NGPF Podcast

Imagine facing a room full of 100+ educators from 30 states across the country.  We can be a pretty tough audience, but we were putty in the hands of some true masters at the NGPF 2018 Summit in San Francisco in mid-March.  

The first panel we attended was on Behavioral Finance.  Leading the intros and discussion was Allan Roth Founder of Wealth Logic, LLC.  (Ever read How a Second Grader Beats Wall Street? I did and really enjoyed it, so I was already psyched.)

Here's a link to their presentations which will be helpful as they each took 10 minutes at the outset to walk through. 

First up was Terrance Odean, Rudd Family Foundation Professor of Finance, Haas School of Business, University of California, Berkeley.  Terry warmed us up by playing a game (with a cash prize!), demonstrating some Game Theory. Terry then walked us through the evolution of behavioral economics and some of his research. “Economics is based on the flawed belief that everyone is hyper-rational when it comes to money.”  We aren’t, which explains why economic models that were developed with these principles tend not to work very well. Behavioral economics and finance try to explain how humans actually make these financial decisions.

His key findings: Overconfidence leads to more trading and worse outcomes than passive investing, and men trade more actively than women (hence, women are better investors!)  He also did research on the disposition effect, finding that people sell winners too quickly and hold onto losers too long to put off the bad feeling of losing. He now spends a lot of time teaching personal finance and has created 50 videos on the subject.

Meir Statman, Glenn Klimek Professor of Finance, Leavey School of Business, Santa Clara University was up next. He is the author of Finance for Normal People (which has teacher and student guides available.)  His premise is that when we buy anything, we consider three types of benefits—utilitarian, expressive, and emotional.  He opened with the example of deciding between giving his wife a red rose for Valentine’s Day, or $10 (the cost of the rose).  The $10 would be the rational gift (she could invest the money to help pay for a nursing home) but the rose conveys emotion (and is obviously the better choice in this instance.)

Meb Faber turned his hobby into a passion and co-founded Cambria Investment Management. Listening to Meb, you will hear the passion not only of an investor but also an entrepreneur who created a firm based on his investing philosophy. He studies the markets and creates portfolios based on opportunities that Mr. Market provides. He uses his writing of books and white papers as a discipline to force him to elucidate his evidence-based approach. And hey, he puts his money where his mouth is—literally!—by investing 100% in Cambria's funds. 

Julia Lorenz-Olson and Philip Olson are two self-described theater kids who gradually got interested in finance (something about being a starving artist). This interest mushroomed into a career switch and ultimately to them starting their own fee-based financial planning firm, The Art of Finance.

What caught our attention recently, however, was their weekly show about personal finance for millennials and Gen Z on PBS, Two Cents. This series has rocketed up the charts with their first  video, How Cars Can Make You Poor, hitting one million views in two months!  From behavioral finance (5 Ways People Are Dumb About Money) to relationships (Love and Money) to taxes (How Do Your Tax Dollars Get Spent?), Philip and Julia deliver concepts in a relatable and engaging way that your students will love. Listen to how this husband and wife duo—an NGPF Podcast first!—got their start in the “edutainment” industry, and get ready to be inspired!

What follows is a summary of an Investing panel discussion held at the NGPF Summit in mid-March 2018 in San Francisco. The all-star panel included Bill Bernstein, financial theorist, neurologist, and financial adviser/author, and Jonathan Clements, WSJ columnist, author, educator and blogger at the HumbleDollar.com.

For those of you who use the Stock Market Game, you might want to rethink that.  Neither panel had anything positive to say about it, but Bernstein explained why.  It rewards risk taking, and excessive trading, and sets up those who win the game to lose in the real world. According to Bernstein, “it is a recipe for investment disaster.”  He goes on to claim “it is the modern financial version of candy cigarettes.” (That was the mildest of his analogies!)

Bernstein has written investment books and advised wealthy people during his career.  In an effort to give back in some way, he has written a short book called If You Can—Helping Millennials Get Rich Slowly, which he has made available at no cost.  In this book, Bernstein gives a straightforward roadmap to follow for savings, and understanding investing, including rebalancing portfolios.  

If you find this to be too much, he suggests you use a low-cost target-date fund and set it and forget it.  It might “cost” you a bit more in management fees, but that may be a rational tradeoff. The most difficult part is actually saving, which Jonathan addressed.

Jonathan Clements talked about how to instill a long-term focus in our students.  

“We do things that feel good in the moment but hurt us in the long run.”  It takes people decades to learn that buying things does not buy us happiness.  He suggests three things to help a teenager think about the long term (regarding investing).  

1. Demonstrate how exciting it can be to save early and consistently by showing how much you can accumulate
2. Get the kids to visualize their future goals (beyond cars and houses)
3. Play on loss aversion: we get twice as much pain from losses as pleasure from gains.

