Tuesday, May 22, 2012

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Calculus or Personal Finance Math

For their senior year math classes, we had to make the decision for both kids whether they should take calculus or personal finance math.  In both cases we chose the latter.
Piggy Bank
Firstly, the reason we chose for them to study personal finance math over calculus is because neither child is interested in going into a science or math field.  Therefore they really don't need to go beyond Geometry, but for college reasons they took Algebra1, Algebra2, and Geometry.  My son also took Trig. 

Secondly, personal finance math is something they will be doing every day for the rest of their lives, so
why not sit down and study it?

Personal Finance Math is more than just adding up dollars and cents.  You have to understand banking which includes, savings accounts, how interest works, checking accounts and fees, credit card amortization, and tax accounting. Next there is financing, which includes home loans, auto loans and interest,  and insurance.  Finally, students should understand Saving and Investing.  Stocks, bonds, mutual funds, risk and diversification, and inflation are all based on very complicated math that kids need to understand.

Not understanding personal finance math, is what caused the current financial state of our nation.  Homebuyers were given fuzzy math to justify buying bigger houses than they could afford so that Real Estate Agents and Loan Agents can get bigger commissions. Investors were fooled into thinking that astronomical profits were possible and so lost their life savings.  The nation as a whole didn't see that the housing and stock markets could only go so high without a drastic correction.  We need our kids to understand math more than calculus; especially those who don't plan to go into a field that requires it.

Yesterday we opened my son's first checking account.  It took nearly 90 minutes as the banker explained to him all of the rules and perks associated with his account.  She talked about lines of credit, recommended he get a credit card in 6 months, and other scary things like that.  In all fairness, she also talked about ways to make sure he wasn't paying to use his own money (fees, etc.) and discussed wise usage of credit.  I was so glad I had chosen that he do personal finance math in college, because we could leave there and have an intelligent discussion of everything that was said, and make his own judgments on how he would proceed.  Without that knowledge, it would have been more of me preaching to him on what he should do without him understanding any reasoning behind it.

It is much easier to instruct an educated person. Everyone should take Personal Finance Math, if they need calculus, it should be in addition to, not instead of.




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