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:
- Teach the students the importance of compounding interest.
- 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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