Teaching school kids about money - what are the real life examples of math, budgeting, finance?
"I am a numbers guy, the math is great. Instead of ""jane was twice her son's age when he married, and is now 1.5 times his age....."" questions in math class, I think the math problems should mostly have dollar/pound signs in front of them.  In general, I like the idea of relating to the kids' situations as much as possible. When my daughter (14) makes a purchase, I'd ask her to be aware of how many hours she had to work to make the money she plans to spend. Was it worth 4 hours babysitting to buy an iPad case? Was it worth 2 to buy lunch that we could have made you at home?  (Note, the 'convert price to hours worked' is a concept that works great when teaching budgeting to anyone, not just kids.)  The math of tax and discounts for comparison shopping works great as well so long as they understand value. A $400 sweatshirt at 50% off isn't really a bargain, in my opinion.   Next, the math of balancing a checkbook should be high on the list. Accounting for the checks that didn't clear but are outstanding is beyond many people, amazing enough.  For the sport fan, there are unlimited math problem one can create for game scores, stats for the season, etc. Young boys who will fall asleep during a stats class will pay attention if instead of abstract numbers, you add 'goals' 'home runs' etc, after the numbers.  (Note - this question is probably outside the scope of the board, no right or wrong answer. But I love it as a question in general, and if not here, I hope it finds a good home.)" If these are children that may be employed, in a few years, it may well be worth walking them through some basics of the deductions around employment, some basic taxes, uses of banks, and give them enough of a basis in how the economy of the world works.  For example, if you get a job and get paid $10/hour, that may sound good but how much do various things eat at that so your take-home pay may be much lower?  While this does presume that the kids will get jobs somewhere along the way and have to deal with this, it is worth making this part of the education system on some level rather than shocking them otherwise. Rather than focusing on calculations, I'd be more tempted to consider various scenarios like how do you use a bank, what makes insurance worth having(Life, health, car, and any others may be worth teaching on some level), and how does the government and taxes fit into things. While I may be swinging more for the practical, it is worth considering if these kids will be away in college or university in a few years, how will they handle being away from the parents that may supply the money to meet all the financial needs? "My education on this topic at this age range was a little more free-form. We were given a weeklong project in the 6th grade, which I remember pretty clearly:  Fast forward 6 years (we were 12). You are about to be kicked out of   your parents' house with the clothes on your back, $1,000 cash in your   pocket, your high school diploma, and a ""best of luck"" from your   parents. That's it. Your mission is to not be homeless, starving and   still wearing only the clothes on your back in 3 months. To do this, you will find an apartment, a job (you must meet the qualifications fresh out of high school with only your diploma; no college, no experience), and a means of transportation. Then,   you'll build a budget that includes your rent, estimated utilities,   gasoline (calculated based on today's prices, best-guess fuel mileage of the car, and 250% of the best-guess one-way distance between home and job), food (complete nutrition is not a must, but 2000cal/day is), toiletries, clothing, and anything else you want or   need to spend your paycheck or nest egg on. Remember that the laundromat isn't free, and neither is buying the washer/dryer yourself. Remember most apartments aren't furnished but do have kitchen appliances, and you can't say you found anything on the side of the road. The end product of your work will be a narrative report of the first   month of your new life, a budget for the full 3 months, plus a ""continuing"" budget for a typical month thereafter to prove you're not just lasting out the 3 months, and all supporting   evidence for your numbers, from newspaper clippings to in-store   mailers (the Internet and e-commerce were just catching on at the time, Craigslist and eBay didn't exist yet, and not everyone had home Internet to begin with).  Extra Credit: Make your budget work with all applicable income and   sales taxes. Extra Extra Credit: Have more than your original $1000 in the bank at   the end of the 3 months, after the taxes in the Extra Credit. This is a pretty serious project for a 12-year-old. Not only were we looking through the classified ads and deciphering all the common abbreviations, we were were taking trips to the grocery store with shopping lists, the local Wal-Mart or Target, the mall, even Goodwill. Some students had photos of their local gas station's prices, to which someone pointed out that their new apartment would be on the other side of town where gas was more expensive (smart kid). Some students just couldn't make it work (usually the mistakes were to be expected of middle-class middle-schoolers, like finding a job babysitting and stretching that out full-time, only working one job, buying everything new from clothes to furniture, thinking you absolutely need convenience items you can do without, and/or trying to buy the same upscale car your dad takes to work), though most students were able to provide at least a plausible before-tax budget. A few made the extra credit work, which was a lot of extra credit, because not only were you filling out a 1040EZ for your estimated income taxes, you were also figuring FICA and Social Security taxes which even some adults don't know the rates for, and remember, no Internet. Given that the extra-extra credit required you to come out ahead after taxes (good luck), I can't remember that anyone got that far. The meta-lesson that we all learned? Life without a college education is rough."
