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), these classes didn't provide the practical fiscal training I'd need to competently manage all aspects of my financial life in the real world. 

Though it's widely agreed that hard work and scholastic achievement will enhance one’s lifetime earning potential, there's a lot to be said for knowing how to constructively manage the economic power that a steady paycheck provides. Regrettably, this sort of thing isn't taught in school and, often times, financial literacy is seldom acquired at home. Young adults spend years in a classroom setting learning the academic basics. To obtain a driver's license, they must pass a lengthy written examination and demonstrate their proficiency behind the wheel of an automobile. And yet, remarkably, although teens and twentysomethings receive extensive training in so many areas, they're expected to master the economic calculus of everyday life without any personal finance training whatsoever. To be sure, this is bad planning on an industrial scale.

Clearly, financial choices matter. They're important because, over time, they profoundly influence one's opportunities and prospects later in life. With hindsight and thoughtful introspection, few adults would argue this point. What's more, over the course of students' professional lives, imprudent financial choices can easily overwhelm the advantages that a pricey education and an outsized income provide. Reflecting on the first few years of my life out of school as a salaried professional, I was too enthralled by the joys and responsibilties of my newfound independence to be overly concerned about the mechanics of my financial life. I did well enough to make ends meet and that (for a while) was enough. As I acclimated to the rigors of the workplace, 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 consistently living paycheck-to-paycheck. To be sure, these weren't comfortable discoveries; but they forced me to radically rethink my lifestyle, examine its component costs, and fine-tune my economic behavior in ways that would more productively allign my income and expenses. This slow deliberate process marked the beginning of a slow painstaking journey that continues to this day. At around age 30, I worked my way up to a net-worth of zero. On hindsight, 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 sophistication early in life could've been.

Though students generally receive the academic tools to graduate college and seek employment, none acquires as a mandatory part of their scholastic training the economic life skills they'll inevitably need to survive on a fixed budget while in college or to make meaningful progress as newly employed professionals thereafter. For young adults who're coming of age and diligently preparing for their peak earning years, proficiency with money—the very lifeblood of their labors—will profoundly influence their future prospects; easily as much as their school of choice, GPA at graduation, or how much they'll eventually go on to earn in the workplace.

As spiraling home foreclosures and mounting household bankruptcies somberly attest, financial illiteracy is expensive. Our information-age economy underscores a mounting sense of urgency when it comes to providing young people the hands-on fiscal acumen they'll need to avoid disastrous money mistakes. Nowadays, financial literacy is universally relevant to students' future welfare because—in a capitalistic society where creditors solicit debtors and money can be as easily minted with a signed loan application as it can from our Treasury’s printing press—making smart financial choices has never been more difficult, or more important. Establishing and nurturing a personal balance sheet requires patience and the continued application of sound economic judgment to everyday life. Students who're on the cusp of becoming full-or-part time taxpayers must acquire and develop the financial skills that, as the years pass, will enable them to get ahead. In practical no-nonsense terms, what this means is that young people must know how to: 1) budget effectively and use personal finance software to monitor and control their personal spending; 2) accumulate and intelligently allocate savings; 3) competently manage investments; 4) establish and improve their credit scores 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) account for the sizeable difference between "net" and "gross" income.

Proficiency in all of these areas is essential if young people are to overcome the gale-force economic headwinds they face: student-loan and credit-card debt are alarmingly high; inflation is perennial; the ranks of the middle-class are thinning; wages and salaries in once lucrative professions are worrisomely stagnant; white and blue collar jobs are being off-shored to lower-cost areas of production overseas; bankruptcy laws are more stringent than ever, and consumers are less able to walk away from unsecured credit card debt. Meanwhile, personal savings rates are worrisomely low and, with payday advance shops sprouting up like weeds on most street corners, predatory lending is clearly on the rise. Additionally, young adults face sobering financial circumstances 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 replaced with tax-advantaged, self-funded and personally managed retirement savings accounts.

Given the enormity of what's at stake for young peoples' future quality of life, they can't afford to stumble haphazardly through their financial lives learning painful economic lessons the hard way. Young Adults & Money, which launched my personal finance column with Oakland’s Globe Newspaper, explores this topic in forensic detail. Though many parents are understandably eager to see their children morph into financially responsible and mostly self-reliant adults, a nuanced 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 that it deserves. In truth, this is hardly surprising since many parents are understandably mystified by the growing complexity of their own financial lives. In the blink of a generation, 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 do something about it) inspired an entrepreneurial venture that, over time, has blossomed into Money 101. This program’s value proposition is eloquently 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 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 illuminating insight. After quizzing people on simple calculations, such as compound interest and percentages, and then 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 troublingly 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 educational supplement to a standard-issue scholastic education. Small workshop sizes, engaging lesson plans and an interactive learning environment will broaden students' fiscal awareness and bridge the enormous gap between what they should know about managing their money and what they learn about it in school. Although inspiration for Money 101 comes from many sources, it's largely the result of my own thoughtful and fiercely independent efforts. As such, it’s free from the compromising influence of DOE (Department of Education) beaurocrats and its educational agenda isn’t accountable to outside financial interests. In short, every aspect of this one-of-a-kind program is designed to satisfy one goal: to provide students the fiscal tools and confidence to doggedly pursue their own interests, and, ultimately, prosper in the real world. I happen to view this as an enormous plus—and I suspect you might agree.

In closing, many 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 accessed by browsing the drop down menu under Articles by Instructor.