic headwind; the middle-class is rapidly thinning; wages and salaries in once lucrative professions are worrisomely stagnant; domestic industries have and continue to be aggressively off-shored to lower-cost areas of production overseas; bankruptcy laws have been tightened, and, through the application of a means test, it's become harder for consumers to walk away from unsecured debt; personal savings rates have only recently bounced off records lows; and, with payday advance shops sprouting like weeds on most street corners, predatory lending is clearly on the rise. Meanwhile, young adults face sobering financial prospects on the distant horizon as well. The future solvency of Social Security and Medicare is hazy, at best, and employer sponsored pensions have been largely eliminated in favor of tax-advantaged retirement savings accounts.

Given the enormity of what's at stake for young peoples' future quality of life, it stands to reason that they can't afford to stumble haphazardly through their financial lives learning painful economic lessons the hard way. Young Adults & Money, the article that launched my personal finance column with Oakland’s Globe Newspaper, explores this topic in greater detail. Though many parents are understandably eager to see their children auto-morph into financially responsible and mostly self-reliant adults, an appreciation for the value of a dollar and a constructive wealth ethic seldom materialize on its own. In today’s hectic and increasingly fast-paced world, few parents are able to give this aspect of their children's educational development the time and attention it deserves. In truth, this is hardly surprising given that many parents are overwhelmed by the newfound complexity of their own financial lives. In the blink of a generation, it seems, our economy’s operating system has gone from industrial-age economy 1.0 to information-age economy 2.0.

The absence of youth financial literacy programming (and my wife’s gentle insistence that I get off my duff and do something about it) inspired an entrepreneurial venture that, over time, has blossomed into Money 101. This program’s value proposition is compellingly simple: though the time-value of money is impressive, the time-value of a sound and well-rounded financial education that, starting at a young age, is rigorously applied to everyday life is vastly more remarkable.

Which raises a titillating question: in dollar terms, what's a financial education likely to be worth over the course of an economically productive lifetime? Research by Annamaria Lusardi (professor of economics at Dartmouth College) and Olivia Mitchell (professor of insurance and risk-management at the University of Pennsylvania) offers tremendous insight. After quizzing people on simple calculations, such as compound interest and percentages, and comparing respondents' knowledge to their net-worth, Lusardi and Mitchell found that there is a strong positive correlation between an individual's fiscal knowledge and their wealth. Those who understood the mechanics of compound interest, for instance, had a median net-worth of $309,000 vs. $116,000 for those who missed these questions.

In light of low youth-financial literacy rates (according to Jumpstart's nationwide survey of high school seniors, one-in-two is financially illiterate), Money 101 is a vitally necessary supplement to a standard-issue one-size-fits-all academic education. Small workshop sizes, engaging lesson plans and an interactive learning environment will broaden students' fiscal awareness and reduce the widening gap between what they should know about managing money and what they learn about this topic in school. Although inspiration for Money 101 has come from my own life experience and many other sources, it's largely the result of my own thoughtful and fiercely independent efforts. As such, it’s free from the compromising influence of Department of Education beaurocrats and its educational agenda isn’t beholden to outside financial interests. In short, every aspect of this one-of-a-kind program is deigned to achieve a single laudable goal: to provide students the financial expertise they'll need to pursue their own passions and thrive in the real world. In short, I happen to view this as an enormous plus—and I suspect you might agree.

In closing, some of the articles I’ve written for Oakland’s Globe Newspaper (which address everything from the nuts-and-bolts of budgeting and the mechanics of credit scores to the basics of investing and planning for retirement) are posted to this site's home page and can be referenced by selecting from the drop down menu under Articles by Instructor.