by Elisabeth Donati | Feb 24, 2012 | Financial Literacy, Latest News, Uncategorized
Most people in the United States don’t understand how our tax system works. The following story, written by David R. Kamerschen Ph.D. Professor of Economics originally was written about men and beer so I crafted a kid-friendly version for you. This should be taught in every economics class in the world!
How Our Tax System Works
US Tax System Explained
THE TAX SYSTEM EXPLAINED IN BURGERS AND FRIES
Suppose that every day, ten kids go out for burgers and fries and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this…
- The first four kids (the poorest) would pay nothing
- The fifth would pay $1
- The sixth would pay $3
- The seventh would pay $7
- The eighth would pay $12
- The ninth would pay $18
- The tenth kid (the richest) would pay $59
So, that’s what they decided to do.
The ten kids ate in the same burger joint every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily meal by $20”. Food for the ten kids would now cost just $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four kids were unaffected. They would still eat for free. But what about the other six kids? How could they divide the $20 windfall so that everyone would get a fair share?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth kid and the sixth kid would each end up being paid to eat their meals.
So, the restaurant owner suggested that it would be fair to reduce each kid’s bill by a higher percentage the poorer he/she was, to allow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
- And so the fifth kid, like the first four, now paid nothing (100% saving).
- The sixth now paid $2 instead of $3 (33% saving).
- The seventh now paid $5 instead of $7 (28% saving).
- The eighth now paid $9 instead of $12 (25% saving).
- The ninth now paid $14 instead of $18 (22% saving).
- The tenth now paid $49 instead of $59 (16% saving).
Each of the other five was better off than before. But, once outside the restaurant, the kids began to compare their savings. “I only got a dollar out of the $20 savings” declared the sixth kid.
He pointed to the tenth kid, “but she got $10!” “Yeah, that’s right,” exclaimed the fifth kid. “I only saved a dollar too. It’s unfair that she got ten times more benefit than I did!” “That’s true!” shouted the seventh kid. “Why should she get $10 back, when I got only $2? The wealthy get all the breaks!” “Wait a minute,” yelled the first four kids in unison, “we didn’t get anything at all. This new tax system exploits the poor!” The nine kids surrounded the tenth and taunted her until she couldn’t take it anymore.
The next night the tenth kid didn’t show up for her meal so the nine sat down and had their burgers and fries without her. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists, anchor people and elected officials, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore.
As always, just something to think about…
PS Thank you, David.
by Elisabeth Donati | Feb 9, 2012 | Financial Literacy, Latest News, Uncategorized, What you can do
When we travel, we tend to notice things in the context of our lives. Here are some examples:
My boyfriend is in the carpet repair niche, so everywhere we go, he looks for, and critiques, carpet installations and notices carpet that needs to be fixed.
If you’re in the bakery business, you spot bakeries and judge their baked goods based on what YOU bake.
If you own a nice fancy red car, you probably notice every time one passes you on the road.
This is often referred to as RAS or Reticular Activation (System) and it was introduced to the world by Tony Robbins. It’s related to, but not the same as, the part of the brain called the Reticular Activating System, the part of our mammalian brain involved with arousal and motivation.
Reticular Activation, in Robbins-speak, has to do with the way we filter information and in particular, the way we decide what is important to us and what isn’t.
OK, let’s go back to traveling. We tend to spend a lot of our time filtering the information, experiences, and especially our thoughts related to where we’re traveling, through who we are, what we do, our values, priorities, beliefs, previous experiences, etc.
The simple fact is…we can’t NOT do this. We’re wired to judge and question…it’s truly a survival mechanism at it’s primalness as it helps us determine what is safe and what is not so safe.
The following pondering is based on my recent travel experience to the island of Dominica and of course, it is filtered through the responsibility, self-reliance, financial freedom context that I currently live and work in. Read on…you’ll see what I mean.
Day One – Arriving on the Island of Dominica
After going on my annual internet marketing cruise where there is always an overabundance of food, and a few days back in Tortola where I spend six weeks last year, my boyfriend, Steve, and I set off to explore a brand new island called Dominica.
We got to the island, were picked up by a friend’s nephew at the airport who took us to the house where we would be staying in a small village (that’s what they call little towns) called Marigot. The house was owned by this same friend’s cousin who lived out of the country most of the time.
