A lot of people are trying to assign blame for the current depression.  Some will say that former President Bush and his policies were the cause.  Some will lay the blame on Alan Greenspan.  Others will mention housing, Fannie and Freddie, or even greed.  While each of these, and more contributed to the problems we are going through today, I believe things go deeper and to a more fundamental place.

The Stock Market Game

You might remember playing this game in elementary or middle school.  Here’s how it works.  Your teacher gives you a fictional start-up from anywhere to $1,000.00 up to $100,000.00.  You are told that you have to “invest” this money in the stock market, buying and selling stock to leverage your initial investment as high as possible.  Periodically, your progress is assessed and at the end of the game, the person (or team) that made the “best” investment(s) wins.

I remember playing this game as a kid, and lesson plans are still floating around everywhere for this game to continue.  The goal is to demonstrate how to build wealth.  As a teacher, I see that this lesson plan is too simplistic to teach anything beyond how to invest in the stock market.  As such, it is a good plan.  Too many teachers who don’t have basic financial knowledge of their own expect too much for this plan.  As a financial professional, this lesson “plan” worries me.  Stocks are only one path to wealth.  Each different path has its own process.  But students are never taught these different processes.

You simply can’t succeed by treating stocks like real estate, or vice versa.

Whether you are talking about stocks, bonds, real estate, cash, work (what a concept?!?), owning a business, lending money, or collecting comic books, there is a right way and a wrong way to work.  If you work in the right way for the right method you are trying to use, you will be successful.  If you try to use comic books the same way you would use stocks, you will not succeed.

Students are never told this.

Whether the teachers are pressed for time, and feel that they can’t give a thorough explanation, or whether they just don’t know any better themselves, for more than 30 years, students have been given misinformation which has led a whole generation to make the mistakes that got us where we are today.

Economics and Government (Civics)

I don’t know when other states teach these classes, but in California we teach 1 semester of Economics and 1 semester of Government.  In the senior year.  Let me say that again.

California Students have to take 1 semester each of Economics and U.S. Government.

This total of one school year is in 12th grade.

Now I remember being a senior, the parties, the dances, walking across a stage, etc.  What I don’t remember is what was taught to me.  Those classes didn’t matter to me.  I had other things to think about, like graduating and getting out of school.  More recently, I taught an Economics class as part of my student teaching experience.  Those students gave me a lot, but attention wasn’t on the list of what they gave.

The problem here is that students get half a year of education each, and that year is stuffed with things that are more important to the students than the classes they are missing.  Before 12th grade– maybe the above mentioned Stock Market Game.  After, they have their whole lives to use whatever training they might have picked up on.  What does this get us?  Generations that don’t have basic economic or financial knowledge who don’t understand beyond the basic workings of American government.

People vote in ways that are contrary to their own best interests for reasons that defy logic.  Or worse, they don’t vote because they don’t understand the importance of their voice.

Solution?

In my career, I would never let one of my employees come to me with a problem unless they also had an idea for a solution.  I rarely would go to my bosses without a solution.  Recently my wife and I were talking about this, and we came up with this:  You don’t have to know how to fix a problem to realize that there is a problem in the first place.  That being said, I do have some ideas to help us not go through this again.

1. Students need more than 1 year of financial education.
   1. There should be some grade-appropriate education every year.
2. Students should be educated in more than just the stock market
3. TEACHERS need to be educated in different forms of wealth building, before they are allowed to teach students about it.
   1. In order to teach Social Science, including Economics, Government, US and World History, Psychology and some other classes, I had to take very difficult tests.  These tests focused on history and California Government.  I remember about three questions that had anything to do with economics, and none that dealt with personal finance.
      1. There are teachers out there right now that didn’t even take the same tests I took that have less experience with money issues.
4. Families need to take a front seat in the education of young people.  Schools are only one venue for students to learn.  Dialog between parents and children about money from an early age will help get the young people more curious about finance and money issues.
   

Will these steps guarantee that this never happens again?  Not even a little.  What will happen is that when this does happen again, there will be more people who see it happening and stop it before it gets as bad as this.  We will go through market and economic turmoil periodically, but with proper preparation, we won’t panic the world every time we do.