Jonathan suggested we explain that every dollar a young person spends today costs them $5 of retirement income….that should get students interested in both savings and investing!!!

Jonathan’s book, “How to Think About Money” aims to help people with all of the simple but important decisions they make about spending and investing.  It starts with “money doesn’t buy happiness” and ends with “we can control risk and costs, we cannot control returns.” Another was how he got his children to feel like they were spending their own money.  I wish I had thought of the “soda game” when my kids were small!

Far too often, we read in the media articles with titles like "Does Financial Education Really Work?" that take a skeptical view of the work that we do. Yet, every day, we seem to be seeing more evidence that it does. Today on the podcast you will hear from Melody Harvey, a current PhD candidate at Pardee RAND Graduate School. Her dissertation focuses on the question of whether financial education impacts usage of alternative financial services (a.k.a. payday borrowing and other high cost borrowing strategies). What she found will have significant implications for policy makers...you have to listen to find out why! She got her start in personal finance as a young entrepreneur selling avocados in the neighborhood and has been passionate about money management ever since. Thank you to Melody for sharing her time with us and for making a significant contribution to the field with her research. Enjoy! 

Brian Bean definitely took the road less traveled—though not always of his own accord—to become a teacher. After a Ponzi scheme he invested in went bust, he vowed to teach the younger generation about money management. What his students simulate in his classroom economy at Tomball Memorial High School (TX) will undoubtedly be situations they face in the “real world,” and Brian wants to prepare them as best he can. This personal finance math teacher extraordinaire has even gone one step further, taking his real world class model and developing it into a business for other teachers across the country to use in their classrooms. Get ready to be inspired!

In a little village of just about 5,400 full-time residents, the Community Store in Saranac Lake is one unique endeavor. I stumbled upon the store during a recent vacation in the Adirondacks (a 6 million acre park in upstate New York). What makes this department store one-of-a-kind? Well, to start, it was backed by over 750 mostly local shareholders, who also doubled as volunteers when it came to renovating the building. The store was co-founded by Melinda Little, who spearheaded the effort to create this social enterprise. In a nation that’s been captivated by Amazon’s rise to fame, this
"brick and mortar" department store demonstrates that there is still a place for scrappy local retailers. 

Details:

• 0:00–1:24 Introduction
• 1:25–5:23 Out with the old, in with the community store
• 5:24–7:37 A divisive time for the little village of Saranac Lake
• 7:38–11:12 The trifecta: Brains, brawn, business plan
• 11:13–13:58 Method to success: accessible and affordable stocks
• 13:59–14:27 A word from NGPF
• 14:28–18:16 Road to the finish line: share parties & festival floats with hanging underwear
• 18:17–20:42 Less about the money and more about the social enterprise element
• 20:43–22:02 Living rurally has its pros and cons
• 22:03–25:47 Shareholders doubled as volunteers to renovate the building 
• 25:48–29:09 Learning as they grow
• 29:10–33:25 Front page worthy: how the community store ended up in the New York Times
• 33:26–35:06 Other cities that have tried to pursue this unique endeavor
• 35:07–37:41 How brick and mortar stores are adapting to modern times
• 37:42–38:31 Conclusion

Resources mentioned:

• Amy Cortese’s book: Locavesting
• Community Store marks five year anniversary (North Country Public Radio)
• A Town Creates Its Own Department Store (NY Times)

Quotes:

• “You can’t sustain a town on visitors. You need a core group.”
• “The trick for an effort like this is not only sticking to it… but it’s also staying in front of people.”

 From a very young age, Courtney learned about the value of a buck and now she’s giving back to the next generation by sharing her knowledge. She's creative in her teaching techniques. I bet you can't wait to hear about her Business and Board Games class. She's passionate in her advocacy. The Vermont legislators can certainly attest to that. She makes the community better, much better, as the attendees of the Vermont Summer Institute and the NGPF Fellows will tell you. Listen to this podcast and you will be inspired by this one-of-a-kind educator.

From buying her own car at the age of 16 to graduating with no student debt, Liz Thames seems to have always embraced the frugal lifestyle. After she and her husband took a hard look at their lives and thought deeply about what made them happy, they doubled down on saving money to pursue their dream: living in the Vermont woods. Liz realized that while financial independence is something we all crave, few actually take the difficult steps required to achieve it. In her new book, Meet the Frugalwoods, she shares the solutions to achieving that freedom! 

She’s relatable, she’s understandable, she’s Miss Be Helpful! Yanely is a first generation Millennial who attended Brown University on a full scholarship, but managed to graduate with thousands of dollars in credit card debt. Fast forward to a few years later, and she’s now an expert at managing her finances. MissBeHelpful has amassed nearly 20,000 YouTube followers and over one million video views. She’s posting weekly videos to share her wealth of knowledge. Did I mention she does this in her spare time? This passionate Brooklyn native is simplifying personal finance for the next generation!.