Wednesday, September 8, 1999

Lessons From the Real World


As a means of escaping from the routine of a law practice, I do something a bit crazy: I teach an entertainment law class to undergraduate students at the local university. Like most college students, the students at this university seem, on a whole, to be lacking in personal finance knowledge. Except, of course, for those who are studying business.

Taking a chapter from Walt Disney World's The Jungle Cruise, I tell my students that on occasion we will encounter the most dangerous part of our educational journey by taking a detour into the Real World. I have two objectives when it comes to these dangerous journeys:

  1. Teach the students the importance of compounding interest.

  2. Teach the students that credit card companies are really pirates looking for the gold the students have now and will have in the future.

I present a spreadsheet to my students showing how $166.67 into an IRA on a monthly basis beginning when they are 21 will produce far better returns than $2000 invested once a year. More importantly, I show the students how much they might lose out (in compounded returns) if they wait five or ten years before saving for retirement.

I explain to the students how paying the monthly minimum on their one credit card charging 18% per year will take them eight years to pay off, and how their $1000 generic stereo turns into a Bang & Olufsen by the time they are done.

It's amazing to see how wide a student's eyes can get.

At the end of the semester, I would like to see the students know something about proprietary rights to a creative work and the trouble that managers can get into when they act like agents for their superstar client. I tell them, however, that if they learn nothing else all semester, they should learn the important lessons from the Real World.

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