Things We Should Learn In School: 12 Money Topics

Things We Should Learn In School

I believe that there are many things that we should learn in school. It’s disappointing that specific money-related and personal finance topics are still not being taught. As a Business Management teacher, I teach a unit on Accounts and Finance. However, this is quite different to teaching personal finance and financial literacy, which is quite lacking in most schools. 

I recently read The Millionaire Fastlane, by MJ DeMarco. It’s a great read for all future entrepreneurs, and I learned a lot from it. It certainly approaches wealth accumulation very differently from the slow path to accumulating wealth through long-term investing in index funds and reducing consumption. The title alone would indicate that. Towards the end of the book financial literacy and basic money skills get a mention.

One key point made is that education really does begin ‘after’ graduation rather than before. In fact much of this is learned in our 20s. In making this point, the author identifies many subjects and skills that are still not being taught in the majority of high schools throughout the United States. I’ve modified his list slightly for a more global audience and come up with my top 12 things that I believe we should learn in school. I’ll discuss each briefly here and dedicate an individual article to each a little later.

The Top 12 Financial Literacy Things We Should Learn In School 

1. Interest rates
2. How to finance a home or a car
3. Different business legal structures
4. Calculating return on investment
5. Why stock prices rise and fall
6. Why insurance exists
7. How mutual funds and index funds work
8. What bonds are and how they rise and fall
9. Exchange rates
10. Compound vs simple interest
11. Budgets
12. Taxation

Interest Rates

Interest rates refer to the cost of borrowing money or the return on investment. They are determined by market forces and central banks. Interest rates, influenced by factors such as inflation and central bank policies, impact the cost of borrowing and the returns on savings.

How To Finance a Home or a Car

Securing finance for a home or car loan involves working with financial institutions. Consider factors like interest rates, loan terms, and your credit score. When financing a home or car, it’s essential to consider the loan’s interest rate, repayment period, and your financial capacity to ensure sustainable and manageable payments.

Different Business Legal Structures

Businesses can be structured as sole proprietorships, partnerships, limited liability companies (LLCs), or corporations, each with distinct legal implications. Choosing a business structure involves weighing factors such as liability protection, taxation, and ease of management, with options like LLCs providing a balance of these considerations.

Calculating Return on Investment

ROI is a financial metric that evaluates the profitability of an investment. The formula is (Net Profit / Cost of Investment) x 100. Calculating ROI is vital for investors to assess the profitability of their ventures, helping them make informed decisions about where to allocate their resources.

Why Stock Prices Rise and Fall

Stock prices fluctuate due to various factors, including company performance, market trends, economic conditions, and investor sentiment. Stock prices respond to a myriad of influences, including company earnings, economic indicators, and global events, making the stock market dynamic and sometimes unpredictable.

Why Insurance Exists

Insurance provides financial protection against unforeseen events, helping individuals and businesses manage risks and recover from losses. Insurance acts as a financial safety net, shielding individuals and businesses from unexpected losses, and promoting stability in the face of uncertainties.

How Mutual Funds and Index Funds Work

Mutual funds pool money from multiple investors to invest in a diversified portfolio. Index funds track a specific market index, offering broad market exposure. Mutual funds offer diversification by pooling funds from various investors, while index funds passively track market indices, providing a cost-effective investment strategy.

What Bonds Are and How They Rise And Fall

Bonds are debt securities issued by governments or corporations. Their prices rise and fall based on interest rates and credit ratings. Bonds, as debt securities, rise and fall in value inversely to interest rates; when rates rise, bond prices fall, and vice versa, making them sensitive to economic conditions.

Exchange Rates

Exchange rates determine the value of one currency relative to another. They are influenced by economic indicators, geopolitical events, and market sentiment. Exchange rates reflect the relative strength of currencies, impacting international trade and investments, with fluctuations influenced by economic indicators and geopolitical events.

Compound vs Simple Interest

Compound interest includes interest on both the principal and accumulated interest, while simple interest is calculated only on the initial principal.  This exponential growth over time can significantly increase wealth compared to simple interest, emphasizing the importance of considering both when evaluating financial options.

Budgets

Budgets outline planned income and expenses, aiding in financial management. They help individuals and businesses allocate resources effectively. Budgets serve as a financial roadmap, helping individuals and businesses allocate resources effectively, plan for future goals, and adapt to changing financial circumstances.

Taxation

Taxation involves the levying of taxes by governments on income, transactions, or property to fund public services and infrastructure. It is a crucial revenue source for governments, aims to fund public services and programs, with tax laws shaping economic behaviour and wealth distribution within a society.

Conclusion

This is just a very brief overview of the things that we should learn in school. I think each topic here deserves a whole lesson or two at least so that every student is better equipped for decisions that they will need to make once they enter the real world. I aim to write an article for each and create a learning activity or worksheet to accompany them.

Stay tuned.

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