Op-Ed: Education system overhaul should include new emphasis on financial literacy

Published by Tribune News Service

As Secretary of Education Betsy DeVos sets out to reform America’s underperforming public schools, let’s hope she puts their appalling lack of personal finance instruction near the top of her priority list. Our nation’s high schools are flunking badly when it comes to imbuing their students with the key elements of financial literacy.

A 2016 study by the Council for Economic Education found that only 17 states require high school students to take courses in personal finance. That’s particularly distressing when you consider that the final year of high school is, for many young people, the last great opportunity to acquire financial literacy before entering today’s costly, complex and rapidly changing world.

Personal finance courses don’t require teachers with advanced degrees. Almost any teacher who can balance a checkbook can follow some already successful course guidelines to impart financial basics to graduating seniors.

“To be successful, most kids don’t need to learn about collateralized debt instruments, but they do need to know how to open a bank account, how much they need to save each month to reach their goals and, if they borrow this amount of money, how much money they will need to earn to pay it back,” said Nan J. Morrison, president and CEO of the Council for Economic Education, in an interview with CNBC following the report’s release.

She and other personal finance advocates are responsible for many of the recent gains made in the establishment of what some call “everyday economics” in high school classrooms. In 1998, only 14 states required that high schools give their seniors a rudimentary knowledge of personal finance. Now 37 states do, meaning more students are receiving finance lessons in their civics and math classes.

And over the last few years, populous states like New York and Illinois have toughened standards. Washington state has new legislation doing the same. But while more states are implementing personal finance standards, the number of states that require high school students to take an actual course in personal finance — 17 — has remained unchanged since 2014, according to the study. That’s truly unfortunate. The states with the most rigorous personal finance requirements send their students on to college and into the real world with a measureable head start.

Data recently released by the Investor Education Foundation show high school students who passed mandatory personal finance courses have better-than-average credit scores and lower debt delinquency rates as young adults. The IEF study found “notable improvements” in credit outcomes for young adults ages 18-22 in three states — Idaho, Georgia and Texas — where financial education mandates are considered rigorous by the Council for Economic Education.

Personal finance courses provide an important leg-up to students in low-income areas with lagging schools. A key driver of the perpetuation of poverty is that young people in economically challenged areas are often unemployed or underemployed and find themselves at the mercy of loan sharks and payday loans with stratospheric interest rates.

Hemmed in by poverty, recent graduates in these communities find themselves struggling to pay bills and manage what little money they have. As Morrison told CNBC: “Exposure is everything. When you learn good habits, you tend to have better outcomes.”

About The Writer

K. Alexander Ashe is the CEO and founder of Spendcast, a tech firm that develops finance-focused apps. Readers may email him at kashe@spendology.net.

2017 Tribune Content Agency, LLC

Distributed by Tribune Content Agency, LLC.

Stretch Your Marketing Mind By People Watching

In environmental psychology, you learn people like to manipulate their surroundings.

From choosing how your dwelling looks, to moving chairs in a public space one inch before you sit down. People firmly believe they’re in control and make their own decisions.

Watching the behavior of humans, and how they interact and manipulate their environments – will help you expand your thinking on the complex layers of individuals, and widen your view on marketing to people. As a small business owner, you know marketing to the right people is crucial to your revenue. As you continue to educate yourself in marketing and understanding people, your approach towards illustrating advertisements, tailoring pain points, and how you frame stories for your customers will evolve.

Since you’re a small business owner, you’re probably a people watcher too, whether you realize it or not.

As a child, I was interested in people watching. At the…

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TrumpCare 2.0: May the Odds Be In Your Favor

TrumpCare / Republicare is back and it’s worse than ever. The “bill” or concept has not been scored by the Congressional Budget Office but the Conservative Tea Party/ Freedom Caucus is reveling in the fact that insurance companies could charge whatever they wanted for pre-existing conditions in addition to the following major changes:

Republican Health Proposal Would Undermine Coverage for Pre-existing Conditions

States would have the option to jettison two major parts of the Affordable Care Act’s insurance regulations. They could decide to opt out of provisions that require insurers to cover a standard, minimum package of benefits, known as the essential health benefits. And they could decide to do away with a rule that requires insurance companies to charge the same price to everyone who is the same age, a provision called community rating.

New York Times – The UpShot

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What Color is the Dress? Political Edition

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I had a conversation with a medical doctor 2 days ago-we looked at the now infamous Inauguration comparison images and he stated that “he wasn’t quite sure which image had the largest crowd”. Wow. We are just in a brand new place where objective facts and evidence are meaningless to a large group of people. Psychology does provide justifications for this. Cognitive biases like the confirmation bias and the backfire effect can explain why people would reject evidence that does not conform to their worldview. It is just so amazing to engage with people who you think should know better resort to mental gymnastics to explain their unsubstantiated worldview.

