UNIVERSAL BUSINESS EDUCATION,
A democracy starts to dig its own grave when it fails to teach all children how to prosper in the free markets in which it depends on its citizens to make a living. America will climb out of the grave it has been digging for itself only when we start teaching all students - especially our underprivileged kids – how to prosper by teaching them about basic business principles. The Universal Business Education Movement is a grass roots effort to spark a national discussion about blending business lessons into the curriculum of every public school in America.
Four essays launch our discussion. First, “Universal Business Education, an Elementary Approach to Social Justice and Economic Growth”, (p. 2), is an expanded version of an article that first appeared in the June 2020 issue of The Mensa Bulletin. It argues that teaching business fundamentals in every public school in America would eventually generate more wealth and spread that wealth far more fairly and evenly than anything we’ve tried in the last hundred years.
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Second, “Grade School Math and Money”, (p. 10), explains how two personal finance tools developed in the 1970s – Individual Retirement Accounts (IRAs) and stock index mutual funds -- have let many Baby Boomers show that million-dollar retirement nest eggs lie within reach of most American workers. That’s why the millionaire next door might these days be a forklift operator, a mail man, a sheet metal worker, or a teacher. Although one million dollars no longer represents the great fortune it once did, a million-dollar nest egg would still mean solid financial security for most workers and their families.
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Third, “Florida’s New Financial Literacy Law: Improvement Needed”, (p. 14), explains why, although teaching financial literacy is a big step in the right direction, a broader business education must follow that first step if students are to learn how to prosper in the real world.
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Fourth, “Grass Roots”, (p. 15), offers my personal opinion on how to sow the seeds for Universal Business Education across America. Some of you will disagree. That’s OK; this is not a manifesto; this is a discussion. If you can think of a better way to spread the UBE message run with it. You certainly have my blessing.
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What do you think?
Introduction
______________________________________UNIVERSAL BUSINESS EDUCATION, an Elementary Approach to Social Justice and Economic Growth
A democracy starts to dig its own grave when it fails to teach all children how to prosper in the free markets in which it depends on its citizens to make a living. The purpose of this essay is to convince America to stop digging its own grave and start teaching all children – especially our underprivileged students – how to prosper by teaching them about basic business principles. I believe every public school in the United States should start blending business lessons into its curriculum.
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Teaching all children how to succeed in a free-market economy would strengthen the foundations for both social justice and economic growth in America. Although some people believe these are mutually exclusive goals I disagree. I believe long-term economic growth actually requires widespread social justice, and widespread social justice requires long-term economic growth. Universal Business Education can help us reach both goals.
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“All the math you need in the stock market you get in the fourth grade.” So wrote Peter Lynch, the legendary manager of Fidelity’s Magellan mutual fund. In fact, many other business functions besides investing in the stock market also require only grade school math. That’s why I believe that every American school district should start blending business education into its curricula no later than the fifth grade; and our schools should continue teaching business principles through high school for three reasons.
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First, fifth-grade students can grasp the ABCs of business because business is not exactly rocket science. Far from it. Addition, subtraction, multiplication, and division are the only math needed for many basic business functions. That’s why business education can start in grade school math classes with a few problems as simple as adding up revenues and subtracting expenses to calculate profits and losses. To such basic exercises middle schools could then start adding accounting, the language of business, which students would find to be far easier than their Spanish and French lessons. High school students could then confidently handle basic finance, management, and marketing courses.
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Second, more grade school students would take their education seriously once business lessons showed them that rewarding careers lie within their reach. Learning that many ordinary accountants, managers, and salespeople command six-figure salaries could be the epiphany that grabs the attention of day dreamers and class clowns who might have previously never worked with such large numbers. Visions of fat paychecks could fuel adolescent dream machines. Teachers could turbocharge those vehicles by pointing out that two-paycheck families can more than double a household’s disposable income. Lucrative career goals would later motivate more students to avoid the self-inflicted wounds that often sabotage those dreams such as dropping out of high school, pregnancy, drugs, and police records.
