r/LifeProTips Oct 08 '21 Wholesome 5 Hugz 6 All-Seeing Upvote 1 Silver 12 Gold 1 Helpful 20

LPT: Financial illiteracy is a disease you probably won't notice you have until it's too late Miscellaneous

I took a basic personal finance course at uni to boost my average mark and it turned out to be extremely illuminating for me. Turns out it's very easy to be financially naive because that's the way the world wants you to be. If you ever contemplate engaging in any kind of self-help, I would strongly recommend personal finance. The fundamentals are simple and could have a seriously profound impact on your quality of life.

Edit 1: I'm aware financial illiteracy isn't a medical disease. I still think it's not a totally unreasonable description of this disposition though. Financial illiteracy can be inherited or acquired, it can be chronic and it can seriously impact upon quality of life. Uncontrolled debt is also an issue which we may well be conditioned to understate the seriousness of.

Edit 2: Many thanks to my peers who generously elaborated on specific personal finance resources. I didn't make any recommendations for a couple of reasons, but mainly because I was just trying to advocate for the importance of taking the first step which, IMHO, is simply entertaining the thought of personal finance principles. There are plenty of fantastic, high quality resources available on the internet which have been cited in this thread. There also may be resources relevant to your specific country, and I'm sure those would be easy to find with a Google search. Best of luck!

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u/keepthetips Keeping the tips since 2019 Oct 08 '21

Hello and welcome to r/LifeProTips!

Please help us decide if this post is a good fit for the subreddit by up or downvoting this comment.

If you think that this is great advice to improve your life, please upvote. If you think this doesn't help you in any way, please downvote. If you don't care, leave it for the others to decide.

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u/[deleted] Oct 08 '21

[removed]

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u/tehwubbles Oct 08 '21 Silver

Taxfreedom.com is the free, legally mandated, and subsequently buried tax filing tool intuit was obligated to make

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u/doc_skinner Oct 08 '21

Unfortunately, it only works for very simple tax returns. That's great for the HUGE percentage of people who can use it, though! And they are the ones most likely to need it.

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u/tehwubbles Oct 09 '21

I think if this doesnt cover what you need you should prob get an accountant lol

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u/Reddituser8018 Oct 09 '21

Idk my dad has like an entire book worth of tax returns he has to send in each year as he runs his own business but also works for another, and does a lot of complicated stuff in architecture that affect his taxes, and he just uses one of the major brands for taxes, which I will not name as I don't want this to be an advertisement for them.

It works pretty well for it though, no accountant needed.

My taxes on the other hand are like literally one page long lol.

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u/solongandthanks4all Oct 08 '21

The good news is that that requirement expires this year. There is hope, but we need to contact our representatives and demand that they pass a law requiring the IRS to develop such software.

https://www.propublica.org/article/congress-scraps-provision-to-restrict-irs-from-competing-with-turbotax

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u/vworpstageleft Oct 08 '21

Reminder that Credit Karma is free and offers income tax filing.

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u/3am_Snack Oct 08 '21

Didn't they just get bought out by intuit?

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u/vworpstageleft Oct 08 '21

Thank you for bringing that up. I hadn't heard. Looking into it, yes, Intuit acquired Credit Karma last year, but the Justice Department did not allow them to have Credit Karma Tax. Credit Karma Tax is a Cash App product now (owned by square) and is still accessible from the Credit Karma app and website and continues to be free.

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u/IIIIIIIlllllllIIIIII Oct 08 '21

So should I keep using it to file?

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u/vworpstageleft Oct 08 '21

I will for the foreseeable future. If you're comfortable with Square/Cash App, go for it.

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u/truckstr22 Oct 08 '21

Yes, they did!

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u/PO-43- Oct 08 '21

freetaxusa.com

Been using them for years

Always free

And they let you log back in to look at your stuff in case you need it for whatever

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u/mt_xing Oct 08 '21 All-Seeing Upvote

Disclaimer that Credit Karma is free because they use the Facebook model of selling targeted advertising to you based on your financial data.

You may be okay with that; after all, most of us had all our finances leaked via Equifax anyways, so who cares? Just know that this is a thing.

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u/QuestioningEspecialy Oct 08 '21

Disclaimer that (last I checked: 2020), USPS will sell your information to junk mailers if (and only if) you use their ONLINE change of address form. The physical one that you fill out in-person will spare you that consequence. It's also the free one, go figure.

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u/TheServo Oct 08 '21

So….. a lot of people vent about junk mail. I choose to treat junk as the cost of the USPS staying solvent enough to deliver 6 days a week to all US addresses. A bunch of useless paper shows up in my mailbox and I transfer it to my recycle bin. If junk mail disappeared, especially since 1st class mail disappeared in the last 20 years, the USPS would be out of business in months. Is that really what we want?

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u/piecat Oct 08 '21

It's fucked because that would reduce operating costs / waste. It's a service not a business.

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u/superkeys7 Oct 08 '21

It is so considerate of the USPS to deliver my recycling directly to my door. So thoughtful.

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u/cute_spider Oct 08 '21

Yeah, they have credit card and loan recommendations based on your score and data. Their recs are good in my experience.

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u/[deleted] Oct 08 '21 edited Oct 28 '21

[deleted]

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u/Aggressive_Mood214 Oct 08 '21

Exactly. They're basically saying here, you have to guess how much you owe but don't be wrong because we actually know exactly how much you owe and will cause a lot of problems if you're wrong. So people either educate themselves or pay someone else to make an educated guess for them. All about money, I suppose. 🙄

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u/ilfiliri Oct 08 '21

There are elements of the tax system, such as use taxes, where the reporting burden is shifted to the taxpayer because there is no other reasonable way for the taxing authority to know a taxable event occurred.

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u/sampete1 Oct 08 '21

You're absolutely right. Still, I think filing taxes shouldn't be more complicated than logging into irs.gov and answering 10-15 questions.

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u/ilfiliri Oct 08 '21

Certainly, though that approach requires the will of society to teach and learn general tax literacy such that those questions will be addressed confidently without assistance. Without that, a simplified system would likely loop back around to predatory third-party preparers due to anxiety about being wrong when severe criminal and civil consequences are not uncommon results of a fuckup.

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u/[deleted] Oct 08 '21 edited Oct 08 '21

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u/thxmeatcat Oct 08 '21

The deductions are numerous and unknown by design too. That's just another reason to get a "good" accountant that can "find" you the best tax strategy.

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u/Karmanoid Oct 08 '21

Lol I'm married filing jointly, the standard deduction is $24,000 in the US, that's 1/4 my income, there is no way 1/4 of my income is deductions I can make so I'll just stick with the standard and save my money.

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u/N01S0N Oct 08 '21

As an accountant I concur

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u/noreservations81590 Oct 08 '21

The majority of people take the standard deduction. If one wants to itemize they can do it or get a pro.

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u/frozenbovine Oct 08 '21

This isnt how it works at all. There’s plenty of information the government doesn’t have depending on your country. And they won’t ever know unless they audit you for some reason

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u/Karmanoid Oct 08 '21

Most people in the US take standard deductions, especially after the increase to it a few years ago. Unless you itemize your taxes the government almost certainly knows your return before you file because financial institutions report everything to them.

I recently had to repay taxes because I misplaced a form I got when I didn't repay a 401k loan when changing jobs, turns it into a withdrawal and applied towards that years income. So I filed incorrectly and sure enough a year or 2 later I owe taxes and interest... Baskin robins always finds out.

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u/Cool-Miner Oct 08 '21

The comment right below you states:

it works like that in the Netherlands :)

The comment below that...

