Thursday, September 16, 2004

Teaching Kids about Money: Why It's Not Just Fun and Games - Knowledge@Wharton

Teaching Kids about Money: Why It's Not Just Fun and Games - Knowledge@Wharton

We all know that finance is important not just for our business lives, but also personal lives. Yet with millions of people living paycheck to paycheck and facing mounting debts, even a quick look around leads many (Alan Greenspan among them) to conclude that many people do not understand finance.

While it is definite that some of the blame stems from laziness (too high of discount rates) and the fact that finance is not offered (or if it is offered it is taught by non finance people) in high schools. But part of the fault also must fall on our shoulders because we don't make finance interesting enough.

As Wharton's Knowledge Journal points out, teaching finance is not as easy at it appears. Why? Many students have no reference point and thus little interest (no pun intended).

Don't believe me? Ask a random group of college students (and not just business majors) how many have direct experience with stocks or bonds. Or better how many find financing decisions inherently interesting?

One way to increase interest (and hopefully learning) is to make the material relevant to students. This may mean using different examples. Examples that make perfect sense to us, may mean nothing to those just starting in finance.

Where should the examples come from? Anywhere! Sports work well--for instance see Using Football to teach Finance by Rodney Paul and some other guy) or music or the news or just about anywhere.

In addition to using different examples, different formats can also help. This might mean using new technologies (web based, or interactive lessons, or even self-paced tutorials to supplement classroom learning) or different formats (putting classes to music etc). Of course it is more work, and I'll be the first to admit that I do not do it as well as I should, but it does work.

You do not need to do it alone. While you can argue as to the effectiveness of my efforts, I would argue that the FinanceProfessor blog and newsletter help in this endeavor by bringing examples to light that are more timely and, in some cases, more interesting than can be found in some texts.

The WSJ Classroom Edition also helps in this area by making business (not just finance) more interesting. This is done by reprinting stories from the WSJ that students can relate to. Krishnan M. Anantharaman is managing editor of The Wall Street Journal Classroom Edition and is in charge of story selection. In his words the stories "have to relate to a teenager's life in some way. I happen to think all stories in the Journal are educational in some form. The trick is finding ones that teenagers can really relate to." Well said! In fact the same is true for virtually any topic in finance!

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