Saturday, April 28, 2007

Mandatory financial education

I would fully support mandatory financial education at all stages of schooling, from elementary on up to high school. I would also happily accept an increased property tax to cover the cost. Consider it an investment. A few dollars today to ensure that I'm not suffering through inflated interest rates caused by the poor financial decisions of the upcoming generation.

There was never any real finance classes when I was growing up. A few teachers spent some time teaching us about stocks and managing a checkbook. No one ever mentioned what a W2 was, or how to fill one out, or what all those "tax" things it mentioned were. Every kid knows what taxes are, the government takes some of our money to do...well, whatever it does with it. But how many kids are explained to that taxes are fully 100% their responsibility, right down to the fees and interest they are charged should they make a mistake and short-change uncle Sam. Even if the IRS makes a mistake it falls to the taxpayer.

Taxes are perhaps the most important aspect of financial planning, one that can have a profound affect on your security. Defaulting on a credit card may leave you with bad credit but unlike the IRS, Citibank can't dip its hand into your savings account and take whatever it feels you owe it.

How many kids these days are going to graduate from High School knowing how to choose a 401k plan? Or understand how a two-cycle average daily balance interest charge works? Or how much mortgage amortization costs for a young loan? Not many, I'd imagine.

A week out of high school and these kids have entered a world where their contracts are binding, one mistake can put them into debt for decades and the burden for retirement savings is placed squarely on them. Suddenly they have to build credit but know what compounded interest is, let alone how it's calculated. Many adults have trouble with all of it.

It's no wonder we're in trouble. We're a nation of uneducated consumers breeding uneducated consumers surrounded by money-hungry corporations and institutions whose terms and conditions are constantly reviewed by a panel of experts with the single goal of taking as much money from our wallets as possible. How are we supposed to compete with that?

Education is the only line of defense we have against the onslaught of confusing contracts and hidden fees. The best place to begin this education is early in the classroom, or better yet; at home.

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