The Compound and Friends - Teaching Financial Literacy to High Schoolers (Tadas with Tony Isola)

Episode Date: April 22, 2019

“Personal finance can’t be taught in one day or period. It’s a lifetime journey. A full week, though not long enough, gives kids a fighting chance and sparks their interest for further independent study.” Tony Isola an investment advisor representative at Ritholtz Wealth Management, who blogs at A Teachable Moment recently about his experience teaching a personal finance mini-course to high schoolers over the course of a week. Tadas Viskanta got him on the phone to talk about what he taught the kids and asks why we, as a society, don’t demand our kids be financially literate.. You can read more about Tony’s experience at his blog, A Teachable Moment. https://tonyisola.com/2019/04/what-happened-when-we-spent-a-week-teaching-h-s-kids-about-money/ Enable our Alexa skill here - "Alexa, play the Compound show!" https://www.amazon.com/Ritholtz-Wealth-Management-LLC-Compound/dp/B07P777QBZ Talk to us about your portfolio or financial plan here: https://ritholtzwealth.com/ Obviously nothing on this channel should be considered as personalized financial advice just for you or a solicitation to buy or sell any securities. Please see this 3,000 word terms & conditions disclaimer if you seriously need this spelled out for you. https://thereformedbroker.com/terms-and-conditions/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey Tony, it's Todd. Hey, how are you? All right. Hey, I'm on the line today with Tony Asola. He's my colleague here at Ritt Ulth Wealth Management, and I wanted to have Tony on today so we could just discuss his recent post, What Happened When We Spent a Week Teaching High School Kids About Money, where he writes about his experience teaching a personal finance mini-course to a slew of 10th through 12th graders. So for the purposes of this discussion, it's important to note that prior to becoming an investment advisor, Tony was a public middle school teacher and has a passion around financial literacy and providing teachers with better retirement options.

So first off, Tony, what did Dina and Matt and you try to teach these kids about money and personal finance during the week? Well, first of all, we tried to show them like, like the biggest problem I think in financial literacy is you might learn about it, but then you don't apply it maybe for many years later. Right. So like, it probably doesn't make a lot of sense to teach a kid right now about social security because it's just, it's ridiculous. They can't even conceptualize themselves being like beyond 21 or something. So we try to teach them things that would come up immediately. For instance, we would teach them, you know, about college loans, about credit cards, about creating a budget.

And finally, about compounding and starting, you know, an investing program, which they could start right now. an investing program, which they could start right now. So the main focus was hopefully to get them to actually act upon what we did, because that's a big reason why many of these programs don't work, because there's just too big of a gap between the knowledge and the application. Yeah, no, honestly, the only thing I can remember from high school talking about personal finance was playing one of those silly stock market games. So I know I know you I know that's one of your bugaboos as well. But one of the things for me, one of the things from your post that kind of jumped out at me was how, you know, we're asking 17 and 18 year olds to make a huge financial decision when it comes to college and, you know,

potentially taking out loans to pay for that. And if you think about the financial implication of that, that's huge. And you said that a lot of the kids in the class were kind of shocked as to just kind of the implication of that. Yeah, and I also – we tried to show them like these are non-recourse loans. Like you're going to pay this back. This isn't like, OK, I defaulted on my mortgage and now I'm going to declare bankruptcy and now I can start over. This debt is going to be paid back. Whether you think that's fair or not, that's a whole other question. But if you take on this debt, it's going to be with you for the rest of your life. So you better be very judicious in doing this. And, you know, we try to teach them,

you know, when you get financial aid, there's a difference between getting financial aid by getting a merit scholarship or a work-study award, which you'll, you know, have a campus job and student loans. And obviously when you're looking at your package, you want it to be heavy with the former rather than the latter because, you know, colleges are a big business and their recruiters are paid by how many people they get to attend the college and how much those people are going to pay. So don't ever lose sight of that. Yeah, you know, it's interesting because, you know, the kind of the parallels between, you know, the idea of student loans and credit cards is, you know, somewhat similar. You know, we're giving kids whose brains, you know, aren't necessarily fully developed and matured and giving them, you know, giving them these options of taking on either debt or credit card debt. And, you know, it's really it's really amazing. Yeah. And, you know, for

instance, like the Stafford loans, there are no qualifications like anyone could get one. And I'm not saying that's a terrible thing because, you know, obviously we need to help people go to college. But when you can't vet people out by their ability to pay, it creates really bad situations. Well, we are, you know, we are investment people. So what about the stock market and investing did you discuss with the kids? Well, we just tried to show them, you know, like, hey, there's nothing wrong with buying stocks and, you know, having some fun with it, but use a small portion of your money, maybe 5% or 10%.

