Economic Education Gap

As we enter the graduation season, full of hope and promise I find myself asking, why don’t we teach the most powerful engine of economic prosperity? Our children face a large economic education gap. Our school systems do not educate for entrepreneurial leadership any more.

God created us to steward the earth and its resources. He created us with the capacity to create, produce, cultivate and domesticate. He also works through us to bring about the knowledge of him around the world. God desires his “kingdom to come on earth as it is in heaven.” With all this in mind, prosperous societies are somewhat of a recent novelty. Not until around 1800 did individual prosperity emerge in a few countries in northwestern Europe. Even today, more than 2 billion people in the world live on less than $2.00 a day.

America has been a leading power in economic growth for nearly two hundred years. Even with a quarter of the population of China and India, the United States continues to have the largest economy in the world.

What Makes a Culture Prosperous?

Economic activity rests on the foundation of political, legal and cultural conditions within a society. The societies that are most economically free, prosper the most. Economic freedom can be measure using key cultural indicators like private property rights, just justice systems, public infrastructure, low corruption in government, low government red tape, strong family structures and future orientation toward time. America is now ranked seventeenth in the world in economic freedom with Hong Kong and Singapore vying for the top spots. (See http://www.heritage.org/index/)

The Most Powerful Engine of Economic Prosperity

There are different paths to personal prosperity but the most powerful engine of economic growth has always been entrepreneurial activity. We can define this as: Initiating economic activity through ingenuity, effort and risk, with the goal of achieving profit. If a nation wants to raise its standard of living, the best thing it can to is encourage entrepreneurship.

Knowing this, we should implement a scholastic initiative to educate our population on the rules, benefits and opportunities of entrepreneurial leadership. We should start teaching accounting principles and terms, legal structures and the basics of investment opportunities. This should be required learning. We teach students to find “x” in compulsory algebra, but they can’t fund an IRA or start their own business. If this is indeed the land of opportunity, we should equip our students how to take advantage of the opportunities.

Education Gap

Often when I’m in a store, I’ll ask an attendant where I go to buy stock. They look at me like I have three heads. I say, “Stock in your company, do I get it at the information desk?” Over 90% of people I talk to have no clue where to buy stock in their own company. They have never been taught how to play in that sandbox. Their ignorance imprisons them.

Lifeworks

Five years ago, we started a summer program for junior high students called Life-Works. https://www.facebook.com/lifeworksboys/ This program helps train students through eight-hour days, five days a week in the fine art of work and entrepreneurial enterprises. We take students from impoverished backgrounds and try to give them the tools to provide for their families and the vision God gives them.  One of the books we use is called The Accounting Game that uses the template of a lemonade stand to help learn the basics of bookkeeping. We also teach, the four levels of workers and how work is worship unto God.

They earn currency they can spent at auctions that we hold throughout the summer. They can invest their money instead of spending it to have more for the next auction teaching them delayed gratification. We have now watched as students have grown and entered the workforce in food service, the military and as carpenters. Some have even started their own business.

Take the time to invest in your knowledge and help the next generation know that they can participate in entrepreneurial activity in many ways. To help you learn, we have put together a fantastic resource called, The Christian’s Guide to Wealth Creation. You can learn more here: http://wealthcreation.careywaldie.com/

 

 

Prospering? Time Will Tell; Literally

In studying economic prosperity, researchers have found there are certain cultural and personal characteristics that can either hinder economic freedom or foster it. One of the little discussed qualities is a future orientation toward time. How a person or a culture views themselves in relation toward time will often determine how well economically they will fare.

People and cultures that live for the moment will not invest or pass on wealth generationally. Without investment, wealth cannot compound. All the seeds are eaten with none planted for the future beyond today. I know this attitude well. It marks my younger years. I ate all my seeds every summer and had none for college or investing. I had to go into debt for school and lost a decade of compounding for my future investments.

The prospect of resisting short run temptations for the long run gains has been the subject of a few studies. One of the experiments started with four-year-old children at Stanford University’s pre-school.

