Today I wanted to do a little exercise and reflect on when was the first time, I became aware of the stock market. I’m not talking about when I first became an investor, but when was that pivotal point in my life when I can say I had my first brush with financial literacy?
If you have the time and fortitude, I recommend that you do this too. Who knows what you’ll find? It actually turned out to be a more interesting thought experiment than I had anticipated. But isn’t that the same for all the underestimated things in life?
But in my case, this christening at the altar of capitalism and wealth building occurred in high school. Maybe that’s early for you, or maybe it’s late. I’ll be excited to hear your own take in the comments below.
However, the reason for this little trek down memory lane, is because I have changed my mind. If you are a familiar reader of this blog, then you know I strive to keep an open mind. And in doing so, this leads to a smorgasbord of hypocritical and contradictory thoughts, feelings and ideas on my part. Even in my less than two years of writing, I can already point back to numerous posts and question what the fuck was I thinking when I typed that?
Hahaha.
Fun for me, but maybe it drives you, the reader, nuts with the inconsistencies.
Oh well, to be human, is to err.
And the very essence of questioning, is to become comfortable with uncertainty. Evolve. Grow. Change. Shift. Pivot. Never be sure of anything. Instead, question why it is that I think I might be right.
So, our adventure for today began when I wrote a previous post less than a year ago: Have We Failed at Financially Educating a Nation? In it, I take the common view, that people don’t save and invest as much as they should because they haven’t been financially educated. If we could develop more financial literacy programs as a society, and implement them in schools, then this would help solve the problem. I wasn’t as naïve to say that would solve the problem, but I proselytized it would be a big help.
Now, I’m not so sure.
Steveark, who runs his own great early retiree blog, (very different than mine and a contrasting opinion that I always tend to learn from) posted a comment on that post questioning my premise. He thought that the problem with America’s spending problem was more behavioral than educational. I disagreed with him at the time.
But as I dug further into my own money story, I must admit, I’m taking more of his side now.
However, I’ll let you the reader, be the ultimate arbiter of this financial debate.
So, let’s begin.
Just for a quick recap if you’re new to this section of the blog. I come from a middle-class family – my mom was a nursery schoolteacher, and my dad was a hospital lab technician. So, no high salaries to brag about. We never discussed money growing up and I pretty much developed my own financial habits by watching them live within their means as I already wrote about in a previous segment: My Money Story – Part IV – Family Vacations.
What I would consider my first brush with financial literacy, came during high school in an intro to economics class – we’re talking 1999 or 2000.
Looking back, it was a pretty good class. And keep in mind, I was attending a wealthy private high school, (which you can read about my struggle fitting in here: My Money Story – Part V – Struggling with Affluence). My point being, maybe this class was only being offered because of the type of high school I attended. I have no idea there, but don’t want to discount the fact that might be the case.
We practice full disclosure here in the Q-FI multiverse.
Back to the econ class, it hit on all the basics, and I’m pretty sure covered the miracle of compound interest, but as you know from my addiction history, my memory isn’t what it used to be.
However, the entire class was geared around one major semester-long project in which we each had to pick a single stock during the first week, track it daily and then write a report on it at the end. Whoever’s stock appreciated the most over the semester would get additional points on the final, or some shit like that.
This is going to date me, but the best way to track stocks back then, was to look them up in the newspaper daily, and write down the price change. We had internet back then, but only one family computer that we all had to share with a dial up modem. Plus, the finance websites weren’t what they are today. So in the late nineties, it was some old school shit, highlighting the stock price in the newspaper each morning and tracking it by pen and paper.
You fucking young-ins have no idea how good you have it today… hahahaha. And I’m really not even that old!
Now, at that early age in my teens, I didn’t know shit about stocks so I go home and ask my dad what I should pick. He’s no stock Wizz either, but he reads the news and at least knows where to look. After I peruse the listings a little, he says Oracle has been in the news a lot, maybe I should pick that one?
And once again, knowing absolutely nothing about stocks, I concur. “Great pick Dad!” And that’s what I do. I go to class the next day and tell the teacher I’ll be tracking ticker: ORCL.
Keep in mind, this is all playing out right before the tech bubble crash in 2000-2002. It just so happened Oracle was in the midst of one of its best runs ever from 1999-mid 2000.
