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.
by Elisabeth Donati | Dec 14, 2011 | Burning Financial Questions, Uncategorized, What you can do
Somewhere on our website or in an email of ours we have the question, “What is the single biggest question when it comes to creating financial freedom for yourself or teaching your kids about money?” And on occasion, someone sends us their question. This one was so basically wonderful, I had to post our short answers online for you all to read.
Question from C, one of our readers:
“My single biggest question when it comes to creating financial freedom for yourself or teaching your kids about money is…how to save (pay yourself first) when it seems you have nothing to save.” C
Jan got the email first. This is her answer to C…
What I can tell is this:
Paying yourself first is one of the most effective HABITS of financially free people.
Please know that I completely understand where you are coming from but the thing is, most of us put everyone and everything else first. Even if it’s one dollar ~ one dollar ~ that you put into a savings account on a regular basis, that act in and of itself will take hold and create the space for you to save more.
This is not something you can conceptualize, you just have to do it!
Jan
Jan then forwarded C’s question and her answer to me. This was my response:
Hi C,
Jan forwarded your question and her answer and quite honestly, I couldn’t have said it even better.
Pay yourself first is a simply a habit that, if financial security is important to you, you make happen.
You don’t blame the economy or your situation or anything else. You realize, and accept, that you are at cause…every choice you have made has let you to this current situation.
Now, if you want something else, you have to start doing things differently and choosing differently.
Thanks for asking. Now go pay yourself a dollar!
Elisabeth
Hope that helps you, too.
by Elisabeth Donati | Dec 8, 2011 | Financial Literacy, Uncategorized, What you can do
What I have noticed most in the past ten years of being entrenched in this financial literacy business (and it is a business even though there there’s more passion than profit in it…more on that later), is that human beings tend to make their lives complicated.
Most of these ‘complications’ take money and I have found that the people I have coached, usually didn’t stop to consider how much those complications were going to cost them.
What do complications look like? Well, this is where someone else might watch their words but I just like to call things as I see them, so here goes.
1) Houses: too big, too many, too expensive. All in the guise of ‘the investment’ and not wanting to pay taxes. Well, I have news for you. You pay those taxes whether you own the house or not. If you rent, they are built into your rent.
Now I know what you’re thinking…but what about owning my home when I retire and not having any more payments. That would be great if that’s what most people were still doing and if houses didn’t cost an arm and a leg now (at least where I live…it still makes sense in some parts of the country). Most people I know, regardless of age, still have mortgages…often because they got sucked into the ‘let’s take money out of the house and invest it in another house’ idea. Oh goody, now you have two houses to worry about.
The problem I see often is that the second house, hopefully a rental, doesn’t bring in enough cash flow to 1) pay for a property manager or 2) warrant the effort on your part playing said property manager.
What are your options? Well, it really depends on your lifestyle. If you’re married with children, you might really like owning your own home. But on the other hand, if you’re like me, and you like the freedom that comes from not having to be financially beholden to a house, then you might just want to rent and invest your money in something else.
2) Kids: too many, too late. Seriously…I love kids. You know that or I wouldn’t be teaching them regularly but again, I’m speaking from years of coaching experience and talking to people at financial seminars and such.
I notice that though everyone says how much they love their kids…and I certainly wouldn’t trade my son for anything!…if they had to do it over again, they admit they’d have one or two and have them earlier in life.
3) Pets: too many, too big, too small a house, wrong reason. OK, you know exactly what I’m talking about. You get the dog because your son or daughter says ‘they’ will take care of it but we all know who usually ends up taking care of it…YOU! And then the dog (or cat, or fish, or cow) gets sick and costs you thousands of dollars you didn’t have earmarked for a pet’s medical bills. You have no idea how often I talk to someone who is in serious debt because their pet got sick.
Again, don’t get me wrong…I LOVE dogs and cats and horses and cows and you name it, I’ll pet it but I’m so happy it belongs to someone else.
4) Cars: too new, too expensive, too little gas efficiency. Here’s the scoop…every summer we get scholarship applications from parents who want a scholarship to send their kids to our Camp Millionaire programs. We require them to complete simple income and expense statements and 99% of the time, the CAR PAYMENTS and expenses are sky high…often in excess of 30-40% of their low incomes. You can only imagine the rolling of the eyes I do when I see these figures and they want ME to give them a break!
Seriously, what are these people thinking? I teach our kids to buy used cars, pay them off and drive them until they die. And IF they want to buy a new car or a fancy car? Great…create the monthly passive income to service the payments or make enough money to buy it outright.