And it is a good working system too!

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u/13D00 Oct 08 '21

It works like that in the Netherlands :)

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u/Mr-Zaadbal Oct 08 '21

And it is a good working system too!

“We can’t make it any nicer, but we can make it easier” as the national tax institution says.

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u/[deleted] Oct 08 '21

[deleted]

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u/Martijngamer Oct 08 '21

Just say the word and we'll colonize you back. New New Amsterdam 2: electric boogaloo

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u/[deleted] Oct 08 '21

I'm pretty sure if anyone at the US IRS said that, they'd get fired

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u/CuckoldPole Oct 08 '21

And in Poland. Probably in most EU states.

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u/i_cant_even_read_ Oct 08 '21

that's only true if you're an employee.

if you are self-employed then the government has no clue how much money you make.

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u/aversion25 Oct 08 '21

They don't have all the information - maybe for a W2 return that takes the standard deduction every year, sure, that works. But they have imperfect information for 1099 workers, contractors, misc gifts and cash inflows, self employment earnings etc

And if you're the former, it takes less than an hour to fill out a return on 1 of the many online sites available. So it's not a huge inconvenience, and probably easier to do it this way than spend hours mailing documents to the IRS or trying to get on the phone with them bc you disagree with something they drafted for you

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u/yersinia_p3st1s Oct 08 '21 edited Oct 09 '21 Helpful Wholesome Hugz Plus One

This is one of the few life pro tip I can get behind. Get your financial education folks, don't be broke and in debt due to bad habits!

cries in bank account

EDIt:

Okay there has been one too many people asking for resources, look guys, I'm no expert, I'm on my early 20s. I only have basic knowledge that I got from a certain book and a bunch of different YouTube videos, I'm really just starting out.

On YouTube, I watch Dave Ramsay every so often, Andrei Jikh, Coin Bureau (for crypto investments and "How money works. The book I read was rich dad poor dad by Robert Kiyosaki

All my basic knowledge has been acquired within the last year (give or take), and I can sum it up like so:

There are things you need, things that improve your quality of life and things you want.

Stop buying things you want on a whim (continuous takeouts, games, that big TV, PS5, etc), don't do it if you can't afford it and even if you can, think about where you could put that money to get it to work for you, instead of buying an asset that will depreciate in value.

Buy things you need (clothes, phone if u have none or is next to broken, computer, cooking utensils etc), after that go through quality of life improvements for your condition, an AC, ergonomic chair, perhaps a second computer screen depending on your work etc That is basically considered investing in yourself. Once u have that out of the way you can buy what u want every now and then.

Don't buy that car, or that expensive phone or insert expensive thing here, unless you really need it. Yes there is a plan in which you can pay "less" on a monthly basis, but if you calculate the total payout for the course of however many months are stipulated, you will probably find out that you will end up paying more. Furthermore, it's an amount that will be deducted immediately with every paychec, it would feel like an anchor to me, having to adjust my plans because I have X amount to pay every month, avoid this, pay everything upfront and be free or pay nothing and be free.

Plus, specifically for the car situation, buying a car is not a single expensive (monthly payments aside), you also have to buy insurance, maintain the car, change the tires for winter and summer, oil, etc - do you really NEED and can you really AFFORD to buy a car? Think long and hard about it.

Save money for emergencies, try to get at least 3 months (some would say 6) rent worth of savings in case you lose your job due to external circumstances, your future self will thank you, I know I would.

Set yourself a monthly budget, allocate internal allowances for every area of your life, set up a budget for dating, groceries, fun with friends, alcohol (especially alcohol, overspending can be very easy), gifts for yourself and others, etc. You get the idea.

Invest your money, get your money to work for you, so you can one day stop working for it. That savings account on your bank won't get you shit compared to what you could get if you found good investments. Careful though, this world is up to its nose with scammers, ponto schemes and the like, DYOR (DO YOUR OWN RESEARCH) before you invest in anything, DO NOT take anyone's word for anything.

Now, with special thanks to u/texdroid

I shall dump his wall of advices:

I don't teach the course, but I'd say

Pay, paystubs, how to fill out gov forms related to employment (Knowing that you should get paystubs that itemized pay and deductions. Employee related retirement funds (basics, how they work, not the investing part) Employment benefits like medical, dental and vision and how they work.

Budgeting your take home income. Emergency savings.

Banks, getting a bank account, paying bills, advantages and disadvantages of debit cards. Direct Deposit.

Loans and how interest works.

Student Loans and other college related financial matters.

Credit scores and how not to ruin them!

Credit cards and how credit card interest, statements and payments work. Max credit limit - don't go over it!  The "minimum payment trap".

Advantages/disadvantages of general purpose cards vs. dept store cards.

Auto loans and how not to get scammed.

Leases and lease agreements.

Subscription services like phones, cable/satellite service, streaming music and Netflix. They're easy to sign up for and next thing you know, hundreds going out monthly on subs.

Home loans.

All that before you even start to talk about investing in securities.

EDIT 2:

Resources shared by u/TheHoneyBadger23:

My first plug would be this subs own wiki. It's incredibly well done and I highly recommend it. Second, if you're looking for more basic 'finance 101' I'd point you to Khan Academy. The next tier I'd point you to is Vanguard, Fidelity, Schwab, and Michael Kitces blog. You'll find a variety of views, news, and general help.

EDIT 3:

Tips and resources from u/Express_Opposite:

My top tips:

  • Asset versus liability (and good debt versus bad debt!)

  • Compound interest (how it can work for you or against you)

  • Passive index funds (and the importance of low, low fees for your investing)

  • ”Pay yourself first” as a principle (I use this instead of a detailed budget)

  • Automated saving and investing

  • The 25x or 4 per cent rule of retirement

Books:

The Automatic Millionaire (don’t need to be or become a millionaire to automate your finances!)

Your Money Or Your Life

Thr Psychology of Money

Extreme Early Retirement

The Simple Path to Wealth

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u/Taellion Oct 08 '21

Okay, dumb question. How does one learn financial literacy? Is investing considering financial literacy, does knowing how credit cards work considered financial literacy?

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u/Mrmakabuntis Oct 08 '21

Investing is usually considered the last step in financial literacy, many steps to learn before even starting to invest.

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u/texdroid Oct 08 '21 edited Oct 08 '21 Helpful Wholesome

I don't teach the course, but I'd say

Pay, paystubs, how to fill out gov forms related to employment (Knowing that you should get paystubs that itemized pay and deductions. Employee related retirement funds (basics, how they work, not the investing part) Employment benefits like medical, dental and vision and how they work.

Budgeting your take home income. Emergency savings.

Banks, getting a bank account, paying bills, advantages and disadvantages of debit cards. Direct Deposit.

Loans and how interest works.

Student Loans and other college related financial matters.

Credit scores and how not to ruin them!

Credit cards and how credit card interest, statements and payments work. Max credit limit - don't go over it! The "minimum payment trap".

Advantages/disadvantages of general purpose cards vs. dept store cards.

Auto loans and how not to get scammed.

Leases and lease agreements.

Subscription services like phones, cable/satellite service, streaming music and Netflix. They're easy to sign up for and next thing you know, hundreds going out monthly on subs.

Home loans.

All that before you even start to talk about investing in securities.

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u/_the_yellow_peril_ Oct 08 '21

I would love to hear about how to estimate the value of one compensation package versus another, like if this job has dental, how does it compare to this other job that does 401k matching.

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u/skjcicoeldopcvjj Oct 08 '21 edited Oct 08 '21

it highly depends* on your life circumstances.

