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Tuesday, May 22, 2012

Calculus or Personal Finance Math

For their senior year math classes, we had to make the decision for both kids whether they should take calculus or personal finance math.  In both cases we chose the latter.
Piggy Bank
Firstly, the reason we chose for them to study personal finance math over calculus is because neither child is interested in going into a science or math field.  Therefore they really don't need to go beyond Geometry, but for college reasons they took Algebra1, Algebra2, and Geometry.  My son also took Trig. 

Secondly, personal finance math is something they will be doing every day for the rest of their lives, so
why not sit down and study it?

Personal Finance Math is more than just adding up dollars and cents.  You have to understand banking which includes, savings accounts, how interest works, checking accounts and fees, credit card amortization, and tax accounting. Next there is financing, which includes home loans, auto loans and interest,  and insurance.  Finally, students should understand Saving and Investing.  Stocks, bonds, mutual funds, risk and diversification, and inflation are all based on very complicated math that kids need to understand.

Not understanding personal finance math, is what caused the current financial state of our nation.  Homebuyers were given fuzzy math to justify buying bigger houses than they could afford so that Real Estate Agents and Loan Agents can get bigger commissions. Investors were fooled into thinking that astronomical profits were possible and so lost their life savings.  The nation as a whole didn't see that the housing and stock markets could only go so high without a drastic correction.  We need our kids to understand math more than calculus; especially those who don't plan to go into a field that requires it.

Yesterday we opened my son's first checking account.  It took nearly 90 minutes as the banker explained to him all of the rules and perks associated with his account.  She talked about lines of credit, recommended he get a credit card in 6 months, and other scary things like that.  In all fairness, she also talked about ways to make sure he wasn't paying to use his own money (fees, etc.) and discussed wise usage of credit.  I was so glad I had chosen that he do personal finance math in college, because we could leave there and have an intelligent discussion of everything that was said, and make his own judgments on how he would proceed.  Without that knowledge, it would have been more of me preaching to him on what he should do without him understanding any reasoning behind it.

It is much easier to instruct an educated person. Everyone should take Personal Finance Math, if they need calculus, it should be in addition to, not instead of.




Anonymous said...

I'm no expert in either field, but I would think that by learning calculus you learn the way in which all those other things you mentioned (interest, stocks etc.) work and not just understand how they are purported to work. Isn't Calculus what's used for companies to create these products?

Ahermitt said...

I dunno anonymous, but I do know that there are a lot of very smart engineers & scientists out there that can't manage their own bank accounts.

Anonymous said...

Yes, but that has nothing to do with not understanding the mathematics of it which is simple arithmetic. I guess my point really is, there is no such thing as "Financial" math, it's just math and it's probably better to learn skills like algebra and calculus, then learn how to apply it in everyday life.

Lastly, I want to let you know how much I respect the fact that you are totally engaged in the educational process of your child. Commendable!

Ahermitt said...

Anonymous... thanks for your comments, but there certainly is such a thing as personal finance math. Yes, it is derivative of basic math, but it is geared toward calculating interest, and stocks, and other money-centered items. I have several textbooks and curriculum packets on hand that say so. They even teach it in the schools... if the student insists on it and can squeeze it in-in addition to the other maths they have to take.

Knowing Elena said...

Is the "Personal Finance" course that your daughter is taking from a GA approved course for accreditation? I checked with my homeschooling co-op and they did not approve the course, but I want to fight it, not sure that I stand a chance against an accrediting agency.

Ahermitt said...

My daughter ended up doing the business math from ALEKS which includes personal finance in order to get accreditation. So we have fulfilled both my requirements and that of her accrediting "school". Maybe your co-op will allow that