5) Stuff, aka Piddlyjunk: Look around your house and you know exactly what I mean. Look in your closet…what percentage of the clothing do you actually wear. Look in your garage (or better yet, don’t!). Look in your closets, your drawers, your sheds. Look under your clothing at the exercise equipment you bought with good intentions.
Piddlyjunk is everywhere and it’s only job, other than to make you happy for a brief moment, is to prevent you from being financially secure sooner.
Now there is nothing wrong with piddlyjunk. It’s just most Americans waste too much money on it…money that probably should have been invested rather than spent.
OK…I’m finished for today.
My point and invitation to you is to take more time considering how your choices are:
1) Going to complicate your financial life and,
2) Going to increase your financial responsibilities.
Then simply ask yourself how else you could satisfy that ‘want’ and uncomplicate your life instead?
Just something else to think about as we approach the new year.
by Elisabeth Donati | Nov 17, 2011 | Financial Literacy, Latest News, Uncategorized
When it comes to money, my son knows all about swiping debit and credit cards. He’s really good at spending money, both his and mine! When it comes to the finer points of saving, banking, and managing, however, he’s got some room to grow. (Having a financial education advocate for a mom is no guarantee, I’m sorry to say!)
Opportunities for imparting wisdom to my teenage son are getting harder to come by. He can smell a contrived conversation a mile away and, if I so much as utter the word “budget”, he heads for the hills. So when the chance to teach him something arises naturally I get excited. When it happens unwittingly, I’m over the moon and grateful!
Situation Arises
My son needed to withdraw some money from his savings account and had been putting off doing it himself. In my mind, he was either being lazy or suffering from a lack of confidence.
Opportunity Reveals Itself
Instead of scolding him or demanding he “just do it” (which I’ve been known to do), I drove him to the bank and walked him in. I grabbed a withdrawal slip and held his place in line while he filled it out. We approached the teller together and I prompted him to show her his student ID. While she completed the transaction, I asked her (for his benefit) if he could withdraw money without me as long as he showed her his ID. She said “yes”.
Meaningful Moment Occurs
As we walked back to the car, my son thanked me for going in with him. (Sigh.) And then he told me that he thought he was “probably ready to do it himself next time”. (Sigh.)
Why the sighs?
In our fast-paced, hi-tech world, teens can seem so confident, full of themselves, and resistant to our help that we forget they still need our guidance. They need practice and prompting and reassurance because, somewhere inside all that bravado, is just a kid still learning how to be an adult.
Here was an opportunity to help my son take another step in the right direction. I could have easily ignored the chance in front of me out of personal frustration. My sighs are an expression of deep gratitude that I did it another way.
by Elisabeth Donati | Nov 11, 2011 | Financial Literacy, Financial Literacy Principles, Latest News, Uncategorized
Author: Mr. or Ms. Anonymous Attorney
I got this in an email today and it’s good information from an attorney. Even If you dislike attorneys, you will love them for these tips.
Read this and make a copy for your files in case you need to refer to it someday. Maybe we should all take some of his advice! A corporate attorney sent the following out to the employees in his company:
1. Do not sign the back of your credit cards. Instead, put ‘PHOTO ID REQUIRED.’
2. When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the ‘For’ line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won’t have access to it.
What's in your wallet?
3. Put your work phone # on your checks instead of your home phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address.Never have your SS# printed on your checks. (DUH!) You can add it if it is necessary. But if you have It printed, anyone can get it.
4. Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place.
I also carry a photocopy of my passport when I travel either here or abroad. We’ve all heard horror stories about fraud that’s committed on us in stealing a Name, address, Social Security number, credit cards..
Unfortunately, I, an attorney, have first hand knowledge because my wallet was stolen last month Within a week, the thieves ordered an expensive monthly cell phone package, applied for a VISA credit card, had a credit line approved to buy a Gateway computer, received a PIN number from DMV to change my driving record information online, and more.
But here’s some critical information to limit the damage in case this happens to you or someone you know:
5. We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.
6. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).
But here’s what is perhaps most important of all: (I never even thought to do this.)
7. Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the Internet in my name.
The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit..
By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the credit checks initiated by the thieves’ purchases, none of which I knew about before placing the alert. Since then, no additional damage has been done, and the thieves threw my wallet away this weekend (someone turned it in). It seems to have stopped them dead in their tracks.
Now, here are the numbers you always need to contact about your wallet, if it has been stolen:
1) Equifax: 1-800-525-6285 1-800-525-6285
2) Experian (formerly TRW): 1-888-397-3742 1-888-397-3742
3) Trans Union : 1-800-680 7289 1-800-680 7289
4) Social Security Administration (fraud line): 1-800-269-0271 1-800-269-0271
We pass along jokes on the Internet; we pass along just about everything. If you are willing to pass this information along, it could really help someone that you care about.