Look it up. It’s wild. Stock market timing, anyone? Hahaha.
And because of this awesome luck, your boy Q-FI won the contest with the most appreciated stock over that 3-4 month class.
In retrospect, maybe that should have been one of the best lessons of all. Here I am, at a wealthy high school and other kids are getting stock picks from rich parents that actually invest in the stock market. My Dad who knows nothing about investing or stocks, reads a random article and tells me to pick a trendy stock and I win in the short term.
Does that story sound familiar to anyone? Was that skill or luck?
Hahaha. It’s that easy, right? Anyone can do this.
However, now that I have this new financial literacy, what did I do with it?
I did exactly what most people do with it regardless of age: Nothing. Nada. Zilch.
But why?
I was armed with all of this newfound knowledge. I understood economics and the stock market. Why didn’t I start investing? Unleashing the power of compound interest like Dionysus riding his leopard?
Simple, because my behavior didn’t change.
To be brutally honest, I was more preoccupied with music, drugs, partying and chasing girls back then. Investing was the farthest thing from my mind.
Yet, subtract that from the equation and I was also surrounded by parents that didn’t invest, or know how to talk about stocks or wealth building. My predetermined path in life was to go to college, get a 4-year degree and then work for the rest of my life just like them. That’s what they did and all the people who surrounded me. No one was wealthy. My behavior mirrored theirs no matter what I had just learned in class.
And that’s why my opinion has changed.
If you have a kid living in poverty, do you really think they will change their behavior because of a financial literacy class they attended in school? If every day, they go home and see their parents working multiple jobs. Are told to work hard and they’ll be able to do the same by the family they love and trust. While observing all their uncles and cousins doing the exact same thing, week in and week out, and saving/investing is never discussed.
Do you think they’ll really change?
Probably not. Maybe a few here and there do. And that’s great. But we default to the behavior that surrounds us. We adopt the daily routines of our parents.
I wasn’t in an impoverished situation. I had means and yet, even after winning the econ class competition, I had zero desire to invest or further my financial education. It wouldn’t be until years later in my early twenties when I was setting up my first 401K that I finally started taking investing seriously and began to learn on my own. And even that is probably considered early by most Americans.
If that was my experience, and I had means at my disposal, why should I expect others to change simply by attaining financial knowledge?
I think the results speak for themselves.
More often than not, whether we’d like them to or not… people don’t change.
-Q-FI
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So, what’s your take? Do we need more financial literacy in schools? Does education not matter and it’s about behavior? If it is about behavior, is America just screwed? You’ve seen my opinion shift on this topic, has yours ever changed?
Congratulations on winning the high school stock picking contest. I hope you gave your old man an ‘attaboy for his investing prowess! If nothing else, it gives you bragging rights you can use as a financial war story during job interviews.
You raise an excellent point about how effective theoretical financial education might be, particularly where students lack the ability to see it being implemented first hand by their family or neighbourhood peer group.
If we can’t “learn by doing” and are unable to see the relevance of what gets taught, then for many students the lessons will either fall on deaf ears or be mindlessly parroted back in an exam and then promptly forgotten. I’d argue personal finance falls into a similar category as computer programming, cooking, motor mechanics, and sex education… an academic based approach can’t do the subjects justice, nor hope to successfully equip students with tangible skills and knowledge to be of much use later in life.
Hey, we all get lucky sometime… hahaha. And adding that piece of wisdom to the resume right now!
That one key word, “theoretical,” prior to financial education is what I think most of us dismiss and forget. That’s why I wanted to think back and see if after the first time I had been exposed to finial literacy did I learn from it, or was it just another topic of book smarts to be passed on an exam.
I agree with you the learn by doing is a key aspect and what makes it so tough to translate “theoretical financial literacy,” into “real life financial literacy.”
BTW… great list of non-academic based subjects – I’d never affiliated sex education with financial literacy before! Hahaha.
I second that congratulations on successful stock picking! To date myself, I remember reading the newspaper daily as a kid to check stock prices. Unfortunately, the number of stocks listed in each paper varied, so I couldn’t always check everything I wanted.
