Personal finance really should be taught at high school

[question everything]

The recent AARP bulletin had this financial question:

I transferred $200,000 from stocks, which had cost me $144,000, to bonds. My accountant says I have to pay taxes on the difference, even though the transfer was within the same institution and I didn't put a penny in my pocket. That doesn't seem right

And the answer, of course, was that the reader did not really "transfer" the money. "You sold your stocks at $56,000 profit and used the proceeds to buy bonds." Unless these investments were held in a tax deferred account such as IRA or 401K, no taxes would be due. "Outside a retirement account, however, you have to pay taxes when the profit is booked." "The lesson here is to be aware of the tax implications."

[PoindexterOglethorpe]

1. While you are right that personal finance

ought to be taught in high schools, it would be better to concentrate on things like credit cards, borrowing to attend college, debt in general, how mortgages work, how Social Security works and the implications of collecting at various ages, and so on. Maybe the difference between long term and short term capital gains, and how 401k plans and IRAs work. Even those will not be of much interest to most people so young.

The example you gave is a pretty sophisticated one which, even if covered in high school, isn't going to be remembered 50 years later. Plus, the tax rules and laws change often enough, that such a specific question probably wouldn't be that good to go over with a current high schooler.

The main thing they need to have impressed upon them is that they need to pay attention to money, to their own spending. If I were teaching the course I'd do my best to steer them away from using a debit card for all day-to-day expenses. Pay cash.

[question everything]

3. Absolutely correct

The example that I gave is the culmination of what we see. With all the talks about high students debts, I have often wondered whether many would have found themselves that deep in debt had they been given the tools to assess debt. And, we know that in college many are offered credit cards which they readily accept.

Especially today, with everything "virtual." I have recently posted a story

https://www.democraticunderground.com/11601035

about kids purchasing virtual weapons not realizing they were dealing with real money.

[PoindexterOglethorpe]

4. Yes. That thread is very much to your point.

I think that many students who take on huge college debt (along with their parents) simply don't fully understand what they are doing. In some cases the lenders don't fully disclose, and in others they just don't do the math to see exactly what will happen down the road.

A couple of examples.

Several years ago a woman I knew told me her daughter was remaining in school, continuing to rack up debt, even though she didn't have a clear goal to graduate, because she knew that once she left school the clock would start ticking on paying back. Dumb. I told the mom that and she agreed but the daughter was over 21 and this was her debt, not the parents'.

Once a woman whose daughter was getting ready to finish high school and go off to college, told me that her kid would be able to get some rather large sum of money in financial aid. She specifically named Pell grants. I told her that I was pretty sure Pell grants were not that large, and she should please double check. She did, and thanked me. A lot of the money would be in loans, and it was making her help the daughter re-think where to go to college.

In addition, too many students decide to major in something that seems interesting without ever considering what kind of job will exist at the end of that schooling. And most of them never visit their school's career center, or whatever they call it. Our community colleges are for the most part very good, and have lots of programs that lead directly to good jobs in two years or less.

Some years back I got into a discussion here with someone who was defending his getting some sort of liberal arts degree in something totally impractical (17th Century French poetry or some such) because down the road when he was working he wouldn't have the time to read that poetry. I tried to convince him that he can always take classes that interest him on a part time basis, and he'd be vastly better off having a good, well-paying job. Don't think I convinced him.

[Karadeniz]

2. You've got that right!