Monthly Archives: June 2015

A Tale of Two Credit Scores: A Case Study

I have been working on a case study to help students understand credit scores.  Let me know what you think about my draft. Contact me at tim@nextgenpersonalfinance.org if you have any comments or just want the answer key:

A Tale of Two Credit Scores: A Case Study

Staring at the two student files on your desk, you know that you only have a few minutes to review them before your afternoon meetings. Your role as peer financial advisor provides you not only with the opportunity to help others but also has deepened your understanding of so many personal finance topics. Both students have come to you with one simple request: teach me how to increase my credit score. As more financial institutions have freely shared credit scores with their customers, you have seen interest in this topic grow.   Continue reading

Activity Idea: Putting A Face On What It Means To Be In Debt

I often hear my high school students remark “why would anyone ever allow themselves to be in debt?” when they see the costs and consequences of being saddled with debt.  Unfortunately, most people don’t plan to be in that situation…life just happens.

I stumbled upon this website, the Debt Project, that I thought would help to put a human face on debt but also help students to understand the life events and decisions that help lead to indebtedness.  The Debt Project has portraits and 47 first person stories that are handwritten and describe the amount of debt and the story behind the debt.

So, what’s the activity idea? Continue reading

Two NBA Stars Provide Personal Finance Advice: Who Would You Listen To?

Here’s a six minute audio interview with Adrian Foyle from NPR’s All Things Considered.  Here is an excerpt:

I got my master’s in sports psychology, and my thesis was on retirement experiences of NBA players. I went out and spoke to about 10 to 12 different players, and I talked to them about their transition. And one of the things we talked about was: If you were to do it again, what are some of the things that you would do differently? And almost all of them talk about financial literacy and financial education.

One guy said that, you know, “I saw my parents. They didn’t have any money. I grew up poor and then I was given all this money, and then I had no idea what to do with it. And I was so silly I didn’t ask questions because I was afraid that people would think that I wasn’t smart.”

And here’s Antoine Walker (you might recall that he lost $110 million) who has been barnstorming colleges to discuss the painful lessons that he learned with his financial missteps (click to see 2 minute NewsChannel 5 video).

Ask students what lessons they can take from these professional athletes that they can apply to their financial lives…

Question: How Can I Spend My Money In Ways That Increase My Happiness?

Hat tip to Jonathan Clements for citing this 2011 research that delves into this question.  The research is behind a paywall, but this Atlantic article summarized three of the key findings:

A new exciting paper in the forthcoming Journal of Consumer Psychology makes the case that money should buy us happiness, but most people aren’t spending it right. On the edge of psychology and economics, Profs. Daniel Gilbert, Elizabeth Dunn and Timothy Wilson lay out eight principles of spending efficiently, including:

1) Buy more experiences and fewer material objects
2) Buy many small things rather than a few large things
3) Avoid extended warranties and outsized insurance plans

How about asking your students to agree or disagree with the research findings and cite specific examples.

Parental Advice: Use Everyday Events to Teach Kids About Money

NGPF was recently featured in MoneyWatch article:

“When my daughter graduated elementary school and got her first phone, I took the chance to dive into the phone bill,” says Tim Ranzetta, founder of NextGenPersonalFinance.org, which offers personal-finance educational materials for high-school and college students.

With his daughter, now age 12, Ranzetta emphasized that data usage drives the total monthly cellphone bill, which is why it is worth using Wi-Fi networks whenever they are available.

The article lists nine everyday situations that are “learning opportunities:”  I have listed NGPF activities that can help in the learning process: Continue reading

Classroom Experiment: The Ultimatum Game

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This might be a fun classroom experiment to demonstrate behavioral aspects to finance that prove how irrational we can be.  From PBS NewsHour:

Let’s play the ultimatum game. Here’s how it works: I give your friend $20. He has to share a portion of his $20 with you and can give you as much as he wants. If you accept the offer, you get that amount, and he keeps the rest. If you turn down his offer, both of you get nothing.

Let’s say he offers you $2. Would you take it?

Economics correspondent Paul Solman sat down with Richard Thaler, who’s been called the inventor of behavioral economics, to learn about the ultimatum game. And in the process, he learned quite a bit about behavioral economics. Economic theory assumes that people make rational, selfish, and mathematical economic decisions. Behavioral economics, however, acknowledges that humans aren’t always rational. Enter the ultimatum game.

Here’s an 8 minute video that you may want to show AFTER playing the game in your classroom (you might reduce the stakes to $5 and bring two students to the front of the class so everyone can see the game in action). It is an interview with Richard Thaler, generally considered the father of behavioral finance: Continue reading