The house was only a few miles from the airport and when we arrived, we were greeted with a locked gate which had to be opened so that we could drive in and unload.
We were shown the house, the detached (and locked) kitchen which appeared to have everything we’d need and met a sweet man, Ian, who would be showing us around and getting us acclimated.
The nephew drove away, leaving us in Ian’s capable hands, we unpacked and looked around a bit and decided it was time to find groceries, as my boyfriend and I prefer cooking our own food to eating out. In Marigot, eating out isn’t really even an option anyway.
Ian led us, on foot, up a fairly steep hill and took us to a shop, a little hole in the wall place that had eggs, milk, a few canned goods and some other miscellaneous items. We asked Ian if there was such a thing as a grocery story in the area. He said to follow him.
When we arrived a few minutes later at his idea of a grocery store, we knew we were in for a little bit of an eating challenge. We live on fresh fruits and lots of vegetables and the store only had garlic and onions…you get the picture.
They said we’d need to go to Portsmouth in order to find veggies so we rented a car (a completely different tale) and drove a third of the way around the island to what they call the Second Town because it’s their second capital. The actual capital is in Roseau. Here’s a little map if you want to follow along:-).
Dominica Island
We got to Portmouth and found an IGA store, which I recognized from the US. We were able to find a few things we could eat (albeit incredibly expensive) and checked out. We asked someone about fresh veggies and they directed us ‘down town’ to what we’d call a little farmer’s market.
We went and found some lettuce and tomatoes and a couple of other things and made the curvy, nerve-wracking (mine) drive home.
End of Day One.
Day Two – Rest and Relinquishing Expectations
Day two started out with me realizing I was exhausted and just needed to rest…so I did. I took a few naps, read a bit, ate a bit and finally, mid-afternoon, decided to venture down to the beach via a fairly steep trail down the hill behind the house we were renting. Steve had gone with Ian a couple of hours earlier another way to the beach and wasn’t back. I went looking for them now that I was a rested.
I walked down the trail to the beach and was greeted by something that turned my stomach and made me realize I had made a choice that wasn’t going to bring me what I craved most…three weeks swimming in the Caribbean. I was greeted by a large area filled with garbage.
Needless to say, I was stopped in my tracks. It wasn’t just a few bottles or cans I could have picked up and put in a garbage bag. It was a HUGE area right on the beach up to the water. I contained my stomach and walked back to the house in sadness.
Upon asking Ian about it, he said that there are two main ditches (part of the car tale) that run from the top of both sides of the village up high down to the ocean. Heavy sigh…
At this point, both Steve and I had been questioning the location of our lodging and my initial choice to visit this island. We rested the remainder of the day, pondering other choices.
Day Three – Exploration, Rain Forest and The Emerald Pool
Dominica’s Emerald Pool
We spent day three driving around three-quarters of the island. The best part of our entire stay was finding The Emerald Pool…a place where a river comes tumbling down over a hill and falls into this beautiful pool.
We spent quite a lot of time there enjoying the rain forest, the people who tended the place and the water everywhere. It was one of the sweetest moments of our trip.
We moved on, stopped for some coconut water, finally ending up in Rosea where we found a larger store (but still little produce) and after a veryyyyy long drive, ended up back at the house after dark. We did find a roadside stand where we were able to get more grapefruits, some bananas and even some spinach!
By the time we got home, I was ready not to ever get in a car on that island again. I drove my boyfriend nuts (though he was a little nuts before this day:) and he was completely fine with my resolve!
Day Four – Leaving
That night, after spending time talking about options, knowing we weren’t prepared to pay upwards of $150-$200 a night for a nice hotel in a cleaner spot, we went to bed a little dejected and for me, very disappointed, feeling trapped in a place I knew I didn’t want to spend two more weeks, let alone two more days.
Steve woke up and said, “Let’s go home.”
It was more a statement about his desire to take care of me than anything and I am always eternally grateful to be with a man who is such a fabulous provider and protector of the ones he loves. Thank you, Steve.
We spent a few hours that day changing flights, answering questions about why we were leaving, packed and left the next day. Though it took us a few days to get home, I can tell you from the center of my being, the minute we left that island and the plane lifted off, the sadness and depression I had felt lifted as well.
