Here is our financial literacy class, or at least what we have so far. We’re adding more every day!
The class is meant for teenagers, but it offers a solid financial education for anyone! I think the only way to understand many of these concepts is to play with the numbers. So you’ll be building a spreadsheet from Lesson #1! Don’t worry: I use extremely detailed animated graphics to show how to build your spreadsheet.
Here’s the course. Please e-mail me and let me know what you think!
Financial Literacy #1: Compound Interest
All of finance is compound interest. This is, of course, an exaggeration. But only slightly. So much of what you need to know involves how money compounds. If it's your money, compounding is very good. If it's money you owe to someone else, it's very bad. The concept of compound interest here is simple: If ...
Financial Literacy #2: More Compound Interest
In the first lesson, I (and hopefully you!) created a simple spreadsheet to calculate a 6% return on $100. Now we're going to make that more flexible, and graph our results. The first question we'll answer: How much more money will you have after 50 years with a 6% annual return vs. 8%? (Take a ...
Financial Literacy #3: Graphing Compound Interest
The numbers we're looking at are getting big quickly. Well, not quickly: it's taking 50 years to turn $100 into $1842. I think it's easier to understand what's happening if you look at a graph. And it's more fun to look at a graph comparing two different curves. We'll start with the same data we ...
Financial Literacy #4: Adding money while compounding
So far, we've started with a fixed amount of money and let it compound. In real life, you're likely adding more money each year. But now we have 2 things going on: we're adding money while the money that is already there is compounding. This is critical to get to the next section, where we'll ...
Financial Literacy #5: Mortgages, Credit Cards, and Student Loans
So far, all of our numbers have been positive. I've assumed you have money in the bank (positive!), and you're earning interest (positive!). But now we're going to get into negative values, which will represent money you owe to someone else. I'm going to use a mortgage as an example. You borrow money from a ...
Financial Literacy #6: A Focus on Mortgages
Let's look at our mortgage example some more. We already know that 83% of your payment the first year ends up just paying off the interest. The good news is that this number steadily decreases with each payment. This makes sense: You pay the same fixed amount each year, but the loan balance decreases each ...
Financial Literacy #7: Introduction to Credit Cards
So far everything has been quite clearly positive or negative to your finances. Money in the bank earning interest gis helpful. Paying off the interest on a mortgage is not helpful (though buying the house can be good over the long-term!) Credit cards are a different story. They are either positive for your finances, or ...
Financial Literacy #8: A Credit Card Example
When we looked at mortgages, the payment amount was set so that the balance was paid off in 30 years. When you carry a balance on a credit card, the credit card company isn't going to promise a payoff date. The time needed to pay off a $1,000 balance is going to vary based on ...
Financial Literacy #9: Credit Cards vs. Debit Cards
In the last lesson, we looked at credit card debt and how much interest you can end up paying. Credit cards are one of the best financial tools out there if you pay your balance in full every month, and one of the worst if you don't. Debit cards are somewhat similar to credit cards ...
Financial Literacy #10: Student Loans
We've looked at home mortgages. We've looked at credit card debt. Student Loans don't look all that different. You borrow a large sum of money, and then you pay back the money plus a lot of interest. Student loans are just a different version of this: The payoff period is usually 10 years, and so ...
Financial Literacy #11: Intro to Investing
Now let's get to the good stuff. We can get to the good stuff (making money with investments) because we've covered the bad stuff (paying money in interest.) If you avoid paying $20,000 in interest on your credit cards, you can invest that $20,000 and maybe turn it into $100,000. Remember: compound interest! Here's the ...