Friday, November 21, 2008

Personal Finance 101

From the 24 November 2008 Greater Niagara Newspapers

By Bob Confer

Americans have a long tradition of teaching our youth about common sense for the comments cents. At a very young age we start them on the path to fiscal conservancy by providing them with a piggy bank and the lessons that go with filling it and saving for the object of their desires.

Despite such an important life lesson we seem to forget it as we come of age. No longer limited to maintaining a piggy bank for basic childhood wants, we adopt newfound adult responsibilities, desires, and income. As they hold jobs to pay for wants and needs, many find it necessary to save little or nothing yet spend a lot in order to satisfy the culture of consumerism so prevalent in today’s world. It’s an ongoing cycle of addiction, one fueled by the messages we receive from advertisements, the media, shifty lenders, and our own peers. Today’s adults feel compelled to have the biggest, best and most when it comes to housing, cars, electronics, and leisure.

This materialism has caused many people to approach their incomes with reckless abandon and the economy has hit a brick wall. Millions of homeowners couldn’t pay for the morbid mortgages they entered into and millions more have accrued unreasonable amounts of debt on their credit cards, the next nightmare on the horizon. They all gambled on the housing bubble, they all lived beyond their means. It’s bad for them, yet worse for us a collective society. We’re all on the hook for their debts, our federal government spending our reserves and creating money out of thin air to prop up the faltering financial markets that were based on false, ethereal funds and credit payments that will never materialize.

For all those folks who spent and invested with no respect for the true value of the dollar, there are many more people who, like me, are pennywise. I’m notoriously cheap at work and at home, finding it difficult to part with a dollar. I know that if I err on the side of excess at home, I’m on the streets. I know that if I do the same at work, there will be 120 families on the street. You’ll find me saving my money to improve my future and investing in my company to guarantee its future.

I’m left asking (as are many others): Why can’t more people be that frugal? We coupon-cutting cheapskates feel let down by the world around us, wondering why we must pay for the sins of society.

Truth be told, the spenders might not be acting in a malicious way. They might just be ignorant. And I don’t mean that in a bad way. They may be uneducated in personal finance. It’s a confusing world out there with so many gimmicks on mortgages, interest rates, loans, retirement accounts and all else financial. I was fortunate enough to have fiscal knowledge drilled into my brain by my parents and the Boy Scouts.

The latter brings me to this point: We need to educate our young adults on basic personal finance. It works. “Thrifty” is just one of the twelve points of the Scout Law, ranking up there with the likes of “trustworthy” and “helpful”. Scouts are taught endless lessons on saving and spending wisely. The Scouting program knows the importance to society of a young man who respects the dollar and the penny. Because of that, most Scouts are stable in their adult lives.

That same approach needs to be applied to our high schools. Back in the day – maybe to this day - there was a class called Home Economics. There were no economics involved, it was all domestic science. We were taught how to sew and cook. It would behoove the greater good of this nation if the schools developed a course that was a true study in home economics, a year-long course for high school seniors that educated them on all the nuances of personal savings. Many seniors have study halls galore, so it would not be that difficult to add another course to their schedule. Millions of seniors venture into the real world every June and it’s imperative that we prepare them for it. They’ll be better - we’ll be better - for it.

It comes down to this:

The wealth of a person is not based on that which is spent. It’s based on what is saved. The wealth of our nation should be based on that which is spent and saved: by spending just a little on the intellect of our youth we can save our nation from a repeat of the horrible economic disaster we’re in now.

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