The Financial Ponderings of Dominica’s People and Stated Famine
The day before we left, we went to their credit union to pay for our rental house. We were told by the lady (another relative) in charge of taking payments that the credit union’s funds were way down because the island was experiencing economic problems and even famine.
Wikipedia defines famine as a widespread scarcity of food, caused by several factors including crop failure, overpopulation, or government policies.
But I contend it can be, and is often, caused by something far more serious…a belief about life that is so deep that it takes something truly profound to change it.
After spending just four days on the island, what I saw and experienced was a hopelessness and lethargicness of the locals that was both causing their financial problems and perpetuating it. Think about it this way…
Let’s say you’re the average tourist with money and a desire to see a beautiful place, like Dominica. Most of us are more inclined to spend our hard-earned money in a place that is clean, safe and offers us at least a little bit of what we need (which is subjective) to be comfortable on our little journey. That includes an environment (air, water, land) that we perceive to be safe and clean to be in and decent food and water to eat and drink.
After learning that the islanders were experiencing famine, which was not evident by the size of the women (90% of those over 30ish were very overweight…but not the men?), my boyfriend and I couldn’t understand several things:
- If you know that some, if not much, of your island’s economy is dependent on tourist dollars, would you not clean it up so that the beaches, villages and other areas were clean and inviting?
- If you lived in an area where practically anything grows with great soil and plenty of water, would you not grow most of your own food, at least enough to feed your family?
- If you had any land at all, wouldn’t you attempt to grow food to sell to the local grocery stores so that locals and tourists alike had great and plentiful foods to choose from?
We had these thoughts but then remembered something HUGE. Ian, our caretaker at the house, had told us that the islanders were not that far removed from being freed from slavery and many of them still lived with the slavery mindset.
My initial, uneducated, reaction was one of questioning why they didn’t do more to make their lives better but then I remembered one of my favorite, and quite profound personal sayings…
You can’t get a chicken to think like a duck.
The Chicken and The Duck
What this means is that a chicken is a chicken and a duck is a duck (obviously:-). In a deeper sense, it means that the chicken sees things through it’s chickenness and the duck through its duckness and the freed slavery mentality can’t see (literally) the way out of its situation because it doesn’t have a freedom, improve oneself mentality through which to think.
(Note: I took the following from a website where I found exactly what I experienced on the island: http://www.outcrybookreview.com/MindSlave.htm.)
As a slave, man is set up to believe that his master is in charge of taking care of all of his needs. (Sound familiar?). He becomes dependent on this person for all things and even when he is eventually ‘physically’ free to take care of his own needs, improve things, etc., he can’t see to do it because he is still dependent on ‘them’ to provide it, change it, make it happen, etc.
So where my boyfriend and I saw opportunity after opportunity to change the way they were doing things, improve their situations, make money from selling goods to tourists, even improving the chances that tourists would come to the island in the first place, they didn’t see it…they couldn’t.
We saw so many people, young and not so young, just sitting amongst the garbage and projects left undone, in ruin…what was disgusting and unacceptable to us seemed normal to them.
Now I’m not suggesting that we (Americans) should go into areas, civilizing the people there or even suggesting that other cultures do it our way…I’m far from that view to be honest.
But the simple fact that in my opinion there were so many things the islanders could do for themselves to improve their basic living conditions, and they couldn’t see to do them, will always make me realize how grateful I am to have been born in the United States and to have lived the life I have lived so far with the experiences, skills, knowledge and beliefs that I have in my life.
The bottom line question for you is this:
Where in your own life do you think like a chicken when thinking like a duck might get you where you want to be in life?
Quack, Quack.
p.s. I am in no way inferring that chickens are inferior but how often do YOU see duck readily available in the store or on a menu? I’m just saying:-).
by Elisabeth Donati | Feb 6, 2012 | Financial Literacy, Latest News, Uncategorized, What you can do
This may be the shortest blog I’ve ever written.
It consists of one very deep, very enlightened question, based on over 10 years of experience in the ‘industry’ of financial education.
Riddle us this one, Bat Man…
“Why do public and private schools, all across America, purchase millions of dollars of textbooks and curriculum for required, tested subjects (often worthless from a life-skills standpoint) from for-profit companies, yet when it comes to one of the most important subjects a child will ever learn and master, money and investing, school administrators and teachers practically demand that the programs come from nonprofit organizations which are all too often supported by banks, credit card companies and other financial institutions?”