Third, at home students’ business lessons would no doubt rub off on some spendthrift parents and motivate them to cut down on the conspicuous consumption and other bad habits that have financially crippled many families from generation to generation to generation. Keeping up with the Joneses is an American tradition that continues to kill too many American dreams.
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Adding business education to our public schools’ curricula would boost not only business careers; it would also help aspiring doctors and teachers, for example, to perform the economic analyses in high school that can help them steer clear of common pitfalls like college diploma mills and predatory lenders. But students who aim for careers that require no college at all might benefit the most from business studies. For example, auto mechanics and bakers must know how to manage costs and set prices to survive. And both blue collar and white collar workers must show prospective employers they can help their firms turn a profit just to land jobs in the first place and then to earn promotions.
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But “profit” is a dirty word for some idealistic young minds. Nevertheless, students must see that a grasp of basic business principles could help them pursue careers that have nothing to do with turning a profit. For example, charities, art museums, political parties, and colleges must operate effectively and efficiently enough to convince donors their contributions will not be wasted. Labor unions must carefully manage their members’ pension funds and benefits. Government agencies must provide detailed financial plans to justify their budget requests. And churches must manage their finances at least well enough to pay their utility bills. Although none of these organizations try to turn a profit they all need competent people with a working knowledge of business principles to manage their operations.
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Finally, regardless of the careers they choose all Americans as well as the nation itself would be far better off if everyone learned how to save and then prudently invest part of his earnings. Prudent investing requires thrift. As the saying goes, “It’s not how much you earn; it’s how much you keep.” Teachers must emphasize that fat paychecks build no wealth at all for those who spend money as fast as they earn it. Infinitely worse off are people who spend money faster than they earn it by using credit cards to bury themselves under mountains of debt.
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Yes, thrift matters. Students must learn how even moderately thrifty habits have allowed many working-class heroes to help themselves to healthy slices of corporate profits. Even boring, old S&P 500 Stock Index mutual funds have let many proletarians cultivate seven-figure portfolios. (For details see the following essay, “Grade School Math and Money” on p. 10.) Just one example is the over 75,400 current and former federal employees who had retirement accounts of over $1 million by the end of 2020. Such investing is one reason there were over 21 million millionaires in the United States at the start of 2022. That’s over 6.3% of the population of 330 million. One out of every 16 Americans owned assets of over $1 million then. The millionaire next door can these days turn out to be a sheet metal worker, a forklift operator, a mailman, or a teacher. When that lesson sinks in even the budding socialists among our students might change their tune from “Workers of the world, unite!” to “Workers of the world, invest!”.
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Results? Expect no quick fixes or panaceas. Leave such promises to the pros: career politicians, professional activists, and bureaucrats. Cranking out short-term solutions to long-term problems is their bread and butter. But while those experts continue to experiment with the latest trends in education Universal Business Education could at the same time start producing steady, enduring progress for individuals and for the nation.
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Within a year? Universal Business Education would show students a glimpse of the real world that would help them outgrow their childhood fantasies and start dreaming about the rewarding careers actually within their reach. More kids going to school in September fully expecting to someday become the next Tom Brady of the next Rihanna would start thinking about attainable careers in, for example, medicine, the building trades, and commerce. More students would start taking their classes in reading, writing, arithmetic, and history seriously when they realize those lessons can help them reach new, adult goals.
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In just a few years? Fewer grads would be waiting tables and defaulting on their college loans. That’s because by their senior year of high school most kids would have learned better than to pile up massive debt to pursue one of those college majors for which the job market will never show much demand. America does not need more baristas with degrees in, for example, psychology or the performing arts. Compare their plight with the clear sailing enjoyed by engineering grads, few of whom ever have trouble paying off their college loans. By the way, I suspect the lucrative engineering and pharmacy salaries mentioned in their business classes would draw more high school students into science and technology careers than all the programs specifically designed to interest them in STEM. Majors matter! Underprivileged students who choose the wrong major can turn a college education into a real poverty trap, a ticket to a common American nightmare instead of a ticket to an American dream.
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Within a decade? Fewer grown men and women would be struggling to support their families with minimum wage jobs and food stamps. That’s because they would have learned in their teens that career planning usually works better when it starts well before a student leaves high school rather than anytime afterwards. They would have also learned in school that successful family planning – especially birth control – is a key ingredient for successful career planning.