"In the UK there is a School Rewards System used in many schools to teach kids and teens  about finance and economy. In the UK there is a framework for schools called ""Every Child Matters"" in which ‘achieving economic well-being’ is an important element. I think is important to offer to offer a real-life vehicle for financial learning beyond the theory." Hey thank you so much for the reply!  So the interview is a late stage one - I've gotten past the concepts and honestly the role *shouldn't* be that heavy on the finance side   ...what I'm looking at now is actually having to mock up a financial forecast in a real estate development scenario.    I'm getting the case in advance and have to prepare a presentation.  So right now, I really need the ABCs of forecasting specifically.  But I'm definitely checking out your recommendations! "In that example, ""creating money"" could be used interchangeably with ""making promises"".  There's no inflation, and no problem, so long as everyone keeps their promises. Which sounds like a horrifying thing to say about the foundations of the economy, but the remarkable thing is that people mostly do." As asked previous in the week, there is a big difference between budgeting and expense tracking.  Using software, like GNUCash, allows one to track their spending.   A budget is a plan, the tracking is what actually happened. I do not track expenses, although I do budget.  For me, hitting financial goals is good enough of a track, without investing the time and energy into tracking every penny.  One could easily criticize my method, as how can you have a good plan without continuous feedback? For me it is an example of the 80/20 principle.  If I put in 20% effort into making and sticking to a budget, I will obtain 80% of the financial success that a person who devotes 100% effort into budgeting and tracking.  A person with the same income and life events, who budgets and tracks, will likely be more successful that I, however, not overwhelmingly so.  For me time is better spent on other endeavors.  You seem to have this attitude as well, but those that do track have it as part of their path to financial success and probably view us as somewhat foolish.    This is another example how personal finance is more about behavior than math. As a 20 year old who has just started earning enough to save, I suggest showing them the different types of lifestyles they could live in the future if they started saving now versus what their life would be like if they didn't save at all. Try showing them actual dollar values as well so it's not just an arbitrary idea. Can anyone recommend a good textbook for a first course in finance? I'm not studying it, if it's relevant--I'm just a guy who wants a better understanding of the financial sector. I don't know anything anout finance outside a few basic concepts. My daughter is two, and she has a piggy bank that regularly dines on my pocket change.  When that bank is worth $100 or so I will make it a regular high yield savings account.  Then I will either setup a regular $10/month transfer into it, or something depending on what we can afford. My plan is then to offer my kid an allowance when she can understand the concept of money.  My clever idea is I will offer her a savings plan with the Bank of Daddy.  If she lets me keep her allowance for the week, I will give her double the amount plus a percentage the next week.  If she does it she will soon see the magic of saving money and how banks pay your for the privilege. I don't know when I will give her access to the savings account with actual cash.  I will show it to her, and review it with her so she can track her money, but I need to know that she has some restraint before I open the gates to her. Here's a very good series of classroom lectures by Robert Schiller, one of America's top economists and a prof at Yale:  http://www.youtube.com/user/YaleCourses#g/c/8F7E2591EE283A2E  This should give you some general insight into basic principles of finance and give you a framework to learn more later. Until they're old enough to be legally responsible for their own credit, the only thing you can really do is show them by example how to manage money and credit in your own finances.  Teach them budgeting, immerse them in understanding how credit and financing work, and teach them smart ways to make their money work for them. When they're teenagers, you could potentially approach small banks or credit unions about ways to perhaps co-sign loans for them and let them make payments to learn good habits for managing their responsibilities, but that's not always easy either.  