The answer(s) to this question may surprise, and I hope, disturb you.
What do YOU think?
by Elisabeth Donati | Feb 2, 2012 | Financial Literacy, Latest News, Uncategorized, What you can do
There you are, in unfamiliar territory (US or abroad), frustrated by the fact that the credit or debit card you had planned on using isn’t going through at a local restaurant or hotel. Now what do you do?
The one thing you do NOT want to have trouble with while traveling, especially out of the country, is money. You’ve probably worked hard to save money for your vacation and put in a lot of time planning it — travel arrangements, getting the right gear, making sure you have enough hormones (oh, that was me:-), etc. — and not being able to function because something has shackled your finances is almost as bad as getting sick when you’re traveling.
Luckily there are a lot of things you can do to prepare for a financially flawless vacation and since those things are fresh on my To-Do list from having been away for a few weeks, I thought it was a perfect subject for today’s blog.
You’ll find that I have included things to do that are both personal and business related, as well as some additional little tips my boyfriend and I have learned this trip:).
OK, here you go…
Vacation Budget
It goes without saying that you shouldn’t go on vacation without having a pretty good idea of how much money you should be taking with you for transportation, lodging, food and other expenses. Great budgets require great research so if you really want to make sure you have enough money to enjoy your trip to the fullest, do enough research and planning (including reservations) to know how much money you’ll need.
I call this Prior Proper Planning and without it, you’re simply asking for a rotten vacation.
Hint: Research and budget before doing anything else.
Personal and Business Expenses
We all have expenses that incur monthly or semi-regularly whether we are home or traveling. Somehow mortgage companies and landlords don’t have a sense of humor when it comes to our travel plans getting in the way of receiving their payments! Making sure your bills are paid on time is easy with a little planning. Here’s what you do:
First, make a spreadsheet (on paper or on your computer) of your personal and business expenses (if you have a business), when the bills are due, how you will pay them and who will pay them. You have several options for making sure the bills get paid:
- Put the bills on automatic payments through the company itself. This is very easy with utility bills like electricity, gas, phone, cable.
- Set up the payments to be done in the future with your bank’s Bill Pay program.
- Leave pre-written checks (sign and date) already in addressed envelopes with stamps with a trusted friend with the date on a sticky note of when it should be mailed.
- Simply prepay the bills (if they are the same amount each month) for the length of time you are scheduled to be gone.
- If you own a small business with an employee or two, you need to make plans for how those employees will pay for general and emergency expenses that come up while you’re away. The easiest way to do this is to simply leave some signed checks with one trusted employee with strict instructions on what they can purchase and how much they can spend on those purchases. Another way to do it is to set up accounts with local vendors when possible so your employees can simply order what they need to keep your business running smoothly while you’re away.
Hint: think about bills you have that aren’t monthly, for instance, car and rental insurance, car registration renewals, etc. Many people pay a year in advance for things like this so know when these expenses show up in your mail box so you can prepare for them.
Vacation Expenses – paying for your experiences
OK…this is where detailed planning is critical because as we all know, if you get into a situation where you can’t access your money, you can be in BIG trouble, depending on where you’re traveling.
In the United States, there are lots of options because making phone calls is easy, but if you’re out of the country, don’t have internet access to look up phone numbers, etc., you can be in a world of financial hurt trying to figure your way out of a situation.
The following are things you must do to make sure that spending your hard earned money is easy (but not THAT easy:-).
- Call every bank with a debit or credit card you plan to use and let them know when and where you will be traveling. They put this information into your file so when out-of-the-country charges come through, your card isn’t flagged so you can’t use it anymore.
- It’s a good idea to even call the banks you don’t plan on using as well…just in case.
- Call every credit card company you have and give them the same information. Note: even when you do this, sometimes they don’t get the information to the right people and you have to call again while you’re traveling (ask me how I know this!).
- Leave the credit cards, debit cards, store cards, library cards, discount cards, local restaurant point cards home. They just take up space in your wallet and you don’t need them.
- Make sure there is enough money in your personal accounts to handle the expenses at home and away. It’s a great idea to use a totally separate account for your traveling money just to make sure nothing happens to ALL of your money if someone gets a hold of one of your cards.
Cash vs. Credit vs. Debit vs. Traveler’s Checks
The question always arrises about how much cash to take on a vacation. The answer will be based on the research you do about the country or countries you’ll be traveling through. Many countries take US dollars but now all.
