5 Other Reasons to Teach Basic Money Skills
Learning about saving money can teach you many other lessons. Let’s take a look at all of the different ways studying this topic can enrich someone’s life.
In George S. Classon’s book “The Richest Man in Babylon,” the first strategy to accumulate a financial savings is expressed in the terms, “pay yourself first.” The idea is to put money aside for savings FIRST (as soon as you get paid), instead of saving what you are left with once expenses have been paid, which is how most people try to save money. By taking savings off of the top, you guarantee that you save that amount of money before it is used for other expenses.
The recommended savings amount in the book is, at least, 10% of your net income (income after taxes, not after bills are paid). Classon’s argument is that, if someone gets by with the income they have, they can also get by with 90% of that same income without feeling too much financial pain.
I can understand this to be true, at least in theory. We are all aware of the amount of money we spend on unnecessary and impulsive items - a cappuccino here, a lunch out there. So, it make sense that, if we trim just a bit of these luxuries, we would be able to save 10% of our income going forward. This is a valuable lesson on its own.
This simple principle actually presents a few other potential learning opportunities. Here are some of the aspects worth considering, in addition to the savings strategy itself:
1) Compound Interest: For some students, this lesson isn’t about amassing a certain amount of savings. Anyone can benefit from recognizing the power of slow accumulation. Compound interest is a cornerstone of investing. Knowing that a little bit can add up to a lot over time is valuable.
2) Math Practice: This topic is a great opportunity to delve into some real-life, everyday math. See what 10% of a paycheck looks like and the difference between all of something and 90% of that same thing. By making the numbers real, students can get a first-hand look at what a day, a meal, a week might look like if thought was given to saving a portion of what’s in their wallet.
3) Goal Setting: At this point, the topic of financial goals comes into play. Financial goals should be encouraged - a better car, their own apartment, a new video game system or a vacation. Savings for retirement and saving for a fancy trip are done in the same, general way - by saving a portion of income. The key is to link the action of brown-bagging your lunch from home to the action of getting on an airplane for a trip later on. Self-control in one arena can translate into rewards in another part of life. Having an appealing reason, or “why,” can be a strong motivator to change one’s behavior. By developing their ability to “desire,” students can tap the strongest motivators available. Once a goal has been established, the “pay yourself first” strategy provides a mechanism for working toward the desired goal.
4) Resilience Training: Having to pay attention to something you would rather not pay attention to is a life skill. Another feature of a lesson like this is that it’s not something most students find to be particularly exciting. This can actually be a good thing. See this as training. Doing what you don’t feel like doing is a pre-vocational requirement. I talk about this concept in my “Vocational Training Through Media” class. You cannot be employed if you are only willing to do what you feel like doing. I will discuss this further in future articles. By introducing students to topics that aren’t preferred, we are giving them an opportunity to strengthen their resilience and ability to focus. If delivered in small doses and with some tact, this resilience workout can be both pleasant and effective.
5) Flexibility and Adaptability: As with ALL classes, students have the opportunity to learn that they don’t have to do things the same way, time after time - as soothing as that might feel in the moment. Students can learn that, by changing their behavior, they can change their life for the better. This can be a tough concept to apply for anyone, but especially for those who struggle with social and emotional challenges.
Classic lessons like these are invaluable as curriculum. I believe that there can never be too many common-sense lessons we can learn. By providing students with solid principals, we are giving them the tools they need to make better decisions in the future.
Burak Uzun
SOCA LLC.