Wednesday, August 29, 2007

Economics and Financial Literacy

One of my favorite financial writers is Jonathan Clements. He's a regular contributor to the "Personal Journal" section of The Wall Street Journal. He has a very good; not only giving sound advice, but providing a clear, cohere nt explanation of why. That is my main reason for advocating the teaching of economics along with financial literacy (or the other way around if you're and economics supporter).

In today's column (free), Clements speaks about four ways that small savings can be used to provide the basis for retirement wealth. They are financial account fees (whether bank or brokerage, it doesn't matter), credit card charges, borrowing costs, and insurance premiums. All of these are sources of savings that can be, in turn, put toward retirement. Now, much of the current issue in financial literacy is related to helping people provide for their retirement. And while it is frequently difficult to get school-age children to think about saving for retirement ("do people really live to be that old?"), they may be able to relate to purchasing cars or homes, both items that Clements talks about in the article.

More importantly, Clements' clear explanations of why we should do the things he talks about, get into economic concepts without labeling them as such. You can use his explanations, add a simple statement relating to opportunity cost, capital resources/investment, money and credit, and you've made an economic lesson and a personal finance lesson.

Look at the article and let me know what you think.

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