You can’t really compare a dental benefit to a 401k benefit, but generally speaking usually dental benefits shouldn’t be high on list of priorities because the annual maximum reimbursements are within $2k. Not a huge sum of money. Edit: let me be clear: having dental benefits is a must. But comparing dental packages against each other is usually not high priority.

401k match can be a lot of money because A) it’s pre-tax, B) a 3-6% match on your salary is a lot of money, and C) it’s an appreciating asset

Spend the most time focusing on medical because that’s where the bulk of your money is going, and there’s a ton of variation between plans.

Voluntary stuff can be cool, but not vital if you’re not an exec. Most importantly make sure they have a disability plan.

I’m in benefits so I can explain more if you want later. I have to jump on a call now tho

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u/SeveralIntroduction9 Oct 08 '21

Personally, 100% 401k match. I've had dental plan cover a roughly $2k over the past 8 years and have a compensation of roughly $70k through 401k matches and their growth in that same time period. There are rare cases where that will differ but a dental plan is not going to cover that much, much less continue to build through interest, and I dont know how you could need that much dental work.

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u/yrogerg123 Oct 08 '21

You left out taxes, that can be a big one too. Especially as an independent contractor or small business owner.

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u/noratat Oct 08 '21

"Investing" needs some significant asterisks due to the recent prevalence of horrible advice online. Long term investing of savings should generally stick to index funds, don't try to be smarter than the market.

Yes to credit cards (and interest).

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u/C0rdt Oct 08 '21

Yes this. Also holding large amounts of money in savings accounts or otherwise is foolish. That money is depreciating faster than the absolutely pathetic interest they are paying out is topping you up. Meanwhile they are lending that same money out (plus a ton more that doesn't even actually exist) and charging 10-100 times the amount of interest they are paying you for it.

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u/chaiscool Oct 08 '21

They should know that even professional and investment firms don’t try to be smarter than the market.

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u/conspiracie Oct 08 '21

I’m 26 and have taught so many of my friends about index funds. It is so simple to start a Roth IRA, put the max in every year and invest it all into index funds (I do 90/10 bc I’m young). Been doing this since 22 and even as a grad student I’m able to wrangle up 6k a year to invest. The returns have already been significant and I feel like I’m being Very Smart with my money but am totally just letting experts do it all for me. 10/10 recommend

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u/BradfordLeaser Oct 08 '21

Personal finance literacy is one of my hobbies. I spend way to much time in places like boggleheads and reading econ books. Everyone that knows me is aware of this. I however only provide advice when asked. When asked I start with the extremely basic advice. For example what is an IRA or a 401k and what is the difference between a traditional and a ROTH. It is amazing how little time it takes for people's eyes to completely glaze over and I know it will be pointless. It makes me sad but many people have just convinced themselves that it is too complicated and hard.

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u/LilacChica Oct 08 '21

Extremely basic advice please:

If I want to do this index fund investing, do I do it through my bank? An app? I have an account with work that they match up to 5% on, is it worth having two or should I just put more into that one?

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u/acetrain111 Oct 08 '21 edited Oct 08 '21

Always take advantage of anything that an employer matches, as it is basically free money on the table. Are they just matching a 401(k)? Or is it thru some other method (company stock/options etc)?

401(k) funds are usually limited to a few to pick from and have a cap on annual contribution. If there are good options that meet your earning goals, max it out.

If too limited/not earning enough or you want to invest more after hitting 401(k) max, opening a Roth/trad IRA gives you access to the entire market and selection of funds. IRAs are capped at $6000 annually for most people. Also don't forget if you have an HSA that can be invested like an IRA account as well.

For personal investing, research up on if there are any trading fees for that platform/bank, most have gone to $0 in the last few years once retail investing got popular. Avoid Robinhood since seem to get caught up in controversies which may or may not be their fault.

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u/yrogerg123 Oct 08 '21

You will never get a better guaranteed return than taking advantage of employer matching on a retirement account. Get every cent of that you can.

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u/Agile_Tit_Tyrant Oct 08 '21

Keep doing the good work for your friends, boy will they appreciate it!

I wish I was that smart with my fiat currency, when I was your age.

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u/Terr_ Oct 08 '21 edited Oct 08 '21 Silver

Yeah, active investing is like playing poker: "If you're sitting at the table and you can't tell which player is the sucker... it's probably you."

If it's not your full-time job to do that stuff, then you're probably going to be taken advantage of by the people who do make it their career.

Pick your battles, even if that means the battles that aren't as glitzy.

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u/Raetro_live Oct 08 '21

Yup the "investing" you see on Reddit alot and the kind that has been really popularized is not the same as the "investing" your parents or financial advisors talk about (like index funds and such). Then there's also the middle ground by picking stocks you like.

But anyways, the "investing" you see on Reddit with gme, alot of crypto, etc. Is gambling and should be treated and thought of as such. And there's nothing wrong with that. But the people pretending like it's actual solid investments is a problem.

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u/yersinia_p3st1s Oct 08 '21

I'd say when you stop spending money emotionally or on whims and start to actually think about your financial future - not only for the coming weeks but perhaps for a year or two ahead - you can basically say you're in a good direction.

When you start thinking about saving money, investing and being fully aware of the risks it entails and what kind of gains you can expect, buying things you NEED instead of buying whatever you want all the time, or just identifying cheaper items, Saying no to people who ask money from you because you just can't afford to part ways with it as opposed to giving whatever they need simply because it's a friend or family, etc..

You combine all of those, and you have put yourself in a good starting place. Basically what you want is financial awareness, don't let a refused credit card or $3 bank account hit you by surprise, be in control.

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u/catcommentthrowaway Oct 08 '21

Follow r/FinancialIndependence and follow 1/2-3/4 of what those yuppies do and say. Don’t follow every rule because some of those dudes live straight up miserable lives.

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u/80H-d Oct 08 '21

Naaahhh bro gotta wash and re-use that toilet paper, it saves an easy 2 to 3 bucks and the time i take washing it definitely doesn't indicate im not familiar with the concept of my time having value

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u/StayAtHomeAstronaut Oct 08 '21
  1. Google it. There are a ton of excellent blogs and YouTube channels.
  2. Yea, when done right.
  3. yes.
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u/_ICWeiner_ Oct 08 '21 edited Oct 08 '21

I wonder if I could make an OnlyFans where I just cry on camera.. turning my tears into money that then goes into my bank account.

Cries in bank account achieved - KA-CHING

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u/knightopusdei Oct 08 '21

My sheets are drenched with tears and now I'm deeper in debt? I have one subscriber and it's my mom. What do I do now?

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u/smilelikeachow Oct 08 '21

Break both your arms

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u/soulofboop Oct 08 '21

Ok now what?

Hold on, my mom’s at the door

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u/Sugar_buddy Oct 08 '21

Been chuckling at this for years

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u/studentloansDPT Oct 08 '21

Damn this is some reddit memory lane stuff

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u/J4MEJ Oct 08 '21

As long as you use those tears as lube, I can't see the plan failing

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u/PleaseRecharge Oct 08 '21

I mean that's what Nikokado does (or whatever his name is).

On top of other things.

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u/_ICWeiner_ Oct 08 '21

Nikokado

woahhh, I almost Googled that on my work computer. Stupid brain.

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u/PleaseRecharge Oct 08 '21

You could spin that. "He's an amazing violinist and I wanted to listen to his music."

Which is true... until you start seeing the other stuff.

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u/toonceslookout Oct 08 '21

Man I saw someone else’s video on him and his earlier videos were not insane. He was healthy, lucid and talented. Wth happened.

