What Do You Want to Learn During Financial Literacy Month?
Published on - March 27th, 2009 (by J.D. Roth) I’m commandeering the “ask the readers” slot this week to recruit your help. It’s time to plan which topics to cover during Financial Literacy Month!
How much do you know about money?
Have you learned about the power of compounding? Do you know how the stock market works? What is a bond? Can you tell the difference between an Income Statement, a Balance Sheet, and a Cash Flow Statement? Do you even know why you would want to?
Do you know how to keep a budget? Do you understand how your taxes are used and why we pay them? Do you know what it takes to purchase a house? How much insurance do you need? What’s an index fund, and how do you purchase one?
Financial Literacy Month begins next Wednesday. Every April, Get Rich Slowly focuses on the fundamentals of personal finance. This is an opportunity to get back to basics, and I’m looking forward to it! There are some great guest posts lined up this year, but I’d also like to do some research and writing on basic topics that appeal to you.
Are there subjects that you’d like me to write about in greater depth next month? Is there a financial term that you find confusing? Have you ever wondered how bonds work? What fundamental personal-finance concepts would you especially like Get Rich Slowly to explore in April?
I won’t be able to respond to every reader suggestion, but I’ll certainly tackle those that get the most requests.
This article is about Administration
SEARCH FOR RECENT ARTICLES
Is there anything that GRS hasn’t covered? I don’t think there is anything left to be covered.
Maybe, there will be interest in some case studies, especially or people in their teen or early twenties beating student loans and have laid good foundation stones for financial independence.
Otherwise, I don’t think there is something GRS has missed. I think everything is described in detail here and in my another favorite blog, which is Free Money Finance.
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I would like to know more about ETFs. I would also like to know of alternative investments to Equities, Fixed Income, and Derivatives. To truely spread the risk I feel I need to invest in markets outside the financial industry. Just don’t know how.
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I’d like to know why this stuff is rarely taught in school and, if it was, what would you teach first and at what age?
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I would like to see examples of spreadsheets of sample budget outlines. This would be beneficial to me so I can set up a budget and track my expenses.
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I would like to learn how to do a budget so I know where my money is really going.
#2 I also agree with Writer’s Coin. The things I am reading now in PF books & on PF websites/blogs (such as GRS) should be taught to teens in H.S. In Jr. H.S. kids should be learning about, and how to use, savings accounts, checkbooks, & what credit is really all about. I think there would be less of a mess now if people knew how to handle credit & money & how to save & budget their money.
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The easy answer is as much as possible. In college I learned more about finance from a proffesor who went outside the curriculm to teach us. That lasted until some on complained.
As I am looking at more hours being cut at my part time job, I am in good shape to handle the cut in hours. Until I came across this blog I never heard of an emergency fund. In high school we were told to use credit cards for an emergency. I would like to know why our finance education is so bad.
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I’d like to know more about:
1. ETF’s. Exactly what are they and what is the case for or against them?
2. Bonds. How do they work and when would they be a good idea?
3. Roth vs. 401(k). Is after tax or pre-tax better? Some of both? If some of both, how much of each? If there’s no 401(k) match at one’s employer, is it best to skip it and go straight for the Roth?
To speak to financial education in schools, having been in secondary education for a number of years, it is true that financial education is sorely lacking. The main reason for this, that I can see, is because of state and federal “standards.” So much time is spent on teaching to these tests and benchmarks (which do not include financial education as part of their requirements) that there is virtually no time left for anything else.
I taught English, so whenever possible, like when we were doing a nonfiction unit for example, I tried to include reading on basic financial topics that would be of use to the students. Most do not do this, however.
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I’m wondering how (if at all) I should address the losses in my retirement accounts. Also, we’re planning on buying a new house soon. Any financial tips pertaining to those two items would be greatly appreciated.
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For Beth (Comment #5 above) about Roth vs. 401k:
As to the question of after-tax vs. pre-tax it comes entirely down to whether you think your current tax bracket is greater than the tax bracket you’ll have in retirement.
If you think the two are the same, then after-tax vs. pre-tax is a wash. Reason: Remember the commutative property of multiplication from 5th grade? Here’s a real life example!
However, there are generally going to be differences as to the two plans (401k vs Roth).
With a Roth you will have more investment options.
With a 401k you’ll (likely) get some employer match.
With a Roth you’ll have lower expenses. (Most 401k or 403b plans charge an administrative expense in the range of 0.5% to 1% of assets per year on top of the expenses of the funds.)
Hope this helps.
