How I Introduced My Students to Personal Finance

Along with a 10-year corporate career, I studied in American business schools for about nine years, culminating in a Ph.D. from Columbia in 1991—Columbia was different back then because I did not need to file a “diversity, equity, and inclusion” plan. Then and now, though, American business schools have been long on theory but short on practical skills, ensuring I learned little about how to manage my career or my personal finances. When I started to teach 35 years ago, I resolved to fill this gap, and Jared Gould’s recent call for educators to teach personal financial management resonated with me, so I thought I’d share a few things I did.

I integrated four topics into my courses:

  1. Fulfilling Careers
  2. Financial Discipline Through Simplicity
  3. Investing
  4. Importance of the Free Market Economy to Financial Success


Fulfilling Careers

Intelligent financial management begins with a self-actualizing lifestyle, and thinkers like Aristotle and Abraham Maslow can be used to discuss mission-driven career selection and dispensing with credentialism.

Few students have been exposed to real-world managers, so I often integrated a networking exercise with a goal-setting exercise.  In the goal-setting exercise, I would ask the students to identify the spiritual mission that they would like to actualize in their careers and to develop a plan of action.  Richard N. Bolles’s What Color Is Your Parachute? is an excellent source for this assignment—in a few instances, students complained to me that they had trouble completing the assignment because their parents had stolen Bolles’s book.

After figuring out their goals, of which maybe one-third could do well, one-third could do passably, and one-third could not, I would have them find a practitioner in the field in which they aimed to work. I told them to contact the individual and ask to meet in person to learn about how the practitioner got into the field.

That kind of informational interviewing develops multiple skills that are important in almost all careers:  interpersonal, sales, networking, and client outreach among them, but the most important is the ability to deal with rejection.  The informational interview process also allows students to meet people in and develop a knowledge base about their field. In the last class I taught before I retired last year, two of 35 students got full-time job offers from the exercise, and two got internship offers.  Only about one-third of students would do the exercise well because of fear of rejection.


Financial Discipline Through Simplicity

Finding a fulfilling career makes personal financial discipline easier because people who are happy with their work need not indulge in escapism and self-sabotaging habits, but developing self-discipline with spending and credit is an essential additional step.

I taught undergraduates at Brooklyn College-CUNY and MBA students at the NYU Stern School of Business. Most students in either group had not carefully considered how to accumulate wealth, which requires foregoing consumption for personal savings.

My English second-language students were better than my American-born students at this. The U.S. personal savings rate is currently 3.2 percent, while the Chinese personal savings rate is around 35 percent.  Few American-born students have considered foregoing a cell phone or car to invest.  Stanley and Danko’s The Millionaire Next Door is a useful reference—it was updated by Stanley and Fallaw’s The Next Millionaire Next Door.

I would sometimes ask students whether most American millionaires are immigrants or White Anglo-Saxon Protestants (WASPs) with long family histories in the U.S. My English as a second language (ESL) students always knew the answer—immigrants.


Importance of Investing

Median usual weekly real earnings—inflation-adjusted in 1982-84 dollars—of wage and salary workers have gone from $335 in 1979 to $365 today, an increase of nine percent over 35 years.  Over the same period, the inflation-adjusted S&P 500 stock index has gone from 446 to 5,147, an increase of 1,054 percent,117 times the wage increase.

Robert Kiyosaki’s Rich Dad, Poor Dad contrasts the financial philosophies of his biological father, who was the superintendent of Hawaii’s school system and lacked a strong understanding of money, with those of his friend’s father, whom he considered a mentor and “adopted” as his own. This “rich dad” taught Kiyosaki the principles of investing and financial independence. Kiyosaki emphasizes that investment doesn’t need to be complicated. For example, a straightforward strategy such as dollar-cost averaging with an index fund like the S&P 500 can accumulate substantial wealth over a 40-year career. This approach involves regularly investing a fixed amount of money regardless of market conditions, leveraging the power of compound interest and market growth over time.


Importance of the Free Market Economy to Financial Success

The World Bank lists countries by GDP or wealth per capita. The small countries at the top of the list are tax and banking havens like Monaco and Liechtenstein;  oil producers like Norway and Qatar; and free-market countries like Ireland, the Cayman Islands, Switzerland, Singapore, and the U.S. If you look at the list of countries with at least 100 million population, the only rich one among them is the U.S. Mainland China, for example, has a GDP per capita below Costa Rica’s but slightly above Malaysia’s.

The reasons why large countries require free-market economies to become wealthy have been explicated by Friedrich Hayek in a long list of books and articles such as “The Use of Knowledge in Society” and by Milton Friedman in Capitalism and Freedom. 

It is ironic that, on the one hand, American higher-education institutions claim to aim to elevate students economically through the development of human capital but, at the same time, employ faculty who mostly advocate interventionist and socialist economies, which destroy returns on human capital.

If students are to have successful, flourishing lives, economic and social freedom will be prerequisites.

Image by fajrulisme — Adobe Stock — Asset ID#: 679549749


5 thoughts on “How I Introduced My Students to Personal Finance

  1. I applaud your efforts to teach practical personal finance to your students. I have one critique, however.

    Dollar cost averaging is rational if you hope to reduce the risk of regret (investing a large lump sum prior to a sharp decline in the market). But regret risk is irrational. If you are investing for the long them, and believe that capital markets trend upward but in the short term are unpredictable, then a large lump sum immediately is the better choice.

    Having said that, investing regularly via automatic paycheck deduction is an excellent way to maintain discipline despite the short term volatility that is inherent in capital markets.

    1. You are correct unless you just happen to put in your lump sum investment right before a downturn. Also, as you implied few people actually get a significant lump sum. Most of us have to grind it out over time

  2. I’m curious why you believe that reading Hayek is indoctrination while studying Keynes or Marx is not.

    1. You’re imputing statements and thoughts to me that are not there. I don’t have them study Keynes or Marx — both of whom had doctrines, for sure! — nor Hayek — who was also an indoctrinator bigtime!

      I simply teach them how to build wealth and manage money for themselves, with the help of compound interest, time, and securities markets. I let them draw their own conclusions about the market, partly from the prospects I try to sketch for them. If they decide nonetheless to be socialists or Marxists or whatever, or Hayekians for that matter, so be it.

      I suspect someone like Noam Chomsky fits into one of these categories.

  3. I try to do this too where appropriate. Teaching about compound interest and the value of time really grabs their attention. There is a great federal government calculator just google on compound interest calculator.

    I leave out the last part about proselytizing for the market economy. I’m there to help them, not indoctrinate. Nothing does better to promote the market than to do the former successfully.

Leave a Reply

Your email address will not be published. Required fields are marked *