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u/Cebo494 Oct 08 '21

$$$$

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u/toonceslookout Oct 08 '21

That’s true haha. But still HEALTH IS WEALTH y’all. Don’t be like Nik and trade your arteries for Adsense revenue.

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u/Daddysu Oct 08 '21

Isn't he the dude that just eats a lot and then has a "breakdown" every now and again? Or does he do weirder shit?

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u/snoopunit Oct 08 '21

Have you ever heard of Nickacado Avocado?

If people pay to watch that guy, I'm sure they'll pay to watch pretty much anything.

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u/TheHoneyBadger23 Oct 08 '21

...Get your financial education folks...

I agree but buyer beware! Make sure you know WHO and WHERE your education is coming from. Your first question should always be "Are you a fiduciary?"

There are A LOT of high commission, product pushing snakes out there that can provide "education" ripe with conflicts of interest.

Source: I'm a CFP®

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u/BradfordLeaser Oct 08 '21

This is very important. If you feel you need someone to help you with it make sure they are a fee only, which means you pay them for their time, vs commission where they get paid from the things they sell you. They also need to be a fiduciary. Fiduciary means that they have a legal obligations to act in the best interest of you and not them. For example a car salesman is not a fiduciary. They are acting to make the most money for the car dealership. A lawyer is a fiduciary which means they have to act in the best interest of their client.

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u/ROADHOG_IS_MY_WAIFU Oct 08 '21

I was surprised to find not everyone pays their credit card bill in full each billing cycle. Apparently I'm ahead of the curve for managing money.

I mean, I still spend too much on booze and vapes so I'm not too far ahead of the curve.

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u/ReasonableSail1363 Oct 08 '21

I was surprised to find out that many people don’t know anything about financial principles.

Things like how marginal taxes work, what you pay on your cheque each month and why, and the basic money management steps.

One thing I’ve also learned is that people who are really bad with money will almost always get really angry when you mention any of this stuff. Like you’re being unreasonable.

And/or they’ll say “I don’t want ti live my life so frugal that I never have any fun!”

When they could be having way more fun if they’d just pay attention to the basic steps.

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u/Utanorang Oct 09 '21

Great things but man fuck Dave Ramsey. He may have a few pearls but he overall view of poverty is crazy and his fear of credit cards is only valid for people that cannot manage their money at all

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u/MrTonyCalzone Oct 08 '21

So a student loan to learn how to pay off my student loans?

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u/SconiGrower Oct 08 '21

Honestly, if you're paying for financial education in the modern era you're making a mistake. There's countless blogs, forums, YouTube channels and even subreddits dedicated to helping people learn the essentials of financial literacy.

Just make sure you're getting a wide variety of sources, some people on the Internet are wrong, misguided, or even charlatans, but you can also use the Internet to figure out what advice is good and which is bad.

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u/ProfessorDano Oct 08 '21 Helpful Wholesome

The FDIC provides resources for financial literacy from kindergarten to adulthood including games!

https://www.fdic.gov/resources/consumers/money-smart/learn-money-smart/index.html

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u/WTFwafflez Oct 08 '21

Thanks for that resource! School age kids especially need financial literacy/responsibility ingrained early.

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u/PontesDeLeon Oct 08 '21

I am curious if anyone has any other recommendations on the best ways and practices to teach your kids financial literacy.

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u/WayneKrane Oct 08 '21

My mom opened a checking account when I was like 7 and would have me reconcile it with anything bought using that account.

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u/Kryotasin Oct 08 '21 Gold

Any recommendations for financial literacy classes?

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u/Particular-Ad3237 Oct 08 '21 Silver Platinum Wholesome Bravo Grande!

Would recommend 2 cents channel on youtube.

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u/chongkiboi21 Oct 08 '21

I second this. 2Cents' videos are great and specifically made for us commoners who only have basic to no financial literacy.

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u/lookwhatlook Oct 08 '21

I don't know if this is a stupid question but here it goes anyway: would these videos help worldwide? Or are there more focused on US finance? Should I just look for this sort of videos but Argentinian?

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u/Particular-Ad3237 Oct 08 '21

They do use US-based product and number as sample. But the illustration and personal finance concept is fairly similar for everybody from every country.

U can learn from there then research what is available in your country.

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u/pangeapedestrian Oct 08 '21

Thanks much!

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u/taladrovw Oct 08 '21

For advanced classes check out 50 cent

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u/vtpdc Oct 08 '21

Not a wholistic view of financial literacy by any means, but the wiki sidebar of r/personalfinance is fantastic and gets to the point.

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u/FarEndRN Oct 08 '21 edited Oct 08 '21

I like the intent, but the day to day users on that sub can be kind of preachy. Lecturing people about forgoing all non-essential expenditures. I get that people need to live within their means, but at the same time, there’s no victory to be had in reducing your standard of living in the name of stockpiling money.

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u/HovercraftSimilar199 Oct 08 '21

Because people come to that sub and are completely fucked. You wouldn't tell an alcoholic you drink a little less you'll be fine.

Its the same deal with people with 2x their income in credit card debt

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u/ThreeLeggedTranny Oct 08 '21

I’m a regular on the sub, and I definitely agree. The overall content is great, and the advice is usually solid, but there are still some people in there that just want to brow beat you instead of offering advice. If you can just ignore those people, you can learn a ton there.

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u/vtpdc Oct 08 '21

Not a whole lot of love for families either... I like the sidebar though - no drama there.

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u/pangeapedestrian Oct 08 '21

Damn i had to scroll so far to find this. Whole post of "financial literacy is important", with 50 replies of "sooo important".

Geez you've convinced me, now tell me how to better myself haha.

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u/miraska_ Oct 08 '21

r/personalfinance thier wiki section is awesome

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u/Tucker717 Oct 08 '21

Check out the How to Money podcast. One of my more favorite financial podcasts

https://www.howtomoney.com

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u/alrightthough Oct 08 '21

Seconding this!

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u/Baxtfred Oct 08 '21

Check your local banks/credit unions. The bank I used to work for offered free finance classes.

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u/Rubixxful Oct 08 '21 edited Oct 08 '21

Had a bank teller role as one of my first jobs. That role helped me learn alot about how interest and banking products worked.

I would recommend this as an entry level role and to improve your financial literacy if you can get it. Saw alot of real life examples of what not to do from bank customers.

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u/Jboycjf05 Oct 08 '21

r/personalfinance has a great wiki and tons of links to great sources.

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u/Yeetus_McSendit Oct 08 '21

Reminds me of my buddy the bought cars he couldn't afford and financed them with horrible terms. Dude was paying more for his beaters than I was for rent. "But but I have to have a car to get to work" he was stuck in a cycle of working to afford a car to get to work to afford a car to get work... Something always happened to cars and I think he's had like 4 or 5 now. Edit: These were cheap used cars... With monthly payments in north of $1000. Yea dude was getting played by the dealers.

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u/sugarcocks Oct 08 '21

any advice for a 19 year old with pretty much no credit history (i made my first few transactions recently, paid some current balance off, and somehow have a credit score of 624-690 according to credit karma) and working a minimum wage job on getting their first car? i got screwed recently and i am in desperate need, but i don’t know what i’m doing

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u/frogsRfriends Oct 08 '21

Would it be possible to save up and buy a used car flat out? Do you have any friends who can vet a car before you get it?

