The Dow, dating, and your brain on money

Another week, another roundup of the most interesting articles I’ve read in the last seven days:

1. The 7 Deadly Sins of Personal Finance. A nice summary of all the mistakes you should avoid making, from The Globe and Mail’s John Heinzl. Click here to read.

 2. The Dow at 10,000. Don’t bother opening the champagne. When the Dow hits 10,000, as it is expected to at some point in the near future (it was at 9,554 this afternoon), there will be much celebrating. Passing this magic threshold is supposed to prove that the bull is back for good. (Ahh, recession. We hardly knew ye’.) This article, though, says a 10,000 Dow is no big deal.

3. How the recession has affected dating. Hey, let’s face it. Dating isn’t just time-consuming. It’s expensive. All that money on movies, dinner, etc. But here we find that couples are finding new ways to lower the cost of courting.

4. This is your brain on money. The big problem with personal finance advice is we assume that people are rational about money and financial decisions. That’s not true, of course. This article at Get Rich Slowly nicely explains the problem, and offers some nifty tips to getting around it.

5. Who wants to be a politician? In my past life as a newspaper reporter I covered local politics – city hall, police boards, school boards, etc. It was interesting stuff. One thing that always amazed me was how few people ran for the less coveted positions, like school board trustee. That’s why I especially liked this post from someone who recently decided to run and found himself instantly elected when no one else decided to oppose him. The money apparently isn’t half bad.

Old dogs, new tricks

Financial literacy is a hot topic these days. But teaching it is usually something aimed at kids and young adults. This Wall Street Journal article makes a compelling case that the people who actually need to take personal finance 101 classes are the elderly.

That may strike you as odd. After all, the older we get the more experience we have. Presumably that includes knowing how to handle money.

True enough, but what differentiates people in their 20s and their 70s when it comes to personal finance is that people in their 20s have time on their side. They can rack up giant credit card debt, learn for their mistake, and slowly pay the bills off. They can make a lousy stock buy and not lose any sleep over their retirement–still 40-odd years away.

Seniors and aging boomers, on the other hand, don’t have the luxury of time to make mistakes. Also, seniors have more wealth accumulated so a mistake can cost them tens of thousands of dollars, if not their life savings. No wonder scam artists and the Ponzi set tend to target people who are 50-plus. They actually have money to lose. A lot of it, in fact.

If we’re going to teach kids in school how to handle money, we might also offer a couple of refresher courses on money, investing and (most importantly) preserving wealth to seniors as well.

Child's play

If you’ve got kids at home, you’re probably wondering how to teach them to be smart with money. You’re not alone. Governments, schools and even corporations seem hell-bent on making sure the next generation knows more about personal finance than their debt-riddled parents.

The sense of urgency stems from the economic meltdown. If there’s one thing we’ve learned (besides bankers aren’t as smart as we thought) it’s that average folk don’t know as much about how the economy works as they should–or how to balance a chequebook for that matter.

As the recession revealed, a nation of financial illiterates is a dangerous thing. That’s why high schools across North America are now loading up on personal finance courses. Some are even mandatory. In Virginia, students must pass a one-credit course in personal finance and economics before they can graduate.

Teens aren’t the only ones being targeted. A new exhibit at Walt Disney World in Florida, called The Great Piggy Bank Adventure, teaches the kindergarten set to save and invest. During the game, an evil wolf tries to devalue their money with his diabolical “inflation machine.”

I don’t want to come across as skeptical about these efforts, but frankly, I’m skeptical. Recently, I pored over a teacher’s aid that Visa Canada put together on financial literacy. It was pretty dry stuff, filled with the usual quizzes (“List five warning signs of financial trouble.”) and bland advice about the perils of shopping. (“Be realistic about what you can afford.”) I’m not against teaching economics and personal finance in school. But I can’t imagine the average 16-year-old responding to this type of stuff.

Really, personal finance 101 is too important to be left to schools. Or Mickey Mouse. It needs to start in the home.

I’m not talking about lecturing your kids about buying $90 jeans, either. Just from watching my own kids I’ve realized that children don’t learn by listening to parents’ speeches; they learn by watching what they do. If you want your kids to be smart with money, the first step is to be smart with it yourself. Clip coupons, go grocery shopping with the sale flyer in hand, wash your car in the driveway instead of a car wash, and brown-bag your lunch. These are little things, granted. But just think back to when you were young. Parents who were frugal didn’t announce it. They led by example.

Another good idea: Put away your debit card and start using cash again. Debit cards give the illusion that money is infinite and not quite real. When your kids see cold hard tens and twenties coming out of your wallet, they’ll get a sense that money is indeed real–and how quickly it disappears.

Got your own ideas how to teach kids about money? I’d love to hear them. You can let me know your best tips by writing in the comment section below. Or e-mail me at rob.gerlsbeck@moneysense.rogers.com. I’ll share some of the best ideas we get in a future post on this blog.

 

Sailboats… and Getting Started

Hello. Welcome to my first post on this blog. It’s always tough to do the first one, but here goes:

Oh, almost forgot. I’m Rob, features editor here at MoneySense magazine. I’ve been a journalist for 20 years. I’ve worked in newspapers and magazines. I’ve covered lots of different stuff: from politics to crime, from business to advertising. I like to think of it as the well-rounded education I never got in school. Then there’s my other life at home: three young kids, a mortgage and my car payments. Ka-ching!

That’s where my blog comes in. It’s called Getting Started. The reason: most of us, including me, don’t know as much about personal finance or building wealth as we should. We just shovel money into RRSPs and figure one day, when we turn 65, there magically will be enough money to fund a lavish retirement lifestyle. (Which surely will include an awesomely big sailboat, because isn’t that what retired people always have in Freedom 55 ads?)

But money is hardly magical. It’s dollars and cents stuff. It’s RRSPs, and insurance, and investments that usually go up (but not always). We’ll talk about all that stuff on this blog. Hopefully you and I can learn a lot together. And who knows, maybe we will get that sailboat after all.

How I learned about money

My parents began with nothing, But they retired at 53 — while giving me a free education in practical finance.

Big personalities

Love ‘em or loathe ‘em, you can’t ignore these characters — or their new books.

Golf swings and guppy love

Where to find investing ideas for 2007.