Like you, I learned about investing in high school, but it was in algebra class and not in a fancy Econ class. Then I started investing my babysitting money. I think you’re right that you’re more likely to invest if you have the right behaviors and circumstances, but you also need the knowledge. Without the knowledge, you won’t do anything. You didn’t start investing in high school, but you did it in your 20s when the opportunity presented itself because you already knew about it. Someone else who has the means but not the knowledge likely wouldn’t invest at all. I still think we’re better off teaching financial literacy than not teaching it. That’s absolutely a way to promote more equality.
Good times having to actually read a newspaper for stock results. It’s funny how far we’ve come in a such a short amount of time.
Yeah, I’m there with you Katie that it’s still better to teach financial literacy than not. My concern is that it will be treated as a solution but have little “real” effect. How do you really get kids/people/whoever to apply these techniques/principles?
Obviously that’ the million dollar question. But the more I thought about it, the more complex it became. As I point out in the post, I was one of those people guilty of oversimplifying the problem until I took a good look in the mirror at the history of my own behaviors and financial education.
I don’t think this topic nor conversation will be going away any time soon.
Thanks for your insight.
Hmmm, I have another example that springs to mind. In the 1980’s the environmental movement in Ontario was hell bent on lobbying the government to enact recycling laws. They got a receptive ear in the government of the day and Ontario’s blue box curbside recycling program was born. Of course, a program is only as good as the participation rate. So the activists flooded the school system with recycling education. The children went home and the next thing you hear is “No mom/dad, you have to put that in the Blue Box, you have to save the planet!” The program was a roaring success. To the point that years later, when I was working in Consumer Corp (with almost all of our executive parachuted in from New Jersey, so that they could get experience working in a “foreign” country >heavy eye roll here<) I was able to push through environmentally friendly changes by pointing out to the marketing department that their target market had never known life without a recycling program and if they didn't embrace this environmental 'shit' (their words, not mine) they would be eating their competitors' dust.
If you are blessed to grow up in a family that teaches you how to handle money, you win the lottery! But if you don't, you have to learn it somewhere else. School is a logical place. As I wrote to you before, the Ontario education system is working on incorporating financial literacy into the curriculum. Not one semester, but the entire school curriculum, as appropriate for the grade/age level. Maybe students won't invest in the stock market after learning about it in school. But if it keeps them out of credit card trouble, that would be a huge win for society IMHO.
How are you doing Veronica? Has lockdown lifted in Toronto yet?
I remember your initial comment on the first post, which was cool to hear what they are doing in Ontario.
Your environmental example is an interesting one. I’m not sure how replicable it would be though for the financial solution. I think the subject matter for recycling is easier to communicate to kids. Save the planet, don’t litter is a more simplistic message than compound interest and investing for a child to wrap their head around.
Like with Katie above, I agree schools are a good place to start. And you make a very valid point. One class on fincial literacy probably won’t do that much. But if it can be incorporated into the entire curriculum, mirroring how finance will affect your entire life, that’s a great idea.
Finding a way to ever get it done will be the trickiest part. However, that’s probably one of the best ideas I have heard yet.
As always, thanks for sharing and commenting Veronica!
I commented on your Struggling with Affluence article about my wealthy childhood friend. I asked my grandfather (who knew her family) about the money. He stated it had grown considerably through the generations. I remember asking him – “So they made some money and grew it through Aggressive and Lucky investing?” to which my grandfather nodded. That conversation was my first brush with financial literacy, but like you I didn’t act on it.
When I recall my side of the conversation with my grandfather, I agree with the “Aggressive” part of my explanation. Wealth seekers contribute large amounts Aggressively to their accounts until it hurts. It’s the “Lucky” part of my explanation I no longer agree with. “Luck” implies we don’t have control over the outcome. “Luck” is why I didn’t immediately start investing right then and there. I wish my grandfather had corrected me about “Luck” but he lived through the Great Depression so he may have his own deeply-held beliefs about “Luck” in the stock market due to his life experience.
That’s actually pretty good they grew it over generations. Usually within three generations or less it is gone.
I prefer the word, “disciplined” to “luck.” Or at least in the long term. A lot of short term gains are luck. And as long as you’re a disciplined investor, meaning consistent and unemotional about it, you don’t have to be all that aggressive. Over a long time horizon and modest risk you should usually come out ahead.