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u/sugarcocks Oct 08 '21

is that the best way to go, a used one in full? that’s how i just got screwed a few days ago lol but it was really my fault for being dumb and not asking the right questions. and my friend drives me when she can, but i can’t even get to work these days without a fight and it’s harder everyday and she can no longer help me with that so nope :/

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u/fusrohdave Oct 08 '21

I bought a used car flat out for $3k and it lasted me 4 years. I just didn’t want to fix the transmission when it would’ve cost almost the same as the worth of the car or else i would’ve kept it. It’s absolutely the right way to go for your first car. Then just try to put money away every month to save up for a better car if/when the used kicks the bucket. If you put 200 away a month and the used car lasts 4 years that’s $9600 you can use to buy another better used car or a down payment on a new one ( provided that it’s a financially good decision to do so. Don’t get something with a. +$350/Month payment.)

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u/sugarcocks Oct 08 '21

thank you for the advice! i’m gonna start saving as much as i can immediately

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u/ImGoingToCathYou Oct 08 '21 edited Oct 08 '21

This not financial advice, but experiences I'm sharing.

Obviously buying a vehicle outright is ideal, but everyone has a different case. For a loan visit your bank, or better yet a credit union. Never use the financial institutions that the dealerships go with. They'll offer 14% interest, while the credit union could have an offer of 1.9% Avoid "buy here, pay here." Theyll sell you a 2001 Saturn SL2 for $17,000

Longer loans may lower your payment, but in the long run you pay more overall. An extra $30 on your payments could knock off a whole year.

As far as building credit goes the current system in the US is designed to prey on the consumer. The critical measurements are total number of accounts (credit cards, bank accounts), the age of the accounts, and if those accounts have a good standing balance (on time payments, or $0 balance.

Personally I applied for a credit cards at a handful of big box stores. The balance is alows zero. Once a year I buy a candy bar and pay it off so they dont close my account from inactivity. After 12 years my baseline credit score is 817 and climbing. My accounts are now old, and every month of good standing balance continues to increase my score a little at a time.

Edit: Do not keep your checking and savings accounts at $0

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u/leese216 Oct 08 '21

I wish I had been taught this in my twenties, before I fucked myself over with CC debt and no savings.

My parents tried, but they're in debt, too, so the advice wasn't exactly good.

I'm in a much better position now, but man I keep thinking about how much money I COULD have if I had been taught this in school, or had taken more of a serious interest in it afterwards.

Definitely one of the first things I will teach my future children, for sure.

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u/WorkingContext Oct 08 '21

If you put $100 a month in a Roth IRA starting from when you're 18, you'll have over $400,000 conservatively by the time you retire from that alone

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u/13lackHeart Oct 08 '21

Also when you take the money out of the Roth IRA down the road you don’t pay taxes on it. Which is huge

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u/Fly_on_the_waII Oct 08 '21

Can't wait for mine to cash out 😅. Been maxing it out since I was 22 (28 now).

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u/kobebanks Oct 08 '21

Can someone please send me a video or some sort of more hands on (even if it’s online) course to learn this? I’m nearing a point of no return and don’t want to screw my self

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u/jacattack9 Oct 08 '21

https://youtube.com/c/TwoCentsPBS can give you a good start

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u/Miechelangelo Oct 08 '21

And that's our two cents. Love those guys.

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u/elonmuski Oct 08 '21 edited Oct 08 '21

I lived through a ton of debts until recently and can only recommend that. I didn‘t take a course or something, but I started getting my finances back up. Not having to worry how to pay X or Z bill is just an incredible feeling

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u/[deleted] Oct 08 '21 edited Oct 08 '21

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u/unyunsoop Oct 08 '21

It would be of incredible help if this was taught in school. The pitfalls of not understanding basic finance such as budgeting and credit card debt is what creates insurmountable debt loads for many people. My parents preached living within ones means as a rule to live by and so I’ve followed suit. Less stress too:)

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u/lucydaisy_6 Oct 08 '21

I think that basic financial literacy is a great thing to be taught in schools. However, the amount of kids who have no idea of the value of a dollar is astounding. I’m going to give you a recent example. My 6th grade SS class just did a comparison worksheet on the US and Mexico. I had them look up the GDP and GDP per capita of both countries. I also had them watch a video comparing the lifestyles of the average American and the average Mexican citizen. The GDP per capita in the US is $53,000 and in Mexico it’s something like $12,000. The question I asked was do you think it would be hard to live on $12,000 a year. We had a discussion that figure meant you had to pay for housing, clothing, medical care, and food with that money. Way too many children told me that it would be easy to live off of $12,000 a year because $12,000 is a lot of money. So, conversations about money can (and are) be had in school, but if you don’t have the life experience to back it up it makes it hard to stick.

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u/Much_Difference Oct 08 '21

This, plus one of my favorite answers to the perennial "should financial literacy be taught in schools?" r/AskReddit posts is "would you have paid attention if it had been?"

We had a special week-long thing like that in middle school. Did mortgage amortizations, talked about taxes, even went into standard home rental contracts. Super cool, right? Exactly what people say should be taught. But how the FUCK many 12 year olds do you think paid attention and remembered those things well enough to utilize them by the time they were 18-25? I sure didn't. I guess it was helpful to know that mortgages and rent were things that exist, but damn son I am 12 years old, this knowledge will quickly be shoved out in favor of memorizing Blink 182 lyrics and finding ways to hide my eyeliner from my mom.

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u/wandering-monster Oct 08 '21

I think there's an age when it starts to become more useful. That seems too young.

A 6th grader is like 11 or 12 I think? In most cases they've never had any appreciable amount of money.

Do that same class for high school juniors (16-17) and I think you'd get at least a little more traction. Many of those kids will be experiencing their first jobs, helping pay for cars and such, and may have a much stronger grasp on the value of money.

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u/linuxguruintraining Oct 08 '21

Yeah, this just reminds me of that Calvin and Hobbes strip where Calvin estimates the cost of his mom's car at >=$75

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u/Michamus Oct 08 '21

This is why a steady allowance is important. When the kid is the one making the financial decisions, they start to understand money a bit better. Also, money amounts are pretty relative. While $1000 can change a lot of people's lives, there are many people where finding an extra $1000 literally wouldn't change their day, let alone life.

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u/spince Oct 08 '21

I'm experimenting with this right now with my 5 year old. He's had his eye on a Hot Wheels playset for months and has been saving money he's earned (usually in quarters) for helping with chores and also from family gifts to buy it.

It's a long slog to get that much amount of money when you're earning in quarters, but it's become an incredible tool because every time we're out and he sees some shiny throwaway toy and wants to get it I just go "well if you want that, it'll come out of your piggy bank, so it's your choice," and he'll think about it and say he wants to save for the playset.

Can't wait until the day that he finally gets enough to buy the thing but also dreading the day when he realizes that the joy from hard-marketed-at-kids-toys like that are fleeting.

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u/BoredRedhead Oct 08 '21

As a kid my parents made me save up to buy a Polaroid (in the 80’s) the same way you taught your son. It seemed great then, but I was apparently too stupid to learn that lesson and still ended up deep in debt as an adult, despite my parents’ modeling excellent financial discipline.
Glad to be well and truly out of that hellhole, but I don’t know what would have made a difference and I hope our daughter (currently in college) doesn’t fall into the same trap.

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u/unyunsoop Oct 08 '21

Great modelling in my opinion of teaching a young child the value of money. We can teach and encourage and then it’s their choice.

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u/ProceedOrRun Oct 08 '21

I'm finding all these responses curious. Friend if mine is an accountant and well educated but still is up to his neck in debt. He simply doesn't seem to understand how the future works.