Find out as much as you can before hand if you’ll need to exchange money at a local back when you get in and before you do, KNOW the exchange rate and carry a reliable calculator. Know that if you don’t have the local currency you will often pay more for things because the locals don’t always have a way to make the right change back to you (ask me how I know this, too:).
Traveler’s checks can be another option but they have a lot more cons than benefits for most people.
Here’s an article with a lot more of the pros and cons of using different types of currencies on your trip.
Running Out Of Money
This has happened to the best of us for a variety of reasons: money is stolen, we spend more than we allocated, things are more expensive than we anticipated, we find that rare antique we just have to have shipped back to the states:-).
Have a plan for getting more money into your accounts. Whether through an investment account, CD, money market, stock account, or even a trusty relative with money (ask before you leave!), make sure the accounts are set up to wire money or direct deposit more funds into the bank account(s) you’re using for your travel expenses.
Email Accounts and Passwords
So there you are at a local internet cafe, after searching and asking several locals, ready to check on your email and see what’s going on back at home. You try to access your Hotmail account but, for whatever reason, the password you’ve always used doesn’t work so you click, “Get Password.” The system wants to send the password recovery or reset email to your Yahoo account which you haven’t used in a long time and can’t access either because you don’t remember that password.
You then try another option but the system needs to send you a confirmation code via a ‘text’ to a phone number you don’t have anymore or doesn’t have texting turned on and there’s no way to change the number because you can’t get into your email!
Don’t laugh. This exact thing happened to my partner during our last trip to the Caribbean. Luckily, he was able to use his business Gmail account but the entire vacation he felt like he might be missing important emails.
I’m convinced the answer is using Gmail for all of your email needs…at least while you travel. Gmail gives you the option of pulling in all of your other email addresses and even allows you to send emails out of Gmail ‘as if’ you were sending from your other emails.
Hint: always carry your important passwords with you in a little black book or on a simple computer program or phone app or even in a Google Doc you can access from anywhere.
Hint: make sure all of accounts and web tools you use have the correct backup/emergency numbers tied tied to them (bank, investment, utility, online email systems).
Car Rental Deposits
If you’re planning on renting a car, be aware that the car rental company can require a fairly hefty deposit on the car. They’ll require a credit or debit card for the deposit and if you don’t have enough money in that account, or enough credit available, it may tie up a large percentage of the money you were going to spend on other things, like hotels, foods, and excursions.
When you return the car, assuming it’s fine, know that it can take a couple of days for the deposit hold on your card to be removed so you still won’t have access to that money.
Travel Plans
Itemize your travel plans in detail, including hotel names, addresses, phone numbers, confirmation numbers, airline flights, times, etc. Give a copy of this list to each member of your party and give a copy to at least one other person you trust back home.
Prescription Drugs
If you use prescription drugs and are going to be gone for more than your normal prescription covers (i.e., a month), and you want your insurance company to pay for it like they normally do, you need to call them ahead of time to let them know that you will be traveling for a period of time and need to purchase enough supply to carry you through. Give your regular pharmacy plenty of notice to get these prescriptions ready for you.
When you pack, make sure you keep all needed prescriptions with you at all times. It’s easy to replace clothing but not so easy replacing the drugs that may be keeping you healthy.
Phones and Internet Access
With our current reliance on the internet and cell phones, we often feel disconnected and helpless if we can’t get in touch with someone we need to back home or at the office.
Depending on where you’re going and how long you’ll be there, some foreign phone companies now offer unlimited calling to the US and Canada for reasonable fees. In the BVI, I was able to get a cheap phone and pay $99 a month for unlimited calling and it was great to feel like I could reach out at any point and connect with Jan in my office and my family and friends.
Make sure to do your research and know what is available where you’re going in terms of internet access and phone calling plans. Skype is often a great solution for phone calls and communication with others as you can make calls from anywhere with your own computer and smart phone with a good connection and a pair of headphones specifically designed for internet calls.
Hint: make sure you put enough credit on your Skype account BEFORE you leave home because doing it while you’re away is a hassle.
Hint: even though you might have all of your important contacts in a smart phone or other electronic device, it’s important to have them in written form in a wallet or backpack or your luggage as well. If you run out of juice on your device or heaven forbid, you lose it or it gets stolen, you might be hard pressed to figure out how to contact important people. Better yet? Memorize important numbers like we used to!
