5 ms·

How to handle your finances. I can't believe this basic lesson wasn't taught to me at all during my formative years, either by my parents or in school.

regularfry 6y ago
Not only how to handle them, but the theory behind finance, and how it works. What inflation is, what net present value is, what an "asset" is, how interest rates and compounding work.
jawns 6y ago
I admit I could be mistaken, but often when I hear people complain that they wish they had been taught to handle their finances or learned about budgeting, it reduces down to "I wish I had been taught not to spend outside my means." Which reduces down further to "I wish I had been taught self-control." To me, the fundamentals have always seemed relatively straightforward: don't spend more than you have, and only take credit or a loan if you have a plan for paying it back on time. I was raised by parents with limited education, one of whom was an immigrant, and so I was largely on my own when figuring out the minutia of opening a bank account, getting a credit card, saving up for emergencies, etc. But the general lesson of "don't spend more than you have" was imparted. It seems like a pretty obvious thing, but I guess if your parents or guardians are setting bad examples in that regard, it might not be as obvious as it appears to me.
- ghaff 6y ago
  I sort of agree with that. I have some quibbles with what's taught in high school (e.g. surely basic statistics/probability would be more useful for most people than some of the math that is taught). But MBA capital budgeting and accounting classes aren't really needed. Maybe a penny saved is a penny earned could be updated to a penny saved is a penny earned plus compound interest. But the common problem is, as you say, people spending more money than they have because they want to--as aided by installment plans and the like. (And a lot of people just having genuinely little money.)
- imtringued 6y ago
  If people knew how the stock market actually worked then you would see far less retail investors losing their money. Many people think it's equivalent to gambling and that it is a zero sum game. There is also the common misconception that stocks that don't pay dividends (e.g. they do stock buybacks) can never actually return their investments and therefore every investor is looking for a greater fool until the stock plummets. Lots of people think buying the stock from another investor does nothing for the company unless they issue new stock for financing purposes. Obviously, if you knew even the tiniest bit about the stock market you would know that all of these are wrong. Stock trading makes money and produces value by providing liquidity but it has diminishing returns therefore it is slightly positive sum. Stock investing makes money off of company growth. Investors can sell their shares via stock buybacks directly to the company (no greater fool needed). Buying stock from another investor increases the market cap of the company which helps it secure funding through traditional means such as a line of credit from a bank even if the company does not sell stocks. No one on this planet is going to teach you this. You'll have to figure it out by yourself and this is merely information an outside observer needs to know to understand news articles regarding the stock market. Actual investment requires far more in-depth knowledge.
bserge 6y ago
Definitely one of the most important things one should teach a teenager. Why on Earth is it not a dedicated class in school? :/

regularfry 6y ago

Not only how to handle them, but the theory behind finance, and how it works. What inflation is, what net present value is, what an "asset" is, how interest rates and compounding work.

jawns 6y ago

I admit I could be mistaken, but often when I hear people complain that they wish they had been taught to handle their finances or learned about budgeting, it reduces down to "I wish I had been taught not to spend outside my means." Which reduces down further to "I wish I had been taught self-control." To me, the fundamentals have always seemed relatively straightforward: don't spend more than you have, and only take credit or a loan if you have a plan for paying it back on time. I was raised by parents with limited education, one of whom was an immigrant, and so I was largely on my own when figuring out the minutia of opening a bank account, getting a credit card, saving up for emergencies, etc. But the general lesson of "don't spend more than you have" was imparted. It seems like a pretty obvious thing, but I guess if your parents or guardians are setting bad examples in that regard, it might not be as obvious as it appears to me.

ghaff 6y ago
I sort of agree with that. I have some quibbles with what's taught in high school (e.g. surely basic statistics/probability would be more useful for most people than some of the math that is taught). But MBA capital budgeting and accounting classes aren't really needed. Maybe a penny saved is a penny earned could be updated to a penny saved is a penny earned plus compound interest. But the common problem is, as you say, people spending more money than they have because they want to--as aided by installment plans and the like. (And a lot of people just having genuinely little money.)
imtringued 6y ago
If people knew how the stock market actually worked then you would see far less retail investors losing their money. Many people think it's equivalent to gambling and that it is a zero sum game. There is also the common misconception that stocks that don't pay dividends (e.g. they do stock buybacks) can never actually return their investments and therefore every investor is looking for a greater fool until the stock plummets. Lots of people think buying the stock from another investor does nothing for the company unless they issue new stock for financing purposes. Obviously, if you knew even the tiniest bit about the stock market you would know that all of these are wrong. Stock trading makes money and produces value by providing liquidity but it has diminishing returns therefore it is slightly positive sum. Stock investing makes money off of company growth. Investors can sell their shares via stock buybacks directly to the company (no greater fool needed). Buying stock from another investor increases the market cap of the company which helps it secure funding through traditional means such as a line of credit from a bank even if the company does not sell stocks. No one on this planet is going to teach you this. You'll have to figure it out by yourself and this is merely information an outside observer needs to know to understand news articles regarding the stock market. Actual investment requires far more in-depth knowledge.

bserge 6y ago

Definitely one of the most important things one should teach a teenager. Why on Earth is it not a dedicated class in school? :/