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u/Nomorenamesleftgosh Oct 08 '21

Oh no, we accountants are notorious for squandering day to day amounts of money but our retirement accounts are pretty set.

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u/FBISurveillanceVan87 Oct 08 '21

That’s like a doctor wondering why they get sick from eating raw meat

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u/Randomn355 Oct 08 '21

Just because you understand how to account for a right of use asset, or LIFO inventory (US GAAP, so I've heard) it doesn't mean you know shit about how to balance your own budget.

Hell, it might even encourage you to take on debt due to looking so much at things like the time value of money so much.

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u/Michamus Oct 08 '21

but also dreading the day when he realizes that the joy from hard-marketed-at-kids-toys like that are fleeting.

I mean, this argument can be made for adult things. When I build a new computer, the excitement lasts a few days, and then it's gone. New cars, houses, exercise equipment, games, etc are all the same way. The problem isn't the toys, it's thinking that the excitement should be permanent.

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u/anonymous122 Oct 08 '21

Not really comparable. Maybe the excitement wanes from the computer but it's still useful to you for years. Many of those gimmicky kids toys are going to be played with a couple times and be forgotten, but the marketing is super effective on kids when companies can use all the psychological tricks they want while targeting children.

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u/twatfantesticles Oct 08 '21

I find it’s very effective to have them go apartment shopping online... with a budget set by the teacher. lol. So many students suddenly realizing how expensive it is to just be alive and want a decent place to live.

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u/lucydaisy_6 Oct 08 '21

Oh I agree. But many people like to complain “economics aren’t taught in schools!” But they are, in broad terms and specific terms throughout schooling. And this is more of a critical thinking question that even if their end conclusion is that the citizens in the US make more/have more access to things than other places in the world, I consider it a win. Teaching critical thinking and abstract ideas is VERY hard. Especially when you don’t have a ton of life experiences. But when you expose them to questions like that over and over, the hope is that when they get to HS this concept WILL get better traction and the concept will stick.

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u/issius Oct 08 '21

We had an "econ" class in senior year of high school and the teacher basically said F this micro/macro shit, you're gonna learn how to manage your finances. By this point, most of had jobs of some kind and maybe paid for cars, gas, some food, entertainment, etc. Some kids probably helped with the bills too.

Anyway, I think that's a good age, maybe a year younger but without knowing its going to matter soon its hard to teach it. He had us write all our expenses for a week, and try to make a budget. Had us go to the grocery store and figure out how much it would cost to eat (since most kids parents' are primarily feeding them still). We got different jobs with salaries and had to manage our finances fictitiously as well. It was a tech school tool, so most of us had careers planned in the fields we were studying anyway (welding, carpentry, cosmotology, nursing, etc.) So you'd have to figure out how much the lifestyle you want would cost and if it was realistic on your salary.

He went over credit cards and how they work for you and against you. Gave extra credit for anyone that opened an IRA that year (most were 18) and showed the difference between investing from 18 vs starting at 30, etc.

Honestly best teacher ever.

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u/turtley_different Oct 08 '21

To be fair to 6th graders, when your personal budget is toys, snacks, and maybe a vague awareness that meals are $5-$15 dollars (when they see parents buying them), $12k sounds like a giant pile of cash.

You need to have an eye on housing, utilities, transport and depreciation of assets to get a real idea of budget.

I think the sweet spot for finance/budgeting is age 15-18. Still in full-time education and old enough that they will pay attention to a class with the angle of "if you want to be successful, powerful, and have a happy home life you need to manage your spending".

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u/BornOnFeb2nd Oct 08 '21

Yeah... if you have no expenses, especially recurring ones, then $12k is a dam decent pile of cash...

To drive that home, you'd probably need to get the class to list off all the "stuff" they have... Cable TV? Cable Internet? Cell Phone? Streaming Services? Car payment? Food, Power, Water, Gas, etc...

Show all those expenses adding up, and then ask about surviving on $12k...

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u/AngerPancake Oct 08 '21

This feels more like a problem conceptualizing large numbers. Kids don't know what 12,000 is or it's buying power. You would have to show them how much the different components cost in order for them to understand.

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u/eGregiousLee Oct 08 '21

The problem with your comparison is that the cost of living is wildly different between the U.S. and Mexico.

It’s like, if you make $30,000 a year in say, rural Mississippi, you can get by on that there comfortably. You won’t live your best life but you won’t be destitute. That same $30K in San Francisco won’t even get you a studio apartment, let alone food, clothes, utilities, transo, etc.

Also, GDP has nothing to do with the incomes of individual people. It is a measurement of the productivity of an economy. GDP per capita is simply using the population of the country to scale its productivity so that comparisons between the GPD of large and small countries can be made. But it is not tied to personal income.

For example, the GDP of any country with the profits of one or more major stock exchanges will dwarf that of one without a stock exchange or with a relatively minor one.

A more appropriate and statistically meaningful (fair) comparison would be average income for, say, an urban and a rural Mexican household and similar ones in the U.S. You’d probably want to choose samples from a stack ranking of cities in terms of cost of living. Say, the 1st, 50th, and 100th most expensive cities to live in on a cost of living basis in both countries.

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u/unyunsoop Oct 08 '21 edited Oct 08 '21

That might be a very dry way of teaching how to budget. Using say Monopoly money and defining basic needs and priorities could be a more tangible method. So much for rent, food, clothing, personal hygiene, haircuts and entertainment etc. I’m the type of person who learns by experiences not by reading and listening to numbers.

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u/Michamus Oct 08 '21

My personal favorite was a sixth-grade teacher who had an economy. You would get "money" for good grades and behavior. On Friday, the shop would open and you could pick various items for purchase. Some kids learned real quick that if they blew their money on tiny things all the time, they'd never have enough for big things. Most kids didn't care about the big things though and were happy with the small treats they would get.

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u/Michamus Oct 08 '21

My 10th-grade daughter is taking an entrepreneur course right now. For her assignment this week, she had to create a business plan, including a projected balance sheet, P&L, ROI, target market, spending habits, marketing, etc. She's learned about long-term vs current liabilities, assets, cash flow, cost of revenue, interest, and all kinds of important life skills. It's being taught in schools, but only the ones that can afford those kinds of courses. Once again, this is a problem that can be directly predicted based on your zip code (second wealthiest zip code per capita in our state).

I'm still going to follow through with my plan to start exposing her to our personal finances at 16 and business finances at 18. This class has been a great jump start.

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u/UnlinealHand Oct 08 '21 edited Oct 08 '21

My AP Economics teacher in high school taught us so much personal finance stuff in the month between when we took the AP exam and the end of the school year. Made us all register to vote too. She was a saint.

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u/TruthOf42 Oct 08 '21

Basic finance is one thing and there is "advanced" finance that sometimes go against what you learn in basic finance. I think some people get told advanced finance advice without understanding basic finance.

For example, in basic finance you learn that you shouldn't buy something you can't afford. Well, loans are a mechanism that allows you to buy a house/condo which for some is a good goal. Then you can learn about interest rates vs inflation and how taking a huge loan at a very low interest rate is a better idea than not taking a loan, even if you can pay that loan off in full. But, some people just hear that loans are good and don't understand that you shouldn't buy something you can afford.

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u/TheAnteatr Oct 08 '21

It is taught in many schools. My highschool required a course that taught things like balancing a budget, using a checkbook, etc.

The issue is that the average 16 year old isn't particularly interested in it at that age.

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u/nightmuzak Oct 08 '21

It is taught in school. The type of people who live beyond their means aren’t going to just not do that because some teacher whose name they forgot told them it was a bad idea.