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I don’t know if this would be irrelevant to a lot of your readers, but I would love a US->UK translator (e.g. a Roth IRA and 401(k) are equivalent to what in the UK?) Might also be useful for other areas where you have a significant readership. Your blog is great, but sometimes I feel like I can’t follow your advice because I don’t know how to translate it across the atlantic.
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@Oblivious Investor — Thanks, that does help.
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UK stuff would be relevant to me, too
I’d also be interested in information on the safety/security of investments – “ring fencing”, saver protection, etc., to help choosing investment institutions and what happens if they go bust.
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I would be very interested in a discussion of the difference between APR (Annual Percentage Rate) and APY (Annual Percentage Yield) as they provide different numbers on the same financial transaction. It’s a flavor of fun with math that can be a bit misleading. I sort of get it but would like a discussion on the topic. Perhaps there are other formulas that you could include in the discussion.
Mark
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JD, what I’d love is a demystification of life insurance. Simple explanations of the different types, trusted (or highly-rated) providers. When you need it. When you DON’T need it. How and if it works in a same-sex relationship when living in a hostile state.
Actually a second topic would be financial planning in general for those in same-sex relationships. How to CYA and generally plan in an environment in which the gov’t is hostile to your relationship (which is true of the federal gov’t and most states in the US at least).
Thanks!
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I’d like to know more about different stock market transactions, like the difference between a regular purchase and short sale, etc. Most of what I read is filled with a language foreign to most everyday people.
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Adam: A short sale is simply borrowing a security, then selling it. (As opposed to most sales, which are of securities that you already own.)
It’s done in the hopes that the security will decline in price. If the price does go down, the short-seller can then repurchase the security at the new lower price, and give it to the institution from whom he originally borrowed it.
His profit will be equal to the total decline in price.
The danger, however, is that the price will go up! If it does, his potential losses are unlimited. (This is markedly different from normal investments in which you can’t lose more than you initially invested.)
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I would like to see advice for baby-steps investing — I have been setting aside money for my brokerage account, but it seems so daunting sometimes to save for months and months to meet the minimum to put into a mutual fund I’ve chosen, and then that’s what I’ve got, it’s not diversified outside of the fund. I’ve been picking index funds but it sort of feels weird to still have just one choice in there. Are there better options out there for people who haven’t got much (or are wary of doing much) to start investing in relatively small amounts?
Also, seconding WheelDancer at #11 — a commonsense primer talking about APR/APY sorts of issues might be interesting. Throw in a discussion of the different ways interest is calculated on, e.g., credit cards or savings accounts, and if you’re daring some of the equations used to calculate things like mortgage amortization. I’m actually taking a math class now that covered a lot of that stuff and it was really sort of eye-opening to be able to calculate my own amortization table and tweak figures, instead of just feeling like “this is too hard, I just have to blindly give the bank money and let them do the math.” Sort of a borrower’s toolbox of definitions and tools, maybe.
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Personally, I’d just like to know where to get started finding a financial advisor. I’m wary of banks because they tend to only offer solutions within their own products. Similarly, I am deeply suspicious (thanks to my parents) of mutual fund managers.
So… who does that leave? And where do they work?
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I would like to see a discussion about emergency funds. What do people really do about this (1 month, 3 months, 6 months)? Do they factor in Employment Insurance (here in Canada) when calculating how much it should be? How to trade off saving for this versus retirement versus saving for recurring expenses vs having some money for fun… There are so many pots to put money in, but I liked your recent post on the dangers of over-saving & would love to see what people do about actually finding a balance…
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I would like to see articles on how to read and understand company financial statements, morningstar reports, etc, so us laymen can get a better grasp on the strength of the financial institutions we trust our money with.
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I would like to see what investment mix in a 401K or IRA that the professionals recommend – split out by age groups. Whenever I try to do research in this area, it seems a bit daunting.
Also – homeowners insurance is something that I need more education. I know it differs by state but would love to know the steps to get educated on what you need and the different types of insurance.
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To speak on financial education in schools, I teach in one of the few states where personal finance is a required class before graduation. But, that doesn’t mean that the students’ best interest is being considered. As I was looking at open teaching positions in the area I saw a Personal Finance/Government position posted. I have a degree in Soc. Studies and am half way through the CFP program, so I thought I was a strong competitor for the job. When I called and asked about the position the first question that was asked of me was “Do you coach basketball?”
As the students would text WTF?