Thanks for sharing the story Wallies.
While you were exposed to the stock market, there still is a lacking in understanding about what it actually is and how you can benefit from it over the long term. I think you and Steve are both right–it’s a behavioral AND educational failure. I was exposed to the stock market in the same way–a stock picking portion of the class in high school. But I left that class with no fundamental understanding of the stock market, and saw it only as a short term game. So if I learned any lesson, it was the wrong one! Needless to say, I didn’t have the foresight to pick Oracle!
I like it. Playing it right down the middle, you can have your cake and eat it too. Ha!
Yeah, the stock market picking classes will at least expose you to the market, but if the teacher isn’t careful, it can teach you the absolute wrong message. Any form of investing with a predetermined time horizon will do that, when it becomes a competition instead of investing. In my case, I was kind of lucky I didn’t go nuts and say look how easy this shit is, I’m going to be a day trader. Good thing Robinhood didn’t exist back then.
I think I’m leaning toward the behavioral side, because you don’t necessarily need the education side to get started. For example, if someone tells you, maybe a parent or friend at an early age you should invest or sock away at least 10% in your 401K and you start doing it without understanding stocks at all. You begin that behavior and start to observe the compounding over a little time and most likely continue to save and invest. You knew nothing, but by starting the behavior, it taught you the knowledge so to speak. However, on the flip side, if someone is teaching you all these things about compound interest and you never take action to see it work for yourself, you’ll probably never do it.
But overall, I agree a little bit of both, is the optimal scenario and important.
BTW… you finish Sapiens yet? I’m curious on your overall take on it.
Ah, you brought back some memories I’d forgotten from high school. We did the same practice in our economics class. I remember randomly picking six flags amusement park and tracking it in the newspaper (crazy right). This was in 2000 or so too. I also did nothing with the “knowledge” of the market and compound interest.
You bring up a very interesting question about behavioral and environmental influences. I fall into the same category that you did, in regards to parents who didn’t talk about investing. Mine didn’t invest other than a 401k target fund and union appropriated investing. I agree with you that what is spoken about in a home over years, is more powerful than a four month econ course filled with distracted teenagers.
I think we need more financial education, but it needs to start at an earlier age and needs to be spaced out over the course of years. High school kids, for the most part, are too distracted to take in PF knowledge and not dismiss it like English and History knowledge–how much of what we learned in school is critical anyway? Without digressing too much, I believe public school, for the most part, is mostly training to become an obedient citizen and productive employee, not so much a place to learn and thrive–just my own biased experience. I think there’s a tender age for Financial education, when kid’s minds are ripe and not yet corrupted, maybe right before middle school? Or not, as I typed this, I remember the DARE program, and I can tell you first hand that didn’t work…
I wonder if that HS econ class was a Cali requirement? Both you and IF had it as well, along with tracking a stock.
The funny thing is, I forgot entirely about this class as well until I started to think back and wonder when was the first time I had been “educated” about the stock market. I even won contest and still forgot – show’s how little of an effect it had on me.
That’s a good point, maybe there is that sweet spot in learning years for a kid when to target them with financial education. You’ve probably witnessed it firsthand with your girls. I also concur school is more of a “training ground” rather than “learning.” I’ve always likened school more to day care rather than educating our youth. Your thinking is also along the lines of Veronica, that there needs to be an actual curriculum rather than a random single class.
And great point on DARE… hahahaha. Yeah, that shit didn’t work on me too well either. That comparison hadn’t even crossed my mind.
i grew up in the same kind of middle class environment without financially savvy folks. they would say to save but not really to invest and part of that was the pension mentality. it all worked out fine.
i had forgotten all about this but just remembered i did buy some bank stock (TRST, sucky bank stock) in my mid 20’s in one of those DRIP’s where you had to send in a check. it totaled less than $1000 if i remember correctly. i chose TRST because a couple of pals on the company board of directors owned it. my problem was cashing out a 401k along with not continuing to learn and invest in the market for many years. i was not a financial lumberjack by any means. anyhow, by age 35 i had it figured out which is better late than never. the one odd thing is we didn’t cash in that little DRIP fund until about 5 years ago when consolidating accounts.
i agree wholeheartedly that just teaching financial literacy as compound interest without real life examples kids can see is not the best way. it is indeed a behavioral problem if you ask me. my suggestion is you have to add some color to the lesson with names and stories. it could be malevolent missy or once i wrote one about raging reginald (he skipped college in favor of going straight to work) and lucky lucinda (4 year college with student loans) and compared how long it took that high and mighty lucinda to surpass reggie with his 4 year head start on investing. make kids read a story book as part of math class? that’s unheard of!