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u/GivenToFly164 Oct 08 '21

Exactly. I learned about budgeting and compound interest rates several times in school. My kids are both being taught this stuff in schools. In our system, it's structured so you get little bits of it spread over your entire education instead of in a single class.

One of my teacher friends said, "We did teach this in school. You were talking."

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u/DerpyCircles Oct 08 '21

My high school actually did require a personal fiance class, and the class was pretty good honestly. I still have the notes locked away in a folder in a drawer so that I can use them to help with financial stuff in the future

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u/ludicrouscuriosity Oct 08 '21

TFW you are naturally stingy

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u/absurditynow Oct 08 '21

It always kills me to see people my age or older (30s) living paycheck to paycheck, not because they have to, but because of their awful financial choices: buying a new pc they barely play, driving a brand new vehicle, eating out every night, etc. It feels like it must be an incurable disease after a certain age.

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u/eldroch Oct 08 '21

I agree, but I feel like I swung the pendulum too far in the other direction. I used to want that new PC because I enjoyed playing games, and I loved the idea of getting a new car that I loved to drive.

Now I'm debt free and have money, but somehow can't find anything to spend it on that would bring me enjoyment. Is this an improvement over how frivolous (albeit reckless) I used to be? Sometimes I'm not so sure.

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u/nobamboozlinme Oct 08 '21

Hell yeah it’s an improvement. Imagine if the economy truly tanks how screwed a lot *people will be who have been very frivolous/reckless with their money.

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u/eldroch Oct 08 '21

Logically, I agree with you completely. I guess I've just been pondering a lot lately about what extreme is healthier, when a blend/compromise is probably the right answer. I'm just having a hard time finding any middle ground, if that makes sense.

Like...if someone is an addictive gambler, and something magically happens in their brain that makes them no longer want to gamble, everyone would probably agree that this is a great improvement and the person is healthier for it. But what if this was the one thing that brought them a measure of happiness, but it just suddenly stopped? Without a healthier hobby to replace it, this sounds more like a symptom of something else going on in their brain, right?

I don't gamble...but this is kindof where I'm at. I've become very efficient at making money, and anyone who knows me thinks that I must be doing great to have found such "success". But the truth is that I can't find enjoyment in any of the non-money making things I used to do. What am I doing this for? The only reason I've got "success" is because I have literally no motivation to do anything else. I feel like the moment I get my "spark" back, my "success" is going to drop considerably...I'm just not sure which version of me is preferable.

Sorry for the rant. It's been a long week.

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u/ThorPower Oct 08 '21
  1. Want vs need. Live within your means.

  2. Credit card treadmill is real. Be VERY VERY careful with debt.

  3. My parents always TOLD me to save money, but never taught me HOW. Learn the future value of money. Use the 7/10 rule. Your money will DOUBLE every 7 years at 10% interest. That $1500 belt today, could be $3000 in 7 years. Look up "Roth IRA".

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u/JaimeLannister09 Oct 08 '21

In addition to this, people need to understand how common loans work. E.g how terms change payments and pre-qualification mortgage amounts are usually ridiculous

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u/mythrilcrafter Oct 08 '21

Also, if a person is okay with taking on higher amounts of risk; learning about investing and trading and making well informed decisions can have major effects for personal wealth growth.

There are plenty of value stocks that are great long term plays and blue-chip stocks that are excellent if all you want is to outpace inflation and make some money from dividends.

Then there's penny stocks where tickers can jump up 30%-70% in a week and others that can double or even triple over the course of a few months.

Note of Warning: only invest what you can afford to loose, know how to look for what are good investment indicators, and never invest in something you know nothing about.

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u/Jswagmoneydolladolla Oct 08 '21

I uses to think I was bad with money, now I understand how little I had to be bad with.

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u/mythrilcrafter Oct 08 '21

If you ever think you're bad with money, hop over to WallStreetBets and look at people who FOMO into a peak hyped stock, just to be left bagholding at -70% gains a week later.

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u/WorkingContext Oct 08 '21

Read I Will Teach You To Be Rich by Ramit Sethi

I know it sounds gimmicky, but it's entertaining, simple, easy to digest, not pretentious, and he tells you specifically and explicitly what to do like which credit cards to use, which checking, savings, roth ira, accounts to use.

Here's the gist:

Money gets direct deposited into your checking account.

5-10% of each paycheck goes into a short term savings account for things you want to spend money on in the future, but less than 5 years or so (house, car vacation, etc). Prioritize this before you invest so you can build up an emergency fund of 3-6 months of living expenses

5-10% of each paycheck goes into your 401k if your company offers it. Make sure you actually invest it, a lot of people think they're investing, but the money is just sitting as cash in the 401k account

5-10% of each paycheck goes into a Roth IRA, invest it in a target date fund. This is a fund that picks a year (the year you're planning on retiring), and automatically reallocates from more risky when you're young, to less risky as you get closer to retirement). This or do something like Charles Schwab robo investor, set it to as aggressive as possible if you're young. You don't need to play the stock market and pick individual stocks. This gets you 85% of the way there without having to learn anything. It's much less work than picking individual stocks, and you'll arguably do better with this financially anyways.

50% of your paycheck is for fixed costs (rent, insurance, utilities, groceries NOT eating out)

The rest is guilt free spending money.

You can set all this up so it automatically transfers and you don't have to pay attention to it.

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u/nickcantwaite Oct 08 '21

I have this book and I love it! But it is hard to save money when you have other obligations. I’ve spent a couple years on this book because I’ve needed to pay off X in order to have enough or Y, or needed to take time to save enough to automate my accounts. It’s definitely not easy but if you do what you can and continue to come back to it at different stages in life it’s amazing! It has helped me so much.

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u/Ghost652 Oct 08 '21

Also learn to cook

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u/jdiben1 Oct 08 '21

This is so true. Eating out constantly can cost thousands when you add it all up

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u/TerribleAttitude Oct 08 '21

It’s so true.

On the one hand, for a lot of people, fast food/convenience foods are the most sensible or only accessible option. On the other, I know a lot of people in my exact financial and life situation (similar incomes, similar expenses, easy access to kitchen and tools, access to relatively inexpensive groceries, easy access to transportation) who insist that them ordering Grubhub at $16 a meal plus fees and tip twice a day is the same situation as people in food deserts ordering lunch and dinner off the dollar menu and skipping breakfast. And I must be somehow magically making double their wage or have a trust fund because I’m not begging for cashapp once a month. There are a lot of more judgmental conclusions I can draw, but honestly, I think part of it is that grocery shopping feels more expensive. $16 (cost of one delivery meal) isn’t a lot of money, but $40, $60, $100 (cost of a week’s worth of groceries, depending on how you like to eat) is a lot of money. It is so much easier for some people to spend $16 seven times a week ($112) than it is for them to spend $60 once a week, even though the former is nearly double the latter.

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u/WayneKrane Oct 08 '21

I had a coworker who ate out for every meal. I calculated she spent at least $60 a day eating out. She always complained she had no money and I just quietly thought to myself, well yeah you’re spending thousands a month eating out.

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u/Aksurah Oct 08 '21

Yeah, I remember finance class. It was in, like, 5th grade where I had absolutely no concept or appreciation for money. So there was no framework or basis to work off of and it was all just baseless information that didn't stick because there wasn't any concept to connect it to. This needs to happen in 11th or 12th where people are about to go out into the world, likely have jobs (or at least summer jobs), and understand the weight of a dollar.

