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Question for the Money Doctors

Question submitted on Apr 15, 2010.


What should students know (financially) before graduating high school?


The below are some places to secure good information for high school students.

In terms of topics to know as a high school student, you should know the following;

1. The majority of financial literacy is not mathematics, but language related. For instance, a credit card interest rate is the component that the mathematics are applied to. There may be between two to four rates in a credit card contract. However, the pages of the contract are written in English. It is the contract that must be read so that you know what your duties and obligations are.

2. You should find as much information as you can on saving and investing. When I teach, I talk about the Three Key Pillars of Investment Wisdom. There are many more of course, but very few people understand what these simple rules of thumb are, and that would result in a dramatically different result for them.

The Pillars are:

  • Rule of 72s,
  • How to measure risk (Standard Deviation, you may have had a course on this already, but this is typically in University curriculum), and
  • Alpha.

These Key Pillars measure:

  • How long it will take to double your investment,
  • How much your investment can rise and fall, and
  • Whether the money manager is less effective, as effective, or more effective than just throwing your investments in a related index.

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