Taking Care of Business
We’d all like to be able to leave our businesses for a period of time and not worry about them but for most of us, we still need to be reachable because, ultimately, the business and our employees livelihood, are still 100% our responsibilty.
If you’re business is dependent on one or two employees, make backup plans just in case one of them gets sick, quits, has an accident, or otherwise can’t fulfill his/her job responsibilities. Having to cancel your vacation because your business is about to fall apart is no fun at all but it’s happened to people with the best laid plans.
Summary
Bottom line, you need to think through the problems that COULD present themselves and prepare for those problems the best that you can. In the limited traveling I have done both in and out of the United States, my experience has been that if something goes wrong, there are plenty of people who line up to help you solve the problem.
It is my theory that most human beings have great hearts and find purpose and satisfaction helping others. My experience has always backed up this theory. Thinking about this in terms of the belief systems that we talk about in all of our financial camps, you generally experience that which you believe in your core.
So, to make your next vacation a financial success, plan, plan, plan. And then let it go and have a great time!
by Elisabeth Donati | Jan 5, 2012 | Financial Literacy, Latest News, Uncategorized, What you can do
A Financially Literate Society – The Five Critical Missing Pieces
If it’s one thing most of us adults are painfully aware of, it’s that we weren’t taught how to manage or invest our money when we were young so that we could live independent, financially free lives as adults. We went to school ‘assuming’ we were learning what we needed to be successful, self-reliant adults. What a charade that was for us and continues to be for our youth.
Most of us wish we’d learned a headful of useful life skills rather than made to memorize and learn worthless information we’ve never used since high school (or dare I say college!).
To make matters worse, parents give lip service to needing to teach their kids about money but rarely do they. They might nag them to save and even to give but they don’t teach them how to grow up and make their own money OR invest the money they do earn or make so it will grow and produce regular cash flow. This is because our society, and hence our schools, are still so focused on:
- Getting kids into college. (Despite the facts that more high school students don’t go to college than do and a larger share of millionaires either never went to college or dropped out.)
- Indoctrinating students into the ‘gotta get a job’ mentality. They don’t expose students to the many ways they can ‘make’ their own money rather than being a slave forever ‘earning’ money by working for others. It seems that politicians are continually talking about creating more jobs but who do they think will create those jobs? It certainly isn’t the employee.
- Getting money from the state. Tests, tests, tests. Who believes the mis-guided, ridiculous notion that teaching kids all myriad of information they will rarely use again and don’t find relevant at all…and then testing them on this it is of benefit? (Ask any kid why he or she is learning what they are learning and they’ll roll their eyes. THEY know it’s a game.)
Yes, there are financial education courses being implemented all over the United States but most of them are boring and are taught in non-effective learning environments by people who have little knowledge or experience investing money themselves. And the online classes are just as boring and ineffective.
Financial Literacy: The Five Missing Pieces
FIVE MISSING PIECES
So what will it honestly take to create a society full of adults who know how to make money themselves and know what to do with it in order to produce regular streams of money to live on when and if they don’t want to work anymore?
It will take the following five pieces to make up what’s missing from most financial education programs, both private and public: The Right School District, The Right Parents, The Right Instructors, The Right Curriculum, and The Right Students.
Let’s take a deeper look at each missing piece to see how you can implement financial education programs for your kids and students that actually stick. And effective means that your students remember the information AND apply it to their lives.
MISSING PIECE #1: The Right School District
Let’s face it, there are a lot of school districts in the United States that talk about getting financial literacy into their schools but most make a huge mistake in the implementation. Here’s what usually happens…
The school board, principals and district presidents tell the parents and community that they have decided to make financial education a priority and are going to start using money curriculums in their children’s classrooms. Sounds great, right?
Yeah, they’re on the right track but here’s the problem…the powers that be sit around and try to answer this question, “What grade should we teach financial education in?” They then decide on a particular time of year and type of class. The problem is not the question but the answer. The right answer is EVERY GRADE. The reason experts have written extensive pieces entitled, “Financial Literacy Doesn’t Work!” is because it’s impossible to instill a critical life skill like money making, managing and multiplying into one semester or one grade!
