Putting an Old Head on Young Shoulders

By Chris Allison

John Adams said, “There are two types of education. One should teach us how to make a living, and the other how to live.”

The recent stock-market downturn precipitated by problems in the mortgage business got me wondering if a lot of this could be fixed not by more regulation but through better education. The same can be said about rising health-care expenditures due to obesity and increases in chronic but preventable health problems.

I am not talking about the wisdom of CMU Prof. Randy Pausch’s inspiring Last Lecture, but essentially day-to-day navigation.

It seems to me, every student should receive training in some of the basics of living life before graduation.

• How to develop a family budget so that you can afford to save 15% of pre-tax income for retirement. Pensions are gone, so you need to be responsible for your own retirement. You probably need $1 million in retirement savings for every $50,000 of retirement income. On average, your investments will grow 5-6% a year after inflation. A good understanding of modern portfolio theory would help a lot because equity speculation is inherently risky, so don’t have all of your eggs in one basket.

• How mortgages, car loans and car leases work. Your monthly housing costs should equal no more than one week’s salary. And a car’s value depreciates as soon as it leaves the lot, so spend as little as you can on it. A used car is a better value than new because somebody else took the first hit.

• How to balance a checkbook. Insufficient funds fees look bad. Also, it’s called “kiting” and is illegal if you know you can’t cover it.

• How home, life and car insurance works and why it’s important. Don’t wait for the mailman to slip on some black ice in the driveway to find out.

• What are federal, state and local tax rates, and how to file annual returns? Late tax penalties mount fast and furious. You’re in really big trouble when the IRS sends in the agents with the long leather coats and guns rather than the guy who looks like Mr. Bean.

• The fact that borrowing money in the form of credit-card debt is REALLY expensive -- about 18-to-20% a year. Borrowing money from a loan shark is probably cheaper.

• How to do your laundry and iron shirts. Most dry cleaning and laundry bills can be avoided especially in the era of business casual.

• What is proper work attire? You should look like you are there to make the company money not get a date. The more boring the attire the better. And shine your shoes.

• Basic table manners and other forms of etiquette. Your future husband, wife or employer isn’t interested in someone that chews with their mouth open or starts eating before everyone else’s food arrives. In terms of utensils, work your way in from the inside out.

• Basic preventative health measures, such as annual physicals and dental check-ups. A lot of adult-onset diseases, such as diabetes, liver problems, heart disease and emphysema, can be battled a lot easier through preventative behavioral changes. And trust me, the worst thing about a colonoscopy is the milk shake the night before.

• Good personal hygiene. Refer back to the point on table manners and remember you are not European. The French invented perfume for a reason.

• Basic dietary and exercise guidelines. Getting fat is a math problem. Eat more calories than you burn, you’ll get fat. Burn more calories than you eat, you’ll lose weight. You need to eat less and burn more as you get older because the furnace doesn’t work as it did back in the day.

• How to use a cook book to cook simple meals. It saves a ton of money and you might actually have some fun.

• How to clean your house. A good start is making your bed as soon as you get out of it in the morning.

• The basics of plumbing, gardening, construction and electrical work. It will maintain the value of your home and you will be able to spot a shady skilled tradesman.

• How to change the oil and filters in your car. It’s the cheapest way to extend the life of that crappy investment known as a car.

• Basic civics, especially how your local government works and why your vote counts. Remember Florida in 2000? It would also help if you knew the basic differences between Republicans and Democrats, and in which party you belong based on your beliefs.

• How to apply for a passport, and make airline, hotel and rental car reservations. Also, you will get swindled on overseas car rentals, so such just deal with it when it happens.

• How to speak at least one language other than English. If it were me, I’d choose Spanish or Chinese because the world is really getting flat.

• Basic energy conservation techniques. Gas costing $4.00 a gallon and a warming planet isn’t going away anytime soon.

Most people probably think that everyone can learn this on the fly or from one’s parents. But the reality is, most people find out about these things either in a rush or before it is too late. This can often be catastrophic particularly if their only escape is personal bankruptcy, broken relationships and health crises.

Most 21 year olds don’t believe you when you tell them that when they wake up tomorrow, they will be 50. Let’s try anyways. Leading by example is a good start.

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financial education is something we surely missed out on in public schools. perhaps more vital than many of the other more theoretical stuff we studied!

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Great essay, Chris. I enjoyed it so much.

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The reality is, there are things you can do that will actually save you up to $4,000 per year on energy costs, and decrease your carbon foot-print by up to 95%… over the span of just 6 or 7 days, with minimal effort. And it has nothing to do with buying halogen light-bulbs, driving less or going on an “air-line ticket diet.” Yet people don’t know about this stuff.