Student’s hate math class. This is a common stereotype that frequently gets associated with students. And, why shouldn’t they? The topics that get covered in school today is so geared towards topics that hardly anyone will use post high school. Which is so silly when you think about it – people use math every day. Every day you make decisions that impact your financial well-being. Most of them have hardly any impact granted, but the point is this is a topic that would benefit people much more than being able to say solve a tragicomic identity. Yet basically no finance taught in schools.
When you think of it basic finance is something that everyone should have an understanding of. Financial wellbeing is such a cause of stress in today’s society yet hardly anyone understands it. I come from a financial background so I am one of the few that does understand. Hearing people try to talk about money can be comical at times, as they get so excited – yet if they knew what they were saying they’d realize how ridiculous they were sounding.
Here’s an example; this is a real conversation I heard the other day at the gym. This guy was explaining to his friend this new investment plan his money guy has him on. He was ecstatic explaining how he was going to make all this money and trying to get his friend to join in. “‘So what my guy has me on is an automatic withdrawal plan that automatically invests in a mutual fund. Whenever I reach $4000 in my mutual fund he’ll sell my shares in my mutual fund and invest in a stock because stocks are better when you have large sums of money to invest. And this mutual fund he has me in is great. It’s about 2 years old and has had great returns for both years.”’
All that sounds great – I bet in the moment his friend wants to have this guy’s money guy. But realistically, at best, I might call this a decent strategy. Really this strategy is great for the banks. The mutual fund probably has back-end fees so the bank makes money when he sells his shares. When he buys stock there are defiantly commission fees, so the bank makes money again. Keep in mind every time the bank makes money it’s at the expense of this guy meaning it will take him longer to save to achieve his goal. Next, buying stocks when you don’t have a large portfolio isn’t generally advisable since you can’t diversify. Lastly, when mutual funds don’t perform they have strong performing funds absorb them. This is a sales tactic as they know that people will not want to invest in a poor performing fund. Most likely this new fund was created in the hopes of good performance and if not then it will just get moved into a well performing one if not. So, as a summary; he now has lower performance and unrealistic risk expectations.
With something as important as people’s finances, you think people should have an understanding. It’s time schools ditch the math that people won’t use and teach them something they will.