Think of it this way…math, English, reading, writing and geography wouldn’t ‘work’ either it it were only taught for 11 weeks during the child’s life. There is a reason kids take math and English and everything else for years…so they’ll learn it and remember it for a long, long time and be able to actually apply it to their lives.
You can’t teach kids about saving and investing in 11 weeks, no matter the age, and expect them to really get it.
THE SOLUTION:
School districts must require that their students are provided with fun, experiential money classes starting in the 4th or 5th grade. Ten years old seems to be when kids start understanding the concept of interest and how money can grow, as well as other financial education principles critical to financial freedom.
The school’s curriculum must build upon the foundation each year, and finally, when the child is ready to graduate from high school (or before for those who don’t make it all the way), include how to ‘Move Out’ successfully…how to rent apartments, buy cars and insurance, deal with taxes, start businesses, make wise credit and debt decisions and especially how to invest in assets that product cash flow.
This way when they graduate from high school, they’ll know exactly what to do with their money!
MISSING PIECE #2: The Right Parents
There are parents who seem to be paying attention to what their children are doing and parents who don’t seem to have a clue. There’s not a lot we can do to influence the second group, but parents who care about their children’s futures know they must do two things:
- Demand that financial education be taught in their children’s schools in a way that is relevant and effective (see The Money Game)
- Do everything they can to make sure they are instilling the best financial habits and principles they can at home (see The Ultimate Allowance).
The challenge is that so many parents plead “too busy” or “too ignorant” but neither of those excuses gets parents off the hook. They’re YOUR kids…teach them about money even if you don’t know how yourself! There IS no excuse for not teaching your children about money.
THE SOLUTION:
Look deeply at what you’re teaching your kids about money. For a great article on how to do this, download ThreeKeysReport. In this article you’ll learn the three things you must do to make sure your kids are prepared to handle money as adults, but here’s a hint:
- Talk to them about money every chance you get.
- Involve them in the family finances (budgets, investment meetings, bank visits, paying bills, etc.).
- Give them plenty of practice with their own money. The Ultimate Allowance teaches you how.
MISSING PIECE #3: The Right Instructors
Fact: Financial education is a specialty course. That means it requires specific training in order to teach it. And, because the topic of ‘money’ often comes with all sorts of preconceived thoughts, beliefs and attitudes, it’s not a matter of simply handing a financial curriculum to any teacher and assuming they’ll be able to effectively teach their students about money. It would be nice if it were that simple…the reality is that it’s not.
In order for financial education to work, we must have financial literacy instructors who:
- Have personal experience saving and investing money so they can sound intelligent talking about the subject and answer the students’ questions. They don’t need to be experts but they sure need to understand the topic.
- Have a passion for teaching money to kids and teens. Students learn better when their instructor is excited and passionate about what they are teaching.
- Understand and have training in accelerated learning: teaching techniques that teach to all learning styles and make learning fun, relevant and effective for all.
- An ability to address money beliefs and attitudes in a non-judmental way.
With so much of our education system going digital, there is often talk about putting financial education into computer games and having kids learn online but it doesn’t work nearly as well as a tangible, interactive, experiential, life-simulated game.
Money, and therefore the learning of it, is best experienced for real. In other words, financial education works best when it’s in the form of a money game, where the kids get actual paychecks for time and energy they expend, learn to manage their money, learn to ‘pay themselves first’, save and then invest. Throw in lessons on credit, assets, liabilities, debt (good and bad), spending, budgets and more and now you’re talking about developing some pretty financially astute young adults.
THE SOLUTION:
Look for instructors at your child’s school who have a passion for financial education. Start with the math and economics teachers and go from there. You never know who has gotten it under their skin and might be ready to take it on. And then, if you have to, buy The Money Game for that instructor to get them going. It might be the best investment you ever make in your child’s education.
MISSING PIECE #4: The Right Financial Education Curriculum
Talk to just about any teacher who has attempted to teach financial education and they will affirm that most financial literacy programs are boring as all get out. Yuk…it’s no wonder our kids rarely learn it the first time…they are bored out of their minds.
Financial literacy requires an active, entertaining, multi-sensorial financial literacy curriculum, preferably in the form of a game that is fun, relevant and simulates the actual making, managing and multiplying of money.