To answer your question J.D. I haven’t seen you post a lot on estate planning. I’m taking the course right now for my CFP requirement and that should be a huge consideration in every persons personal life/finances. There is a lot of money to be given to the government on passed on to families or charities depending on how prepared you are for your own mortality.
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Personal finance for freelancers!
Has anyone ever made a simple list (or detailed analysis, for that matter) of the financial pros and cons of being a freelancer rather than an employee (health insurance, taxes, etc.)? How does one create a budget on a variable income? We all know it’s critical to contribute to company-matched retirement accounts — but what if you’ve never had a job that offers such a thing?
I’m a freelance musician and music teacher: four semi-regular part-time jobs and lots of one-time gigs.
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How are the “basics” of personal finance different for freelancers?
Has anyone ever made a simple list (or detailed analysis, for that matter) of the financial pros and cons of being a freelancer rather than an employee (health insurance, taxes, etc.)? How does one create a budget on a variable income? We all know it’s critical to contribute to company-matched retirement accounts — but what if you’ve never had a job that offers such a thing?
I’m a freelance musician and music teacher: four semi-regular part-time jobs and lots of one-time gigs.
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I’d like to know about BUYING index funds, I’ve heard so much about why they’re good, but I don’t know where / how to pick them.
Diversification, what kinds of different asset classes there are and what I should be looking at picking.
ETFs: more information about them. I’ve always wanted to invest in ETFs but I don’t exactly know how they compare to index fund. (The bank says that there’s a fee for purchasing them, except if I go into DRIPs with them)
Thanks!
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sorry i duplicated my comment accidentally – #19 and #20.
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I’d love a really basic, beginner’s explanation of the stock market and all the lingo involved. Starting with a little of the history, and explain where exactly our money actually goes when we invest in different things like index funds, mutual funds, and a single stock. (and is it really “invest”, or should the right word be “buy?”
Also I would LOVE more info on socially responsible investing.
Thanks JD!!!
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My thoughts:
Life insurance: whole vs term
Who needs which and why?
Questions to ask when selecting a policy
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More about social lending…perhaps a critique of Pertuity Direct and how it compares to others.
Thanks!
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One thing that I’ve been interested in lately is whether the common financial ‘rules of thumb’ (e.g., 10-20% for retirement, 6 month EF, a house worth 2-3 times income, etc.) are applicable across income levels or whether people in the highest and lowest income ranges (and tax brackets) need modifications and if so, in what way. Relatedly, how does current net worth affect these rules of thumb? Our household income increased dramatically after graduate school, so while we now have a high income we have little net worth. Does that affect the financial advice?
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I’ll second the vote on how bonds work, and I’d also like to see ideas on how to build/manage an emergency fund when you live in a two-income household and can cover all the needs and a few wants on one income – the “x months income” rule doesn’t really seem to fit.
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@ Writer’s Coin and the Other Ann (#3 and #5)-
Some of this stuff is taught in schools as an option. Personally, I volunteer with Junior Achievement to teach kids about the basics of economics. I find the kids are more receptive than the adults I sometimes coach as a personal favor.
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I would be really interested in a post on revocable living trusts and other estate planning. Also, I hear talk of diversification all the time, but I would love different examples of how people have wisely diversified.
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I would like to know about how the “Power of Compounding” effects stocks.
Example: I buy a 100 shares of a mutual fund (w/no dividends)at $10 and hold it for 30 years. It then is at $50 when I sell it at retirement. So all said in done, I make 4 times the initial principal and make only $4,000 profit. Not near the amount that is showcased by compounding.
I understand that dividends might actually be considered compounding, but considering they constantly change and don’t usually hold the magic 5% – 8% guarentee for as long as you hold it, it certainly wouldn’t show the full effect.
So how does compounding actually work for stocks? Thanks.
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I would like to know how to get started in investing. I really don’t know much about it. I have some money in a Canadian money market (I live in Canada), but other than that I don’t really know what to do when I get out of debt and am really looking to invest.
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A couple people have mentioned life insurance — I definitely agree. I always get the feeling that I’m being marketed snake oil when reading about life insurance or talking to agents. And I haven’t been able to find any good, *unbiased* explanations of the different types and what’s good for whom.
Are rates fixed at the level you enroll, or do they fluctuate (increase) as you get older? It seems some life insurance policies have current “cash value” — what’s this all about, and what good does it do me?
I have/can buy pretty large supplemental life insurance policies through my employer. From what I’ve seen, my employer’s supplemental life is cheaper than the term life options available elsewhere. Should I also/instead have my own policy?
