So, they don't live paycheck to paycheck and beyond their means.
So, they save and invest to become millionaires when they retire.
So, they are frugal, debt-free, and have a cash flow from investments to build wealth. (Kids need to learn Algebra-2 to get into college.)
Knowing math and having financial savvy can greatly improve your quality of life. Briefly, learning math and science opens the door to opportunities. Isn't this what we want for students?
Why are you in debt and living paycheck to paycheck? That's stupid!
Arithmetic was deemed important because it was practical, but how many of us perform arithmetic when everything is calculated by machines? Most of us do not balance our checkbooks. We don't have a practical budget to track where the money goes; consequently, 78% of us live paycheck to paycheck and above our means, which is stupid. Most of us don't understand the science of money such as the miracle of compounding, which is exponential growth, not linear change. In short, most of us don't know enough arithmetic or simple ideas of algebra and cannot apply them even with a calculator. The concepts are not difficult.
The difference is between those who know math and those who don't, between those who save and invest and those who spend and spend beyond their means. Income does not determine wealth. As your income increases so do your expenses. Cash flow from other sources (i.e., investments) determines your wealth.
"Income is not wealth. Wealth is cash flow from other sources," write Tracy & Strutzel. Spend less than you earn and invest the difference in a good index mutual fund to start.
Tracy & Strutzel point out that "successful people do not gamble" or buy new cars. They state, "The reason people don't retire financially independent is that they spend everything that they earn."
The average American does not have cash. Nearly 70% do not have an emergency fund of at least $1000, much less 6 months of expenses should something happen.
Unfortunately, most of us don't know how percentages work because of poor teaching. If we did, then we would never take out a seven-year car loan, pay the minimum on credit card purchases, or use "payday" or "title" loans, etc. We have been taught that debt is the normal way of life, and it builds a credit score, so we spend everything we make and then some. It is a dumb idea!
In contrast, financially savvy people don't buy anything on credit or use credit cards unless they have the money in the bank to pay for it. If you don't have the money in the bank, then don't make the purchase. They don't spend everything they earn. They budget and invest the difference.
Financially savvy people buy an affordable car with cash. It's not a new car. Financially savvy people know math. For example, they know probability and don't buy lottery tickets.
Student loans are another problem for young people. I had student loans, but I also had a job with enough income to pay them off.
You can become a millionaire by investing about $100 a month over an extended period. The investment would have to grow by a factor of 10000 over time. It would take 45.67 years of investing at least $100 a month in an index mutual fund that has an average annual return of 9.69%, which was the 50-year annual return in the stock market from 1966 to 2015. Even if your take-home pay is $1,666 a month to start, $100 a month is only .06 or 6% of your monthly take-home pay. You can become a millionaire only if you think that way.
Also, as your income increases, you should increase the monthly investment to 10% to 20% or more of your monthly take-home pay. You can access the American dream, but not by living paycheck to paycheck and going into debt with credit cards and car loans, etc. If your take-home pay is $2500 a month, then 10% to 20% would be $250 to $500 a month. If you do this (10%) for 36 years, then you will have one million dollars, but you may need much more because nasty inflation kills off buying power over time. The only debt you might carry during this process is a reasonable mortgage, but after 30 years, it should have been paid in full. As your income increases, you should pay off the house mortgage within 15 years by making extra payments. Also, if you can't put at least 20% down, then don't buy the house.
We need to teach kids key financial lessons from 1st grade on up. One is that debt is not normal. If you want something, then save for it and pay cash. It is where arithmetic and algebra come into play. Easy credit with high-interest rates can kill your future.
Extras
Wobegon does not exist.
Our educators and schools are loaded with wishful, Utopian thinking and illusions of fairness, most of which is absurd. "Fairness as the equal treatment does not produce fairness as equal outcomes," writes Thomas Sowell.
Many teachers don't know how to teach content because, they, themselves, have not mastered the content. Teachers who advocate flipped classrooms, personalized learning, tech as a panacea, and other schemes and fads don't know how to teach.
The idea that children don't need to memorize or drill to improve math skills (i.e., practice) shows ignorance of cognitive science and of how children learn, which is remembering from long-term memory.
Many have the idea that new is better, so they must have the latest tech, newest car, etc. Why would you want a car payment, mortgage, or credit card debt the rest of your life? The "new is better" attitude has resulted in more lackluster achievement. Reformers preach "out with the old," even if it worked well, and "in with the new," even if it has no basis in evidence. Reformers seem to ignore the evidence.
To Be Revised as needed.
©2017 LT/ThinkAlgebra