It won't do anything for their credit, but having the responsibility of coming in to make payments might instill good habits and help their self-esteem at the same time. You have great intentions, but as has been pointed out here already, from a legal standpoint there's not much you can do.  All you can do is prepare them for the day when they are on their own and can enter into credit agreements.  Kids going to college get into real trouble with credit because cards are handed out like candy to them by the banks, so teaching them money management skills is invaluable and something you can do now. I’d suggest going over to Khan Academy. It’s basically a free school with really helpful videos. There are quizzes you can do and forums for each subject.   My advice would be to starts the personal finance section because most things build from there and it’ll help you more with real life finance. Good luck! "Anything by Frank Fabozzi - the de facto authority on financial education.  Most of the stuff will be textbook ($$$) so get ready for sticker shock.  Hopefully you can find a used copy of something.  Quick search on Amazon yielded ""The Basics of Finance"" for about $150." We are a pretty average (professional, used to be fully two-income) family. I have gone part-time (plus a total career change) to be more involved at home - that's minus 50K from our family budget a year. Montessori for the younger one is - 10K. Violin (-5K) and piano (-5K) lessons for each kid... summer science camps... summer golf/tennis plus equipment... dance/sports all year round are around 10K too. We are looking at an 80K hole in our budget (compared to what we could have had). Plus by now I would have been probably more advanced in my previous career had I stayed there, so the hole is potentially even greater. Hi, I'm going to be a social studies teacher and will have to introduce students to economics. I am saving your post for the future because it is an amazingly well crafted and engaging lesson.. the village analogy can even be used for group enactment. Thanks so much for this! Frankly, I think all the higher maths in finance is mental masturbation.  EDIT: wht all the down votes?  I've made my money by trading against the PhDs in European investment banks who actually and innocently believe their models represent the real world. Their models work when they work.  I love trading against the combination of arrogance and faux intellectualism.   Folks, read Fooled by Randomness or Black Swan. All value given to products is subjective and is different from person to person.  It can also vary for the same person from year to year, month to month, day to day, or even hour to hour as a person analyzes different products and prices to determine which imparts the most value to him or her at a given point in time. In regards to losing money in your investment accounts.  This reminds of a book I read on Jesse Livermore.  Jesse was a famous stock broker who made millions (in the 1920's so he would be a billionaire in today's money) in the stock market multiple times.  Jesse felt like  you - he felt like after a while the losses on paper did not seem to concern him as much as he thought it should.  He thought it was due to the investment accounts being simply being numbers on papers and not cold, hard cash. So what did Jesse do to remove the abstract nature of investment accounts?   From here: Livermore always sold out all his positions at the end of every year   and had the cash deposited in his account at the Chase Manhattan Bank.   Then he would arrange with the bank to have the money, in cash, in the   bank’s vault in chests. “There was a desk, a chair, a cot and an easy   chair in the middle of the cash.” On the occasion described in 1923,   there was $50 million in cash.  In the corner was a fridge with food,   enough for a few days. There was lighting installed. Then, like   Scrooge McDuck, Livermore would have himself locked in the vault with   his cash. He would stay a couple of days and “review his year from   every aspect.”  After his stay was over, he would fill his pockets with cash and go on   a shopping spree.   He would also take  a vacation and not re-enter   the market until February. But unlike Scrooge McDuck, this was not the act of a miser, explains   Smitten.  Livermore lived a world of paper transactions all year long.   He believed that “by the end of the year he had lost his perception of   what the paper slips really represented, cash money and ultimately   power.”  He “needed to touch the money and feel the power of cash.” It   made him re-appraise his stock and commodity positions. Imagine the $60,000 from your investment account sitting on your kitchen table.  Imagine seeing $1,000 dumped into the trash can one day.  I know I would appreciate the money much more seeing that happen.