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Last night, Rachel Maddow  discussed results from a PPP poll asking about the new Trump administration. Take a look at the chart below.  There is a bubble alright…two bubbles. The Trump supporter bubble…and the everybody else bubble.

President Trump appears to have his own reality where he is sacrificing trust in the White House to claim that 3-5 million undocumented immigrants illegally voted in the election and that his Inauguration was the largest ever–both easily prove falsehoods (or lies).  The good news is that a plurality of the people still believes in the objective truth.

 

Why discuss politics and psychology on a personal finance blog? Now, this is a matter of financial security for our customers and readers. White House policies from Obamacare repeal with no real plan for replacement, deregulating Wall Street and eliminating Dodd-Frank, weakening the Consumer Financial Protection Bureau, Infrastructure spending plan that is just tax breaks for Trump’s friends, and a tax reform plan that may raise taxes on the middle class are all affronts to the financial wellness of our customers. Trump’s Tax plan has been published and analyzed-it benefits top earners the most-as much as 7% and only 0.6% on the bottom quintile.

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“A single parent who’s earning $75,000 and has two school-age children, they would face a tax increase of over $2,400,” Batchelder says. That’s if they had no child-care deductions; the increase in taxes comes partly because the Trump plan eliminates the $4,000 exemption for each person in a household.

Source: NPR, Who Benefits from Donald Trump’s Tax Plan

Facts matter. The truth matters. It matters that the Obamacare repeal and replace plan will leave more people without health insurance. President Trump may try to shower himself with praise after the Obamacare repeal and claim that the replacement is “terrific!” We the People, need to embrace the truth and recognize that the “shower of praise” isn’t rain-it’s something entirely different.

Ashe v. PNC Goes to SCOTUS

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Paying for the Right to Work

President-elect Donald Trump made a deal with the CEO of United Technologies to keep some US jobs from moving to Mexico. At stake were 2000 jobs moving from a Carrier plant in Indianapolis, Indiana that manufactures air conditioners down to Mexico where labor is 80% cheaper. The nuts and bolts of the deal where that Indiana Governor and Vice President-elect Mike Pence promised $7 million dollars in tax benefits to Carrier. Carrier promised to keep approximately 800 jobs in the US. Moreover, Carrier also plans to invest $16 million in automation which would eventually eviscerate the remaining jobs at the plant. Additionally, this deal left hundreds of workers at a nearby Carrier plant in Huntington out in the cold.

United Technologies CEO admitted in an interview with Jim Cramer that 10% of his company’s revenue comes from government contracts. Hence, President-elect Trump actually had huge leverage. Yet, this was a sweetheart deal for Carrier including tax breaks , positive press, and increased profits for shareholders..

What about the workers?

The union leader at the plant, Chuck Jones, was not even consulted or invited to the bargaining table. Moreover, Chuck Jones called Donald Trump out for “lying his ass off” regarding the number of jobs saved. President-elect Trump has taken to Twitter to call Chuck Jones out by name and criticize him. Mr. Jones is receiving death threats  – for telling the truth about the deal and expressing concern for the workers who will still be laid off. I think that Mr. Trump has taken union-bashing to a presidential level. Trump’s next tweets went on to claim that unions are the reason why American jobs are being shipped overseas – a blatant lie.

This Deal Doesn’t Scale

Critics like (surprise, surprise) Sarah Palin have come out and said this deal is just “crony capitalism”. Will Trump starting picking up the phone and calling CEOs to offer more deals? Does this deal create a perverse incentive for CEOs to announce moves overseas in search of tax breaks and other government goodies? This deal simply doesn’t scale. Globalization encourages companies to seek out more favorable regulations and low-cost labor. Innovation, cost-cutting initiatives and automation exacerbate the job-crunch from globalization.

Moreover, Trump is promising more benefits to corporations including eliminating environmental regulations, allowing corporations to repatriate money overseas, and lowering the top marginal corporate tax rate from 35% to 15%. The funny thing is that the effective corporate tax rate was 19.4% between 2008 to 2012 and some corporations little or no tax at all.

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Source: White House Historical Tables

The reality is that the burden of paying taxes has shifted dramatically  from corporations to individuals. The Revenue Act of 1916 established annual income taxes in the United States. Between the inception of the annual tax to the 1960s, individuals and corporations contributed roughly the same amount in U.S. Federal taxes. The 1:1 ratio of individual and corporate tax burdens ran away in the 70s and 80s. The ratio as of 2014 is 6:1. Yes, individuals contribute 6 times the amount that corporations contribute in U.S. Federal taxes. This does not take into account Social Security, Medicare and Medicaid, state taxes, property taxes, or sales and use taxes. Moreover, this data does not account for the fact that some S Corporations, Limited Liability Companies, and Sole Proprietors allow profits and losses to flow through their personal income taxes. The raw deal for the American people is that we must engage in a race to the bottom with weakened environmental regulations, lower pay, reduced benefits and greater tax benefits to “enable” corporations to compete with globalization and automation. Americans must literally pay for the right to work.