Blog | Personal Finance

Financial Futures in Jeopardy

This week I came across the story of Raynell Cooper. Raynell is a very smart young man who, three months ago, won the Jeopardy! teen tournament.

The story on NPR centered on the how Raynell won the tournament while in the middle of his college application process, and because the show is shot in December but doesn't air until March, he wasn't allowed to disclose the victory in his college applications.

This has caused Raynell much anxiety because he wants very much to get into George Washington University, and he, like all High School seniors, knows that you need every advantage you can get to gain admission to the nation's top universities.

According to collegedata.com, the cost of attendance, including fees and room and board, for GWU was close to $53,000 per year in 2010. This will likely go up in the 2011 academic year, however, since the university's website now says TBD under tuition costs. So, many of our nations teens are applying to GWU without even knowing how much it will cost them. Why? Because it's what you do.

In the end, the cost of a 4-year degree, based on 2010 costs, would be close to $212,000. I don't want to harp too much here on the rising cost of education and the diminished value students are getting in return. I wrote a blog on that called "The Truth and Value of a REAL Education," which you can read.

The costs of college are high, and the returns are often low. And many people who cannot afford the nation's top-tier institutions take on excessive and destructive debt to cover the costs because they believe the lie of the old rules of money, which include go to a good school to get a good job.

Getting back to Raynell, an interesting part of the interview came when he talked about what he'll do with his $75,000 in prize money.

"HANSEN: How much did you win?

Mr. COOPER: Seventy-five thousand dollars.

HANSEN: Ooh, ooh. What are you going to do with prize money?

Mr. COOPER: Well, a lot of it's probably going to go to college but hopefully to a new car. I've yet to decide on what make and model, but I'll have to look into that. And then hopefully a trip up to Alaska. I've always wanted to see all the glaciers and stuff like that."

It's interesting to me how a young man with $75,000 in prize money talks about spending, because it's indicative of the state of financial education in our country.

There's no doubt that Raynell is a very intelligent young man. You don't win the Jeopardy! teen tournament without being so. But, like most young men and women coming out of our education system, it is clear that he has had little-to-no financial education.

When asked how to spend his money, Raynell mentioned paying for college, buying a car, and going on a vacation. All of these are liabilities, in that they take money out of his pocket and put no money in. You could say the prize money is burning a hole in his pocket.

Now, I don't mean to pick on Raynell. I merely wish to point out that I think our education system has done a great disservice to our young people, Raynell included, by not providing comprehensive financial education in the school system.

A young man like Raynell should know how money works. He should know that the opportunity to invest $75,000 now, at the age of 18, in cash-flowing assets, would reap a lifetime return greater than any a college education could. And he should know how to invest that money, or at least have the tools to research well how to do so. He should know that rather than buy a nice car or go on a fun trip, with a little patience investing wisely now could result in dozens of nice cars and hundreds of great trips, all paid for by cash flow.

I don't blame Raynell for wanting a nice car, a fun vacation, and a degree from a prestigious school. Those are all nice things to have if you can afford them. I blame the education system for not teaching our students that having $75,000 in cash doesn't mean you can afford to spend it on liabilities.

It's fitting that today's blog is about a young man who won it big on Jeopardy! Today, the financial future of kids is in jeopardy as well. As the US continues to print more and more money, the world economy continues to become shaky, and the cost of living goes up and up, it's more important than ever that we equip our kids with a comprehensive financial education that prepares them to prosper. And it's more important than ever that your young people make sound financial decisions at an early age.