I heard Stu Ungar did this once, but I highly doubt it's common.

Interesting conspiracy theory. Do you have any evidence that the financial industry is keeping personal finance education out of schools, or are you just talking out of your ass? Where do the financial industry people learn how to do their jobs?

An easy example of where a very simple financial education would help someone: Rule of 78s auto financing. Perfectly legal (AFAIK), interest paid for loan term is same as simple interest, no disclaimer required, but a loan that should never be agreed to by the borrower.

Not true, for obvious reasons. In some cases you save money.

yeah i didnt get that bit either but figured i must be missing something related to north american ccs.

i pay back what i spend in most cases. if there is a fee on the card its negligible to the point of irrelevance

We are talking about people who get into financial problems not people who pay off their balance every month. Obviously people who pay off their balance every month don't feel that credit cards are tricking them.

I think he was referring to people who dont pay off the cards straightaway...

Don't know why he indicated "everyone" then.

I think a decent % of people actually erroneously believe what he wrote (even though he may have intended something else), which is another indicator of general ignorance.

States outlawing use of the Rule of 78s formula in installment loans of five years and less:
Arizona
Michigan
Delaware
Minnesota
Idaho
Nebraska
Iowa
Nevada
Kansas
New Hampshire
Maine
New York
Maryland
Oregon
Massachusetts
South Dakota
Vermont

Same link says it's outlawed federally for loans 61 months or longer.


How big would you say "a decent percentage" is?

There was a small study (PDF) done on this (79 students) semi-recently, apparently because the idea of formal personal financial training enjoys a certain popularity. The results were actually mixed, and not at all what optimists might have guessed.

"Course Impact on Financial Behavior

Table 4 summarizes responses to questions relating to financial behavior based on whether or not the respondent had taken the personal financial management course. The results show that the course in personal financial management did not systematically impact respondent’s financial behavior. Those who had the course were more likely to make credit card payments on time (71.8% vs. 67.5%); however they were also less likely to pay their credit card in full each month (53.8% vs. 60.0%). Therefore, respondents taking the course were more likely to pay interest on their credit card balance.

Also, while a greater proportion of those taking the course balanced their checkbook (46.2% vs. 32.5%),
they also were more likely to have bounced a check (35.3% vs. 26.3%). In addition, those who had not taken the
course were more likely to prepare their own taxes (35.0% vs. 33.3%) and believed that they had adequate savings and investments (55.0% vs. 43.6%). To estimate overall financial behavior, we assigned a point for each reported beneficial financial behavior. The mean number of points accumulated by all respondents was 3.54, indicating that respondents reported favorable financial behavior on about half of the seven items. Although those who had taken the personal financial management course had a slightly higher mean score than did those who had not (3.62 and 3.47), the difference was not significant at the .05 level (see Table 4).

I am sceptical that school training will work as advertised in this aspect because it tends not to anywhere else, either, particularly in what I would call 'lifestyle' categories, such as obesity and fitness levels. My personal feeling is that people acquire debt because they convince themselves that something will happen between now and later that will make the debt easier to pay (this is the entire basis for ever-expanding tuition fees), the diet easier to keep, the exercise regimen easier to maintain, the impulse to procrastination less appealing.

I don't think the case has been made that the problem is truly miscalculation and not, essentially, human nature -- School can overcome some of the first and none of the second. That isn't to say that it's the worst idea anyone's ever had, but I do suspect it is misguided and so even if it were implemented there would be no meaningful change in outcomes.

Going back to the study, those who had not taken the course were more likely to pay off their cards completely -- likely this indicates they understood how interest works perfectly well on their own. More interesting is that the course takers ought to have performed at least equally well in this respect but didn't. I don't think the study gets into it but observations like that make me wonder about the potential for such a course to falsely embolden students to make inadvisable decisions, thinking that because they Took A Course they can exert more control over their situation than someone who did not. Maybe it's nothing, but interesting to think about.

Here's another brief discussion on the same Jump$tart program / financial literacy generally. They feel that motivation and aspiration are the greatest predictors of financial literacy and positive financial outcomes, rather than high school courses.

To the question, Which of the following do you feel is the greatest cause of serious financial difficulty, where families can't pay their bills?


They go on to say that motivated adults do benefit from financial counselling (often in the form of credit counselling, where motivation is high indeed, or immediately prior to purchasing a home). Thus, personal motivation is again supported as the primary driver of whether the material is retained and applied; it simply is not enough to go through the motions of required coursework, so the question cannot only be whether to require it.

Thanks for confirming rule of 78s financing is legal in 33 states. Just more reason to educate those who might erroneously think it is illegal and does not apply in their case.

I... wasn't really disagreeing with you? I think you're making too much of it, though -- it doesn't change anything if a borrower uses the entire term of the loan. I agree it's not great for someone who pays it down early, but still not terrible.

I read his first book a long time ago and it made me very interested in investing in real estate. That's one big reason why I enjoyed reading it, and expanded on that to find other sources of information.

If not anything at all it got somebody who didn't understand financial investing to look at it a bit deeper. He put out a ton of books after that and I didn't care to read anymore, seems to have the same information as the first one just spread out over many books. Used my library to borrow them so no money lost.