Category Archives: Question of the Day

How Much Is That Investment Education You Provide Your Students Really Worth?

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According to this research study which I unearthed from 2014, more financially knowledgeable workers have higher returns on their 401(k) balances.  While not all that surprising, the research was able to quantify how much that knowledge was actually worth.  It also provides a set of five questions that they used to measure financial knowledge that you could use to test your students.

Here’s their summary:

We show that more financially knowledgeable employees are also significantly more likely to hold stocks in their 401(k) plan portfolios. They can also anticipate significantly higher expected excess returns, which over a 30-year working career could build a retirement fund 25% larger than that of their less-knowledgeable peers. Their investment portfolios are also somewhat more volatile, exposing them to slightly more idiosyncratic risk.

I highlighted the key insight from their research.  So, what do we need to teach students about investing so they can be knowledgeable and generate that larger 401(k) nest egg? Continue reading

Question: What Should You Do Over The Summer?

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With the calendar inching closer to August, which means back to school for many, it’s not too early to think about how your high school students should be spending their future summers.  You might want to file this one away for spring of next year. Based on this NY Times article, there are quite a few benefits to summer employment as a bank teller:

It’s a rare summer job that combines the acquisition of intensely practical knowledge and the opportunity to have conversations about important and personal topics with people two or three times your age.

Interesting to see this research buried in this article about what admissions directors at college look for when it comes to summer experiences: Continue reading

Question: What Percentage of Consumers Have Errors in Credit Reports?

Answer (from FTC report):  About 1 in 4 (25%):

From American Banker:

A widely cited study by the Federal Trade Commission in 2012 found that one in four consumers have potential mistakes on their credit reports. Worse, one in 20 may have errors significant enough to negatively impact how much he or she pays for a loan, or whether credit is provided at all. Given that 220 million Americans are now on file with the bureaus, that’s 11 million consumers with possibly material errors on the reports they will use to buy a house, car or even secure a job.

So, the next time you ask your students to be sure to check their credit report, be sure to let them know the frequency of these errors!

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Check out the NGPF lesson on Monitoring Your Credit.

Question: How Do Credit Cards Make It Easier for Us To Overspend?

A good article highlighting the psychological differences between buying with credit vs. cash and three ways that credit cards can lead to overspending:

  • The credit limit is usually a multiple of our monthly income. “With that high credit limit, it is easy to spend too much.”
  • Without the pile of cash in front of you getting smaller with every purchase, it is easy to spend more than you want. Seeing those bills disappear from your wallet hurts.
  • The minimum payment is usually only 2 percent of the balance. “That makes it very easy to make a small payment today to get through the month and worry about the debt tomorrow.”

Here is a great three minute video that demonstrates the third point with a pitcher of water (when I showed this in my personal finance class, students were amazed and didn’t understand how consumers could be so “dumb”):

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Check out this NGPF Activity, Calculate: Paying With Interest

What Financial Advice Do Kids Remember?

Remember that parents play an important role when it comes to personal finance (recent US Bank study found that 55% of college students identified their parents as the number one influence when it comes to money matters).  Kiplinger writers asked their children what they remembered when it came to parental advice.  Some of the best advice they received: Continue reading