Integrating Financial Education Into The Education System - Part 4

With financial mistakes continually repeating itself, many might wonder why this is the case. One reason I deem possible for this could be the fact that schools have not kept up with times, causing them to train out students who keep making these same mistakes. To help further enhance the quality of education, 1 more lesson should be included, apart from the other 6 which are already addressed in part 1 to 3.

Today, besides the 6 key concepts mentioned, I believe it is definitely an ever-green idea to teach students to know what asset is best for them. Schools should teach students the main asset classes available and provide analysis for these investments to allow an optimal and fruitful learning experience.

The below would be examples schools could adopt to analyze the different asset classes which are business, real estate, commodities and paper assets. We shall now plough through them one by one.

For business, schools could say that owning them gives investors benefits like tax advantages, leverage for them to increase cash flow and the ability to control their operations. However, the downside would include the fact that it needs good people, dynamic leadership skills and the presence of talents who are willing to work as a team.

For real estate, the benefits would be high returns because of leverage from using other people's money like those from the bank. Also, they give tax advantages like depreciation and provides steady cash flow. However, real estate is management intensive and illiquid. Here, because of its low liquidity, real estate should be taken as an asset investors must do extra due diligence for.

For commodities, the main benefit would be the fact that it provides sturdy protection against inflation as commodities tend to rise along with it. This would help investors profit even in tough times like high inflation which can destroy many lucrative investments. However, commodities have storage and security problems.

For paper assets like stocks, their main advantages lie in the ease of entry into market and the fact that it usually requires less money to get in when compared to other investments. However, because of its high liquidity, it can be volatile, causing people to lose money very easily. Also, given the fact that it is affected by wild market swings, they require continual monitoring and can thus be time-intensive.

After giving all these overviews, schools can then proceed to say that to succeed financially in life, students ought to study the asset class they are interested in and learn their language.

For example, in real estate, know terms like cap rate or NOI while for stocks, P/E or EBITA. This will help increase mastery of language used in the asset class, thus improving returns and reducing risk. Also, they can end with a final note that this can be achieved because the greatest asset is the human mind where students who master it can achieve anything in life.

In conclusion, I believe readers have gained another important lesson they ought to have obtained in school. Nevertheless, knowing it now will still give them an edge over majority who are currently in the dark.