When School Taught Me Basic Finance, Badly
May. 9th, 2026 09:01 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
canyonwalkerThe other day I wrote about the question Who should be teaching kids basic finance? Some point to schools and say schools should be teaching it; others point to parents and say it's their job. I noted that one difficulty with asking schools to do it is that they're already overloaded trying to cover basic academics. (And really the reason they're so overloaded on that is public school teachers end up spending, like, 90% of their time trying to manage behavior problems.) I also noted that schools seems ill equipped to teach it because, at least the one time a school I attended did try to teach basic finance, the whole lesson was basically a fail.
I shared part of this story years ago, about one obtuse question in a 3-week long class assignment we all had to do. The bigger picture was that we were making a string of this-or-that decisions for a family about how they were spending their money. Every day in class for 3 weeks we had a new question or two to answer. We chose our answer, read the result, and kept track of the family's savings account balance. Here's that question I highlighted before:
1) Start with a budget first. Any responsible lesson on household finance has got to start with budgeting. The only number we knew for certain in the exercise was how much money we had in the bank. When you've got $2,000 in the bank and you're trying to choose a stereo, maybe one of the more expensive models looks fine. But if you know that two grand has got to last all month and your rent's $1,100, utilities are $200, and food's $500, you're going to choose differently. Making decisions without understanding the monthly budget is how adults get in money trouble. Any real lesson must, must, must start with budgeting.
2) Differentiate needs vs. wants. The stereo question is actually a trick question. It tricked even the person(s) who wrote it. The correct answer should've been E. None of the Above. That's because a new stereo is a want. When the household's budget is tight just paying for its needs— rent, utilities, food— things that are merely wants must be postponed.
3) Cheapest is not always best. Sure, if you're comparison-shopping identical items, you opt to pay less when you can. But if they're not identical then the one that's cheapest is not necessarily best. It may be poor quality that winds up costing you more in the long run when it needs to be replaced more often. This is a trap a lot of people from poorer families say they fell into. Sneakers for a growing kid? Okay, buy the cheap ones because they're likely to outgrow them before they wear out. But shoes for an adult? Maybe spend 4x to get shoes that will last for 5-10 years instead of falling apart in 6 months.
I shared part of this story years ago, about one obtuse question in a 3-week long class assignment we all had to do. The bigger picture was that we were making a string of this-or-that decisions for a family about how they were spending their money. Every day in class for 3 weeks we had a new question or two to answer. We chose our answer, read the result, and kept track of the family's savings account balance. Here's that question I highlighted before:
Example budgeting question
Your family needs a stereo. At the store there are four stereos for sale:
Which do you buy?
- $150
- $200
- $300
- $450
Which do you buy?
The "correct" answer— and here I quote correct because it was merely the answer the exercise creators wanted— was A. If you didn't choose A your family would later run out of money and not be able to pay their rent. The unit's author, like my parents, apparently wanted to teach us that "Whenever you need to buy something, X, the correct solution is to always buy the cheapest X possible."
Because my parents always did that, I'd already learned to pick the cheapest thing possible, so I chose A, naturally. But my classmate, Steve, chided me. "If you buy the cheapest stereo you're going to get crappy Sanyo speakers. You need to pick at least B."
Well, I got the last laugh on Steve because his family went broke and lost their apartment, and mine didn't.
Three things a basic finance lesson should teach
1) Start with a budget first. Any responsible lesson on household finance has got to start with budgeting. The only number we knew for certain in the exercise was how much money we had in the bank. When you've got $2,000 in the bank and you're trying to choose a stereo, maybe one of the more expensive models looks fine. But if you know that two grand has got to last all month and your rent's $1,100, utilities are $200, and food's $500, you're going to choose differently. Making decisions without understanding the monthly budget is how adults get in money trouble. Any real lesson must, must, must start with budgeting.
2) Differentiate needs vs. wants. The stereo question is actually a trick question. It tricked even the person(s) who wrote it. The correct answer should've been E. None of the Above. That's because a new stereo is a want. When the household's budget is tight just paying for its needs— rent, utilities, food— things that are merely wants must be postponed.
3) Cheapest is not always best. Sure, if you're comparison-shopping identical items, you opt to pay less when you can. But if they're not identical then the one that's cheapest is not necessarily best. It may be poor quality that winds up costing you more in the long run when it needs to be replaced more often. This is a trap a lot of people from poorer families say they fell into. Sneakers for a growing kid? Okay, buy the cheap ones because they're likely to outgrow them before they wear out. But shoes for an adult? Maybe spend 4x to get shoes that will last for 5-10 years instead of falling apart in 6 months.