Starting to invest at 35 is still younger than most other Americans. It’s almost scary how many people I hear haven’t even started that are already mid-fifties or older. But the point is to start investing when you can. Beating ourselves up over the past never helps anyone or anything. You’ve learned and have been killing it lately.
Plus, we’ve all made investing mistakes. When I hear some blogger on a podcast say “I’ve never made a financial mistake in my life.” I call bullshit. Or maybe they enjoy lying to themselves… haha.
Your names are awesome – Raging Reginald and lucky lucinda. Hell, I’d read those stories and I understand finance. Here’s to hoping I get to see a malevolent missy story some day in my future kid’s text book!
Too funny, dude! My story is identical – HS Econ class at a private school, had to build a portfolio by picking from newspaper and monitoring and I also won (still have my cheesy award with a framed $1 bill hanging proud in my studio). My folks saved but never invested outside a 401K. I started investing as soon as I had scratch beyond covering rent and fixed costs. I also lived on the cheap for much of my 20s to stockpile a nest egg. That strategy paid off quite well although I can’t ever ingest frozen pizza or King Cobra again.
I’d say it’s both behavioral and educational. I consider most Americans to be financially illiterate and schools should teach the basics. Will it fundamentally alter aggregate behavior? Nope, but at least people will know how money works and what all the options are rather than just blowing their $ on junk and sinking into colossal amounts of debt.
It must have been a cali thing then, all of us cali kids had this same class in high school. Friggin’ hilarious. I had no idea so many people would have had a similar experience.
And way to go fellow contest winner – aren’t we in such an exclusive club now! Hahaha. Although I never got a cool dollar bill trophy.
Ah, King Cobra. Don’t miss that. I was more of an Old English type of guy… haha.
You’re right, at least it will educate people. It’s up to them to do with it what they will. Not more much we can do on our own.
My first financial literacy memory moment was in college. I was reading Cosmopolitan magazine and there was an article about S&P funds averaging 10-12% historically. It interested me! I went to Schwab and opened an account. Unfortunately, the article didn’t provide enough in-depth info for me. I wish it had told me that while the stock market goes up and down, it always goes up in the long run. I also wish it had told me about fees and “financial advisors” that talk a good game. My parents taught me to save in a bank account, but they didn’t invest, so I learned by reading and by trial and error over a 20 year period. While in the end, I’ve learned what I need to know, I could have amassed amazing wealth had I learned it earlier. I’ve tried to teach my three kids (32, 25, and 18) what I didn’t know, but I was still learning while my oldest growing up, and my middle child seems to be the only that has cared to hear the message. I agree that financial literacy should be taught in school because the ones that want to hear the message will, and the others might remember it when they’re ready. I’ve told my youngest that when he’s a grown up, he can handle his money whatever way he sees fit, but I want him to know how to budget and invest so that he knows how when and if he’s ready.
I think you’ve done all you can by teaching your children about saving/investing. That’s already so much more than normal kids ever get exposed to. I’ve also found that, like you mention, some people just have a natural inclination or interest toward finance and others take a lot longer before they grasp money makes the world go round. So why not understand it?
No matter our age, we all probably feel like we could have started investing earlier. I’ve never come across anyone so far who’s said, “yep, I’ve done it perfect.” So good for you on all that you have accomplished and how you’ve prepared your kids for the future.
Interesting story! I got started with investing when I was in high school, and now I’ve been in the market for around 15 years. The most important thing is to build good habits and set systems in place for your saving/investing. Once you’ve got a good plan in place, it’s just a matter of time before you reach your financial goals.
That’s quite a head start Charles, beginning to invest in high school is as about as early as you can get going. Great for you bud and thanks for the comment!