Including examples of what one might expect to pay for different levels and types of coverage would be useful. Even if the specific example doesn’t apply to everyone, it seems like the relative difference in premiums would be instructive.
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I would love if someone could explain why sometimes we have to “recharacterize” our Roth IRA contributions into a traditional IRA? What exactly causes that to happen, and is it good or bad that that happens?
Thank you!
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It may be worth creating an introduction document.
This would go through the basics of financial awareness in one line sentences, with links to previous articles.
Then separate posts could be done, writing about what people want to know about, but hasn’t been covered previously.
This introduction, would also be helpful to you to find out areas you may have missed.
At the end of the month you could even pull all of these articles into a downloadable PDF.
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I would be interested in practical advice on how to survive a total economic collapse or the collapse of the dollar. I’m not really an alarmist, but as things seem to get worse and worse I think it would be a good idea to be somewhat prepared. We are a one income family of very modest means with about a six-month emergency fund. My husband has been talking a lot lately about buying hard currency such as gold or silver coins to use in the event of the dollar collapsing. I hesitate to take our emergency fund and put it into something not easily liquified. In the meantime, we have been brushing up on our basic skills such as: cooking, baking, gardening, mechanics, carpentry as I think these skills and others will be much more valuable than money in the event of a collapse. What are your thoughts on the likelihood of economic disaster and what can we do to prepare ourselves if it does happen?
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Also, any ideas / thoughts on long term care insurance? Who needs it? How do you consult with your parents to see if they are covered or have adequate savings, etc? Thanks!
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Please more information on aligning your money with your values like with Socially Responsible Investing
Thanks – Cliff, GreenMoney.com
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After last night’s discussion, would it be beneath GRS to cover the basics? It may be just the thing that parents need to start the discussion with their kids.
• How to balance a checkbook and track your spending
• How to write a check (yes, I have seen teenagers have problems)
• How do credit cards work
• How to compare mortgage rates for the long term
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I would like to know more about how to get good, affordable life insurance for the chronically ill (like Type 1 diabetes) who are quite healthy except for being chronically ill.
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I would like to know if it is better to pay off your mortgage and invest only a little in the market, or only invest in the market with a little towards your mortgage.
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I’m currently a law student and my boyfriend and I are considering buying a house within the next year or two. So I’m curious about issues that relate to these circumstance such as saving up for a home, trying to budget/save while you’re still in school, or how much sense does it make to buy a house if you’ll be using student loans for the monthly payments.
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I’m interested in knowing more about pros and cons of different retirement funds. I know the basics, but have a difficult time knowing if what I’m doing (20% to a 401k; nothing yet to an IRA, Roth or otherwise) is the right thing for me. I’m 28 and want to make sure I’m on the right track for me before I get any closer to retirement. I know I can research this stuff myself, but I haven’t because, well, I guess I’m a little lazy. And intimidated.
Thanks for asking!
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I stumbled across your blog 3 weeks ago and am now hooked. I am single, early 30′s, good job with good pay. I am now at the point where I have no debt outside my house and a good start on a nice savings nest. I am in good shape retirement wise. And am able to live a comfortable but reasonable lifestyle.
Here is my question/dilemma: My parents are self employed and my dad has never been one to save in the fat years, now with the current economy things look pretty bleak for their retirement. I have the ability to put 400.00 a month toward something for them and am not sure what would be best. I figure I have 10 years to do this and the case may be they will not need it and I will benefit. I need some ideas on what, where and how to put this money to work for them.
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I think you should do a post on life insurance. When and why you need it, that it is not a savings vehicle, etc.
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I’d like to see information on starting a business (side-gig or otherwise). What are the concrete steps to get done before you hang out your shingle? If you have the motivation and time, but need a way to generate ideas, what are some good tactics? What pitfalls would experienced entrepreneurs caution you against? How to minimize risk in the beginning so you aren’t “all-in” with your finances until it hopefully pans out?
Second the votes for: Basic stock purchasing steps and terminology, strategies to survive a meltdown or inflation frenzy, and the examination of “rules of thumb” and how they apply across income levels.
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How about something on how to read a financial prospectus? I get totally lost when trying to evaluate a company for its investment potential.
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Things I would be interested to learn more about:
1) 401k vs. Roth 401k, my company has both and I know the differences, but sometimes it’s hard evaluating which is best for me. How do I evaluate what my tax rate will be in retirement?
2) Best ways to build credit while you are young and your problem isn’t bad credit, but lack of credit.
3) Asset allocation in 20s, 30s, 40s, etc. and which is best for each age group.
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