THE SOLUTION:
When you or your child’s teacher go looking for a curriculum, expect to get what you pay for. The free programs are mostly created by big corporations who haven’t a clue how to teach financial education the right way and the topics and lessons they decide to teach reflect their priorities (banking, mutual funds, credit cards).
Do your research. Choose a program that is activity oriented and that includes an overview of entrepreneurship and investing in assets.
Note about community speakers: Don’t assume they 1) know how to present to kids or 2) that you know what they are going to say. Ask to see them in action first and get an outline of what they want to talk about.
MISSING PIECE #5: The Right Students
For any education to work, you must have students who are engaged, excited about learning and feel that the information is both relevant and worthwhile to learn.
The saying “You can lead a horse to water…” comes to mind when it comes to financial education. Just because you set out to teach your kids or your students how to make, manage and multiply their money doesn’t mean they will necessarily listen, participate or learn the information in a way that inspires them to use the information in their own lives.
THE SOLUTION:
You have to remember that it’s YOUR responsibility to make the information relevant to their lives. Students who are prepared to learn and kept engaged throughout the process are the ones who actually learn! Enroll them in the topic with plenty of questions and discussions, games, activities, fun, personal stories and a whole lot more. If you aren’t familiar or trained in accelerated learning, take a course, buy a few books, make a phone call (to me!).
If your students are bored, it’s because your teaching is boring!
In summary, what makes financial education programs either work or not are the presence or absence of the following missing pieces:
#1: The right school district.
#2: The right parents.
#3: The right instructors.
#4: The right financial education curriculum.
#5 : The right students.
If your financial education programs are missing one of these pieces, go looking for the missing ones and don’t stop until you find them! If you don’t have a program yet, I support you in making it happen now!
by Elisabeth Donati | Dec 15, 2011 | Financial Literacy, Uncategorized, What you can do
I find it absolutely amusing that so many financial planners, financial newsletters writers and money magazines editors continue to tell people they just need to start saving more money, thinking this will actually have an affect on their behavior. As you probably have already guessed, this approach doesn’t work very well.
I know this is a long stretch, but I just finished watching The Mission. In this true story, Jeremy Irons plays a Spanish Jesuit who goes into the South American wilderness to build a mission in the hope of converting the Indians of the region. Robert DeNiro plays a slave hunter who is converted and joins Irons in his mission. When Spain sells the colony to Portugal, they are forced to defend all they have built against the Portugese aggressors who ‘secretly’ want to use the Indians as slaves. Suffice it to say that the ending left me in tears for quite some time, again questioning how human beings can do such atrocious things to one another all in the name of making money.
If you have been reading my posts for awhile, you know that I am a huge proponent of teaching kids (and adults) the difference between ‘earning’ money and ‘making’ money. Most people think these things means the same thing.They don’t.
EARNING money is when you trade your time and energy for money, either by the hour, the week, the month or even by the project. The imporant piece is that you only get paid ONCE for that amount of spent time and energy on your part.
MAKING money, however, is when you use your time and energy and creativity creating something that will pay you over and over again…like a book or a profitable website, or investing in a stock that continues to pay dividends or investing in a house that brings you monthly positive cash flow. You expend your energy once and then reap the rewards, sometimes forever.
The piece I can never understand is this: why does our government and the bulk of Americans, constantly talk about needing to ‘create jobs’ when in fact, we need to create businesses that help, 1) individuals to support themselves without being at the whim of an employer and/or, 2) help individuals create businesses that will need employees and hence create jobs for those who are unwilling or not wanting to create their own job for whatever reason.
Back to the movie…in trying to help His Eminence make a case for letting the Indians be, people from all sides tried to sway him. The priest because he say that the Indians were good human beings, lived naturally and peacefully and were truly full of love and community.
The other side, however, kept telling His Eminence that the Indians were ‘animals’ and as such, should be used, legally, for slaves. In other words, let his fellow human beings make money by using the time and energy of the slaves in whatever way they wished.
The piece that I can’t reconcile is why some human beings use the time, energy and creativity of others, reward them aptly, appreicate them for the part they play in that person’s success (even calling them ‘the team’!) and more while others use other’s time, energy and creativity with no thought to what they are putting that person through.
I’m not sure there is a point to this post…it might just be my contemplating humanity. It might actually be a movie review for The Mission and yet it mght actually have a point.
At this juncture, I’m going to just stop and say…Just something else to think about.