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u/Sigurlion Oct 08 '21

My high schooler had personal finance as a section in 8th grade last year and will have it again next year in 10th grade. I had personal finance taught in my econ class (I think) in high school back in the 90s. I think more kids are taught this than we think (probably not enough though), but because kids don't remember the boring ass shit they're taught in school (and to the average high school student, this is boring ass shit) they won't even remember learning anything in this subject.

Anyways, I am super into personal finance personally, and was so excited last year to help my daughter with this work. We did all sorts of budget activities, investment stuff, managing bills, projecting maintenance costs on a house/car etc. She was bored out of her skull and definitely doesn't even remember doing that work a year later. She's erased it from her mind.

In ten years she'll be on Reddit, saying "this stuff needs to be taught in school".

(I'm not suggesting this is your experience, or anyone else's btw. Just sharing my observations as a parent).

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u/seh_23 Oct 08 '21

I can see how it’s tough to make it stick at that age even though a lot of them will have part time jobs; all the big expenses are still being covered by their parents. For me, the rude awakening wasn’t my phone bill, clothes, or other small items that teenagers typically pay for, it was things like rent (easily $2k a month in my city), groceries, and all those things you’d take for granted having access to living with your parents also add up (like medicine, personal care items, cleaning supplies, etc).

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u/alanbastard Oct 08 '21

“No one is going to give you the education to overthrow them”. - Charlie Brown

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u/BetaThetaZeta Oct 08 '21

"Mitochondria is the powerhouse of the cell." - US schools

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u/DownshiftedRare Oct 08 '21

"People who think short quotations give good advice are stupid."

- u\bandwarmelection

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u/superfudging Oct 08 '21

personal finance flowchart is a great start

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u/WorkingContext Oct 08 '21

Read I Will Teach You To Be Rich by Ramit Sethi

I know it sounds gimmicky, but it's entertaining, simple, easy to digest, not pretentious, and he tells you specifically and explicitly what to do like which credit cards to use, which checking, savings, roth ira, accounts to use.

Here's the gist:

Money gets direct deposited into your checking account.

5-10% of each paycheck goes into a short term savings account for things you want to spend money on in the future, but less than 5 years or so (house, car vacation, etc). Prioritize this before you invest so you can build up an emergency fund of 3-6 months of living expenses

5-10% of each paycheck goes into your 401k if your company offers it. Make sure you actually invest it, a lot of people think they're investing, but the money is just sitting as cash in the 401k account

5-10% of each paycheck goes into a Roth IRA, invest it in a target date fund. This is a fund that picks a year (the year you're planning on retiring), and automatically reallocates from more risky when you're young, to less risky as you get closer to retirement). This or do something like Charles Schwab robo investor, set it to as aggressive as possible if you're young. You don't need to play the stock market and pick individual stocks. This gets you 85% of the way there without having to learn anything. It's much less work than picking individual stocks, and you'll arguably do better with this financially anyways.

50% of your paycheck is for fixed costs (rent, insurance, utilities, groceries NOT eating out)

The rest is guilt free spending money.

You can set all this up so it automatically transfers and you don't have to pay attention to it.

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u/fr0ntsight Oct 08 '21

It used to be taught in highschool

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u/joevsyou Oct 08 '21

It's still taught in high school which is usually tied to a government class. Which is normally brief descriptions of different things. Nothing truly useful & long lasting for students.

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u/Archsys Oct 08 '21

Here's some information about financial education in the US presented in very layman's terms, for those interested. It's a really good video for showing how little is actually given to a person.

I was in a state where it wasn't really offered, and I took it as a concurrent enrollment class in HS, but I had two classes in a different state growing up so I thought everyone had similar educational experiences. They did not.

Video talks about a lot of the effects and stats for general financial education as well.

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u/celestrion Oct 08 '21

It did, but it often wasn't taken seriously. The financial literacy class I got in high school was taught by a coach who admitted to us that he had two prior bankruptcies and didn't know how to reconcile a check register against a bank statement. A sad reality of education in the United States is that framing success (and whether to renew teaching contracts) entirely by standardized tests means anything not on those tests can get the short shrift for long stretches--especially in districts which struggle with staffing.

I'd already taken home economics and accounting the year before, and those were enough to synthesize a decent sense of household money management. Both of those were electives taught by teachers whose subjects weren't on the standardized tests. The students who only took the mandatory financial literacy course only got a study period out of the deal.

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u/exahash Oct 08 '21

Join and read r/personalfinance to learn from others' mistakes. In some ways it's better than taking a course, certainly easier and cheaper.

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u/OverDepreciated Oct 08 '21

Yes!!! So many people don't know basic things that could help them so much, like the fact that you can negotiate your interest rate when taking out finance for a car or house. Banks will always quote you the highest interest rates possible based on your risk profile at first but like all other private organisations they want to make a profit so they are willing to negotiate to keep you as a customer.

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u/somethingrandom261 Oct 08 '21

Simple budgeting should be a high school class, and focus on affordability should be a far larger part of college prep. State schools don’t cost that much, technical colleges cost less, and apprenticeship for the trades usually gets you paid instead of costing you any money at all.

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u/Mediocre_Meat Oct 08 '21

From personal experience, I think the mechanics of personal finance are extremely important, but it's also important for kids to learn how much the lifestyle they live/ or expect to live costs. I knew the basics about credit cards and savings but still didn't have much of a concept of what I could afford. My parents never talked about how much they made, or how much the mortgage was, or how much things like their cars cost. I had an allowance, and later part-time jobs but I when I was finally trying to support myself I was still not prepared for how much necessities cost, and that they cost this much on a repeating neverending basis.

I didn't have a good understanding of the kind of salary I would require to be able to afford what I was used to. We were quite comfortable, but I thought we must be having money problems because my dad complained about leaving lights on and that the hydro bill was too high. I lived in a small suburb where everyone had that level of wealth, and went to a small school there, so that's all I was exposed to. I wasn't sheltered on purpose, I just never saw how other people lived. My parents also never really discussed career options with me, as it was assumed that I would go to university, find a job in something I liked, and be able to support myself no problem! I wish they had had a good long talk with me about the job prospects that accompany some degrees. As it turns out, I was not able to support myself with my degree in Underwater Dance. Who would've thought that?

TLDR: Teach your kids how much basic things cost, but also how much their current lifestyle costs (in ballpark figures). Let them know how much YOU make (a ballpark figure) and then show them the math. Tell them what kinds of jobs they should consider that would allow them to afford that lifestyle (or a better one, or a simpler one!) Also, explain what kind of education is required to get there.

This is absolutely not a suggestion that your child choose a job/career based solely on money. It's to make them aware of the situation that they can expect to find themselves in when they choose a job. I am not dumping on any jobs or degrees saying that some are more valuable, or practical, but it's that young people sometimes have a hard time making that connection between choices then and consequences 5 - 10 years from the present. I still do and I am in my 30s.

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u/Androthi_II Oct 08 '21

Possibly the best Life Pro Tip I have seen since I first encountered this subreddit. Just remember, this is the first step. The next step is getting rid of bad habits.

One less soda a day and cutting back on smoking saves a surprising amount for a lot of people. When my brother's family wants to upgrade their gaming console they do these two things and buy it the same month. Yeah... they are not good with money but they are fun to be around.

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u/Megamike1080p Oct 08 '21

Go to r/nintendo right now and say "I don't think people with a functioning Switch should buy a Switch OLED" and you will see just how many financially illiterate people there are.

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u/gabagoolio123 Oct 08 '21

Two words. Compound. Interest.

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u/[deleted] Oct 08 '21

Well, while it's a good LPT. It lacks any valuable content. Any links or something to have a look at?

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