Can we teach personal finance in school please?

Today at lunch I got into an argument with a teammate about whether personal finance should be taught in school. Her main argument was that personal finance is so personal how could you possible teach that as a subjective. To me this was her weakest argument. I think the two stronger points were:

1. Teachers already have limited resources why would you make them learn finance
2. You would incur a legal liability if you gave financial advice

Saying personal finance is personal is nonsensical to me. Sex is a personal matter as well, but we still have sex education. I mentioned to her that personal finance could be taught similar to how sex ed was taught or, how drugs were taught in school. Although I mentioned that those subjects have a reputation of being taught poorly, and with little nuance.

The criticism of these classes are that all they say are:
1. Don't do drugs
2. Don't have sex

When you know that what's very probable is that students will do both so you should equip them to handle these scenarios. Similarly we know that people will spend money, so we should equip them with personal wellness. My colleague did concede that if you were going to teach personal wellness you could combine it with personal hygiene and claim that it's part of physical health.

I offered a variety of classes to cut. When I was in high school we had a mandatory class that taught us how to interview, and that was about it. I am sure that class could have fit a personal finance segment. As valuable as reading and math were I am sure we could've cut one of those classes out as well. We had enough reading or math. In some ways personal finance is applied reading, and applied math.

Unfortunately, the school system is not going to magically change, and I am not going to get involved in policy. I am fortunate that I grew up knowing and learning about personal finance. It's also fortunate that this information is being spread on the internet and is pretty accessible.

Here's things I've learned overtime not necessarily in order of importance:

1. You should have an emergency fund - this should be anywhere from 3-12 months of living expense depending on your risk tolerance
   1. This money should be stored in a high yield savings account so you get more interest on your emergency fund
   2. When you are estimating your expenses for an emergency fund you should account for increased expenses such as having to pay health insurance if you lost your job
   3. An emergency fund can be used to cover medical expenses, losing a job, having to pay for car repair, basically any unpredictable expense
   4. An emergency fund is usually first priority of where your savings should go
2. When it comes to investing you should keep your investing as simple as possible
   1. Merits a point on its own
   2. Details below about simplicity via Exchange traded funds, but you want investing to be a habit you do and something you only have to think about minimally
3. You should invest your money in Exchange Traded Funds (ETFs)
   1. The advice I've heard from my dad which seems reasonable is anything you are saving for in 5 years or less should not be in the stock market since the stock market in the short term has more volatility
1. How to buy low and sell high: the mechanism that allows you to buy low and sell high is having different types of ETFs at a set percentage split and then maintaining that percentage split overtime in particular if there are deviations greater than 5%.
   1. For example if your portfolio is 75% stocks, and 25% bonds say that stocks are doing really well but bonds aren't growing this can mean that your portfolio balance shifts to 80% and 20% (a 5% shift) so then you would sell 5% of your stocks and use them to buy 5% of bonds to get things back to 75% and 25%
      1. Note this is effectively selling high (stocks have gone up) and buying low (bonds didn't really change). To expand on this suppose stocks tank so that now you have 60% stocks and 40% bonds but want to maintain the initial split well you should then sell 15% bonds to buy stocks. Since stocks have tanked you've bought low.
         1. This approach takes the guess work out of the buying and selling. You might not even catch all these fluctuations, and generally that will be okay!
2. An exchange traded fund is a collection of stocks in the stock market the benefit of buying a collection of stocks is that you reduce your overall risk. In most cases the market (using this synonymously with EFTS) outperforms people who actively trade. This is a good thing it means you can buy ETFs and not worry about things. (site comparing different ETF distributions)
4. You should invest in a 401k (this is US centric)
   1. Even if your company doesn't match your 401k investing in a 401k reduces your taxable income in the present this is generally a good thing
   2. Additionally this allows you to save more money upfront (it's not being taxed) and allow it to grow with compound interest over many years
5. You should also invest in a roth IRA
   1. A Roth IRA is post-tax money but this makes it so that you can withdraw money and not have it taxed
      1. Main thing to know is this is another way to avoid taxes. Comparatively money you invest in a non tax advantaged tax account was
         1. Taxed when you first got the money (think your paycheck)
         2. Will be taxed when you withdraw the money
6. If you have a high deductible health care plan you should consider getting a Health Savings Account (HSA)
   1. A health savings account is also a tax advantaged account (pre-tax) that you can invest once you have enough money in it.
   2. Even if your company doesn't match into the HSA it can still be beneficial to invest in it
   3. I am not saying that a high deductible health plan is better than something like a PPO it's up to you to evaluate your health / health care costs, and decide what is right for you
7. When paying off loans you should compare the interest rate on the loan to the rate in the market
   1. In particular a lot of student loans are interest free for a long period of time. What this means is that you can use the money that you have to collect interest, and only pay the minimum amount on the loan.
8. It's useful to use a credit card to make all purchases you can afford
   1. You should never use a credit card to borrow money the interest rates are crippling
   2. Worth repeating you should be able to pay for everything that is on your card
   3. Credit cards usually have rewards associated with them so paying things with a credit card to get associated rewards is helpful
   4. Paying with a credit card builds your credit score which is useful if you ever want to get a loan or even if you are applying for things like housing
   5. You should pay off your credit card bill every month and never have a balance past that (hope this is clear!)
9. If you are traveling internationally you should have a card that doesn't charge international fees
   1. A debit card version of this is Charles Schwab they also do ATM reimbursements so you don't have to worry about paying ATM fees either
10. You should try to save your money
    1. The thing to look out for more is lifestyle creep which is the idea that the more money you start making the more money you spend.
       1. You aren't always guaranteed the same salary in the future
       2. It can be hard to change your lifestyle when you are accustomed to a certain way of living
    2. Saving money today allows it to grow in the future and to be worth more
    3. This is a balancing act, because of course money is meant to be spent, but it's helpful to think about your purchases, and resist some amount of consumerism.

Okay sure perhaps some of these pieces of advice are too perspective for my teammate, and they would be mad if they read this. I am also missing additional pieces of advice like if you are investing outside of tax advantage accounts you have to be aware of short term capital gains tax, and long term capital gains tax. This could influence the rebalancing portfolio for instance.

I recognize that all the financial concepts can be daunting, and that the situations don't apply to everyone. Some people have no choice but to be paycheck to paycheck, and have no other choice. Perhaps this is insensitive but in those situations it's even more important if possible to have an emergency fund. When you are living paycheck to paycheck it can take a lot less for one small element to throw your life into chaos.

I believe the lack of discussion and education plays into people not knowing what choices to make. If there's no guidance to point out the common pitfalls it's understandable if people fall into those pitfalls. Sure finance is a personal topic, but in the same way that you should share your salary among peers to determine if you are being paid fairly, and you should vote to participate in your democracy, and you should exercise to stay healthy and live a good life you should also have an awareness of financial aspects of your life.

It's totally possible that these steps that I outlined would themselves create more confusion, or overwhelm people. If someone is motivated enough they hopefully provide a reference of things to search. I am sure there are communities on reddit that could provide a lot of guidance and discussion. One community that I was interested when I was growing up is the Financial Independence Retire Early (FIRE) community. Money won't solve all your problems, but if managed effectively it should solve your money problems which can be pretty serious! The point isn't necessarily to stop working for instance, but to provide you with more flexibility (more on that later).