If you'd like to make some young people you care about more financially savvy, you'd do well to send them to our Teens and their Money nook. Alternatively, consider giving them a copy of our well-regarded Motley Fool Investment Guide for Teens book (check out its reviews on Amazon.com).
Financial literacy -- for young and older people alike -- can come from places other than websites and books, though. As Joshua C. Hall and Robert A. Lawson pointed out in a research report, even music and discussions about it can work. (Check out the title of their paper and you'll see what I mean: From ABBA to Zeppelin, Led: Using Music to Teach Introductory Microeconomics.)
They offered snippets of lyrics from five songs and some suggested classroom questions for each. One of their examples is Neil Young's song "Piece of Crap." Here's an excerpt from it:
Got it from a friend
On him you can depend
I found out in the end
It was a piece of crap
As the authors explained, "Products produced for mass consumption are often criticized as being of poor quality. We know, however, that markets create many assurance mechanisms to help consumers monitor product quality." So they assigned some students the following question:
With reference to the song, under what conditions do you think consumers are more likely to be disappointed in their purchases? What market mechanisms help to alleviate these problems? Does Neil Young think these mechanisms work well (use examples from the song)?
The comments on this song were quite diverse, possibly due to the shortness of the song and the somewhat open-ended nature of the question. Here's a representative response:
As consumers realize that certain goods are crap, the demand for the goods will drop, resulting in lower prices. At these low prices, it will be more indicative of the crappiness of the good, and consumers will tend to steer clear, unless it is their only option. Also, firms have return policies, so that consumers can exchange crap products.
Discussions jump-started by song lyrics don't even have to be this high-level. You could discuss the song "Feed the Birds" from Mary Poppins with relatively young children, exploring how we all have choices regarding how we spend our money.
Being financially literate with hot stock tips
That verse from the Neil Young song is of particular interest to me. Once again:
Got it from a friend
On him you can depend
I found out in the end
It was a piece of crap
This calls to mind the hot stock tips many of us receive from well-meaning friends and acquaintances. Heck, I've even been asked for hot stock tips. What's often unrecognized in these exchanges is that the tipper's track record is rarely known. So-and-so might tell you to snap up shares of a certain company, but you probably don't know how successful an investor so-and-so really is, and how savvy he is about stocks and the market. You might ask me what you should buy, but for all you know, I may be the worst investor working for The Motley Fool. (Read about my blunder investing in Martha Stewart Omnimedia (NYSE:MSO) and my imperfect but successful investment in Time Warner (NYSE:TWX).)
In our syndicated newspaper feature, we run a weekly segment titled "My Dumbest Investment." Many of the stories that come in are from people burned when a friend urged them to buy what turned out to be a "piece of crap." For example:
Back in early 2000, some friends convinced me that I should open an online brokerage account and invest in stocks. I didn't know anything about stocks or the stock market, other than that everyone was saying it was making them rich. Someone in our office had a "hot tip" -- buy JDS Uniphase (NASDAQ:JDSU) -- which I did, for $125 per share. I didn't even know what the company did. I ended up selling it for just over $3 per share last December. -- A. T. M., Leicester, N. Y.
And:
In 1967, my best friend, the administrative assistant to a powerful congressman, told me he had a great tip. I invested without doing my own research. All I can say is that I lost $65,000 on that great tip. Tips had been very valuable up until the time of that investment, so I had become more and more casual about doing research. Then came the rude awakening. The dumbest thing anyone can ever do is to rely on the tip of a friend, acquaintance, etc. Even when The Motley Fool makes a recommendation, you should do your own research before leaping into the investment. -- M. S., Dallas
Support financial literacy
One way or another, I encourage you to support financial literacy. You might simply spend some time talking about money with your teenager, or even with co-workers. Given that few of us ever learn much about money in school, most of us still have a lot to learn. One of five impressive organizations (the National Foundation for Teaching Entrepreneurship, or NFTE) in our annual charity drive, Foolanthropy, is devoted to improving financial literacy in America. (The others are pretty "nifty," too.) Go to www.foolanthropy.com to check out NFTE and the other charities, learn more about financial literacy and about wise charitable giving, and make a donation if you're so inclined.
Amazon.com and Time Warner are Motley Fool Stock Advisor recommendations, while Martha Stewart Omnimedia is a former Stock Advisor pick.
Longtime Fool contributor Selena Maranjian owns shares of Time Warner. The Motley Fool's disclosure policy has crossed the ocean for a heart of gold.
