Schools’ money lessons are scary

Don’t teach kids how to be bor­row­ers; teach them to spend less and save more

USA TODAY US Edition - - MONEY - Peter Dunn is an au­thor, speaker and ra­dio host. Have a ques­tion? Email him at AskPete@pe­teth­e­p­lan­ner.com

If you talk with peo­ple about money for more than two min­utes, some­one is go­ing to un­leash one of the most com­mon fi­nan­cial phrases on the planet: “I wish they would have taught this stuff in school.” Yeah, me too. There are schools that fo­cus on fi­nan­cial ma­te­rial. But most cour­ses I’ve seen fo­cus on show­ing stu­dents how to be­come bor­row­ers, some­thing that mor­ti­fies me to no end. We need less “how to bor­row” in­for­ma­tion and more “how not to bor­row” be­hav­ior mod­i­fi­ca­tion.

To­day we’re go­ing to build a fi­nan­cial ed­u­ca­tion course from the ground up. As a pub­lic ser­vice, here is my syl­labus. Feel free to send it to your fa­vorite ed­u­ca­tor. The last thing I want to do is to tell ed­u­ca­tors how to do their job. How­ever, money is some­thing that every per­son needs to fully com­pre­hend in or­der to have a fruit­ful life.

Class is in ses­sion. WEEK 1 We be­gin our con­ver­sa­tion about money with the sin­gle key to fi­nan­cial suc­cess: be­hav­ior. No, your fi­nan­cial life is not about money. It’s about be­hav­ior. Bad fi­nan­cial habits are hard to break. Prior to your first penny of in­come, es­tab­lish healthy fi­nan­cial habits that will shape your be­hav­ior. WEEK 2 You’ll un­der­stand how in­come fu­els your fi­nan­cial life. It pays off your debts, funds your life- style and pro­vides for your fu­ture. If you don’t have enough with one in­come, get a se­cond one. As your in­come rises over time, don’t pro­por­tion­ally in­crease your life­style. Be­fore you know it, you’ll be de­pen­dent on more in­come. That’s bad.

WEEK 3

Bud­get­ing week is here. In­come al­most al­ways sum­mons ex­penses. Your bud­get di­vides your in­come up to han­dle them. Fixed ex­penses will ac­count for a ma­jor­ity of your in­come. You must make wise de­ci­sions with the rest. A ma­jor part of bud­get­ing is sav­ing. Peel off at least 10% of your in­come for sav­ings be­fore any­one else gets paid. WEEK 4 You prob­a­bly didn’t think goal set­ting would be part of your per­sonal fi­nance cur­ricu­lum, but debt doesn’t pay off it­self, nor does money save it­self. Learn to set 30-day fi­nan­cial goals, and good fi­nan­cial be­hav­ior will fol­low. WEEK 5 I hope you had a Red Bull, be­cause Week 5 is all about fixed bills and util­i­ties. Yep, ba­sic modern needs can eat up a lot of your bud­get. Many peo­ple ruin their fi­nan­cial lives via death by 1,000 pa­per cuts. Fifty dol­lars for this, $120 for that and $377 for this. Be­fore you know it, you can no longer af­ford the “small monthly pay­ment of ...” WEEK 6 Learn ex­actly how to be­come a mil­lion­aire: com­pound­ing.

When you in­vest money and your money earns a re­turn, the next year your orig­i­nal in­vest­ment, as well as your earn­ings, can earn an ad­di­tional re­turn. When this hap­pens year af­ter year, your in­vest­ment com­pounds. Time is as im­por­tant as money when it comes to com­pound­ing. If you un­der­stand com­pound­ing in­ter­est, you’ll un­der­stand that wast­ing time is worse than wast­ing money. WEEKS 7AND 8 Stu­dent loans. Yes, two weeks of stu­dent loans. At 18 years of age, you will be of­fered tens of thou­sands, if not hun­dreds of thou­sands, of dol­lars in loans. Typ­i­cally, stu­dents un­der­stand about 2% of what they should un­der­stand about stu­dent loans. Learn why you should take out the least amount you can, and most im­por­tant how your field of study will af­fect your abil­ity to re­pay your loans. Let your par­ents see your course ma­te­ri­als, too. WEEK 9 Learn that the stu­dent loan les­son of tak­ing out the least amount of debt pos­si­ble ap­plies af­ter you grad­u­ate, too. Some­body will lend you money for a car, a couch, a com­puter, a wed­ding, a va­ca­tion, a cat or any­thing else that tick­les your fancy. Sav­ing for a pur­chase al­most al­ways makes more sense than bor­row­ing. WEEK 10 It’s hous­ing week. Be­sides col­lege, you will never feel more pres­sure to make a pur­chase you can’t ob­jec­tively af­ford. Your home likely will be the most ex­pen­sive pur­chase you ever make, and if pur­chased prop­erly, it will al­low you to have a com­fort­able re­tire­ment. WEEK 11 No one likes spend­ing money on in­sur­ance, yet pro­tect­ing your­self against the un­known is nec­es­sary. You’re not invincible, and nei­ther is your stuff. WEEK 12 Some­one is go­ing to com­plain that I saved credit for the last week, but if you have good fi­nan­cial habits, your credit will take care of it­self. Your goal is to have money, not the abil­ity to bor­row money.

Yep, this is ev­ery­thing you should have learned about money in school.

If you’re not ad­dress­ing be­hav­ior in a fi­nan­cial course, the fi­nan­cial course is worth­less.

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Peter Dunn Spe­cial for USA TO­DAY

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