Researchers took each child into a room and gave to them one marshmallow. They told each child, “You can eat this marshmallow as soon as you want, but if you wait and don’t eat it until I return in a little while, then I will give you a second marshmallow.” When the researcher left, they observed the children through a one-way window. Several of the children ate their marshmallows immediately, others tried to resist temptation but soon devoured theirs as well. Others stayed determined to wait, and soon received a second marshmallow.

The result of each child’s experiment was recorded, and then researchers followed their academic performance through their later school years. Those children who had saved their first marshmallow until they received the second were later found to be, according to researchers, better adapted and more popular, and they exhibited more confidence and responsibility than those children who could not delay gratification. Also, those who had resisted temptation scored an average of 20 to 25 percent higher on the Scholastic Aptitude Test (SAT), the test most widely used by colleges and universities to help predict academic success. The inability to delay your gratification will cost you in two realms: financial and relational.

Those who have a future orientation toward time don’t just assess the price of goods but they look at the total cost of buying an item; which includes the important concept of opportunity cost.

Think of every dollar you spend as an investment. What you buy with that dollar can go up in value or down.  The moment you buy a stereo or a video game system, clothes or a pair of shoes, you start losing money because you can never sell the used item for the price you paid for it. That’s called depreciation. That’s bad.

But wait, it gets worse! When an item depreciates, you not only lose money in the value of the thing, you also lose the money you would have gained had you invested it instead of spent it. That’s called opportunity cost. You lost an opportunity to plant your seeds for a future harvest.

Why don’t people make better decisions? Why don’t we have the discipline to delay our gratification? “The costs of what we do are incurred in the near term while the rewards are realized only in the distant future. The pain of self-denial is immediate; the gain in the form of a larger net-worth and higher income at retirement is way off in the future.”[1]

Assuming you invested the extra in a high-quality stock mutual fund like you could through Fidelity or Vanguard or even in your own small business or a form of real estate that could net you a 10% return.

  • If a smoker quit smoking and invested the amount they spent on cigarettes, over 15 years they would have nearly $76,000. After 30 years, they could have $390,924 and two pink lungs!
  • If you bought an $8,000 used car as opposed to a $15,000 one and you invested the difference over 15 years you could earn nearly $26,000 and $122,000 in 30 years. New cars depreciate 20-25% the instant you drive them off the lot. In two years, they depreciate 35-45% depending on the make and model.

When looking to build wealth, don’t eat all your seeds, plant some in good investment soil. You will never regret trading less now for more later.  The Christian’s Guide to Wealth Creation is designed to help you understand the rules of the financial sandbox. We build bridges of knowledge with 27 downloadable, audio lessons and corresponding 100 page e-book that includes everything you need to begin learning about investing in all three investment classes. Click here for more information.  www.Wealthcreation.careywaldie.com

 

[1] Getting Rich in America, 53

Income Inequality

A recent PBS article stated, “The richest 1% of the world’s population now controls 50% of its total wealth.” Often we here messages like that in America, “[1] Income inequality has become a hot-button issue in the last ten years. Meme makers feast off the clever one liners that tap into our emotions.

Americans are fond of feeling bad for others. We feel good about feeling bad but we don’t often think well about why we feel bad and what we should do about it.  First, let’s define what we’re talking about because not all inequalities are equal. There is relative inequality and absolute inequality. Relative inequality compares one person’s wealth with another. This is what most of us complain about. Humans have a nasty habit of wanting what other people have. In fact, we can be quite satisfied with what we have until we see someone with more.

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The Politics of Income Inequality

Income inequality has become one of the big issues of our time. However, our national and local leaders promise help, but what they’re preaching is not helping anyone. Politicians promise “job growth” and “income growth” but government is not a job creator. The governments’ role is to keep the peace and punish lawbreakers. When a government official promises you “better jobs,” or “higher wages” they are lying to you. Governments don’t create wealth. They only redistribute wealth that others have created.

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A Golden Nugget of Information I Wish I had at 13 That No One is Telling You.

At thirteen I had my own lawn mowing business. My mother worked as a beautician (what we call “stylist” today), she served an older clientele and I received the spoils of their need to have their lawn mowed. I made good money for a teenager at that time but I made a lasting mistake because no one in my life told me what I am going to tell you today.

Continue reading “A Golden Nugget of Information I Wish I had at 13 That No One is Telling You.”