But the rest of it should go into what we called just investing in America or investing in the world, investing in capitalism and own everything. And to kind of back it up, we showed them like a cool video where LeBron James was asking Warren Buffett what to do with his money. And basically what Warren Buffett was telling LeBron James was the same thing we were telling his kids. So I think it had an impact as they were kind of like, hmm, you know, this advice is universal and it's easy to understand. And it's something now that it's just, you know, to do it, to buy a simple index fund that owns the world's markets couldn't be easier. And, you know, you could set up a Roth IRA right now if you have a little bit of earned income and start when you're 14 or 15 or 16. And this will make all the difference in the world.

Yeah, I know. You talked about teaching compounding. And that's, you know, when someone is 16 or 17, that's the time to be teaching them kind of the magic of compounding. Yep. You're teaching them when they're like 55 years old. It's just not the way to go about it. But unfortunately, that's the time. And we told him, we said, look, you have something that Warren Buffett would pay you $80 billion for, and that's time. We said, Warren buffett would gladly trade 60 years right now for all of his money and you're rich like you have to understand that you are all

rich so it's about you know you're going to lose this money or you're going to grow it you know and it might it's not so much money but the the opportunity that's ahead of you if someone kind of gives you some basic guidance on on how to do it And that's the whole point. It's really, it's a national disgrace, quite frankly, that this does not go on. Yeah, no, I agree. I've seen a few more, you know, I've seen a few more, at least at the college level, colleges trying to teach students, you know, give them, arm them with some of this information. But why is it that you think that, you know, we teach, you know, in high school, we teach kids, you know, everything but personal finance.

Why do you think that is? And, you know, how is it can we, you know, is that going to change anytime soon? I really don't know because, quite frankly, a lot of decisions that are made in public schools are more political than based on evidence. For instance, you know, everybody knows a teenager needs more sleep. That's biology, right? They tend to go to bed 11, 30, 12, and the best time for them to be waking up is eight or nine. So why does so many high schools start at 6.30 in the morning, right? Why is it that when everyone knows like the downtime of the day is maybe between one and three, maybe seven or eight hours after you wake up that's when

your brain is not as sharp as it is in other times in the day why is it that you know math classes are scheduled then or regents exams are scheduled during those times do you see what i'm saying right so it's like it's like yes this makes a lot of sense to do but i could go a million things about public schools that make no sense and defy, that's not my opinion, just defy all the evidence and data and literally science. So to me, it's not shocking that this isn't being done, if that answers your question. Yeah, no, it's not shocking. But, you know, when you think about, like we were talking about earlier, you think about the decisions that we're making kids take at this point in their lives, and like you said, these are, you know, non-recourse sorts of decisions, and, you know, it seems sort of unfair.

It is. And, you know, maybe it's not surprising. I mean, you've written a lot about how how the school districts essentially have let their teachers in terms of their retirement plans kind of to the wolves. And so maybe it's not not altogether surprising that personal finance doesn't rank too high in terms of the curriculum. Yeah. And to be quite frankly, if you really want to get into it, it really is a social justice issue because the people who need it the most are the people who have the least, right? They're not going to inherit things from their parents. Their parents aren't paying it all their full way to go to college. Less than 5% of kids from low-income schools have access to a financial literacy program or a personal finance program before they graduate, which to me is like it's unfathomable. Like think about that for one second. We're not talking about these kids wanting to set up a Roth IRA. These kids have to learn to have a bank instead of going to a payday lender.

What difference would that make? How to create an emergency fund. How to simply live a little bit in the future, right? Instead of just living everything in the present. Those three basic lessons could change their lives. But again, it's not required. How is that? Explain that to me. Yeah, that would go a long way and 5% is essentially zero. know, explain that to me. Yeah, no, that would go a long way. And 5% is essentially zero. So basically, yep, it's a rounding error. You're right. You're right. You know, and it's not much better. I think it's, it's something like 15% or 18% for everybody else. So it's not

like that. It's, but it's still just an insane thing that you would think if you're gonna, you're, you're talking about this country country and we have these huge gaps in wealth. I mean that's one way to start to narrow it. I mean it wouldn't take this crazy government program to do. Well, Tony, well, thanks for jumping on. We're out of time, but I appreciate it, and we'll talk to you later. Sure, anytime. Thanks. Bye-bye.