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Within a lifetime? Just a little business savvy would help more Americans nurture the careers and the thrifty habits that have let some Baby Boomers ride the longest bull market in history into the middle class and beyond to early retirement. Credit the aforementioned prudent investing. When a 56-year-old worker’s investment returns have surpassed his wages three or four years in a row early retirement starts to look pretty good. He realizes he does not have to work anymore unless he wants to. Too many other Boomers who apparently never learned about piggy banks as kids or about IRAs as adults still struggle paycheck to paycheck well into their 70s. Some pin their retirement hopes on lottery tickets. UBE would help today’s students avoid that sad fate in their old age.
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From generation to generation? Universal Business Education would help many underprivileged children break free of the cycle of intergenerational poverty to start cycles of intergenerational prosperity.
I believe Universal Business Education would eventually turn the overeducated waiter, the minimum-wage head of household, the elderly wage slave, and the victim of intergenerational poverty into vanishing species on the brink of extinction in America.
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Those extinctions would have moved much closer to completion by now if our public schools had been teaching business fundamentals in recent decades. But instead, those extinctions still lie down the road somewhere beyond the horizon because America has relied on solutions such as “It Takes a Village”, “No Child Left Behind”, and “Common Core”.
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How are those “solutions” working out so far? Some people believe those ineffective solutions have actually helped produce the mess we have now. Too many students still graduate from our high schools and from our colleges unprepared to make a living. Too many unemployable college grads still probably feel their resumes have been saying only “Kick me!” to prospective employers. Far too many graduates still default on their college loans. Too many impoverished grads would still make better poster children for Universal Business Education than poster children for promoting careers in their college majors.
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Our failure to teach so many Americans how to prosper in the Land of Opportunity has helped turn many American cities into drug-infested combat zones scarred by sprawling homeless encampments. So much for the enlightened, progressive government programs of the last few generations that promised to solve America’s social and economic problems. Universal Business Education would start producing more citizens who can solve their own problems far better than politicians and government bureaucrats could ever solve those problems for them.
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As for our senior citizens, we should expect no drop in the levels of elder poverty anytime soon. Even before the COVID-19 pandemic started wiping out savings and retirement accounts nearly half of all Americans in their mid-fifties had saved less than $12,000 for retirement. That’s peanuts! Too many Americans will need financial help when they retire, and politicians will compete to satisfy their needs if only because older people vote. When Generation X starts joining the wave of retired Baby Boomers in the next decade our government will have trouble helping the Social Security Administration send out monthly payments as well as trouble paying down our soaring national debt. The government will also have trouble funding all other parts of our tattered social safety net.
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By the way, “Fifty-five percent of parents expect financial assistance from their kids during their retirement years,” according to The Massachusetts Mutual Life Insurance Company. If that’s true, then fifty-five percent of American parents had better make sure their children learn how to make a good living in the real world. Universal Business Education could help more American students prosper well enough to someday be able to offer a helping hand to their parents in their old age instead of coming to their elderly parents seeking a handout for themselves. UBE would also help ensure that today’s children never need the financial help of their own children in their own senior years.
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That’s why it’s way past time our public schools started producing more self-sufficient, prosperous taxpayers. And that’s why it’s way past time our schools started teaching students that in America’s mixed economy it is not only their own self-interest but also their civic duty that requires that they learn how to earn.
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Yes, America’s economy is a mixed economy, a blend that is neither strictly capitalist nor strictly socialist. One thing that both capitalism and socialism as well as their various hybrids all have in common is that their economies run smoothly only when almost all citizens are productive members of society. That’s where Universal Business Education would help. The more our students learn about basic business principles, the more likely they’ll prosper as adults and, therefore, the less likely they will ever need government assistance. The more they prosper, the more taxes they’ll pay. The more taxes they pay the more cash the government will have for the business of governing the nation as well as for funding the social services needed to help what should then be a steadily shrinking number of needy citizens.
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Understanding the role taxation plays in America’s mixed economy would help students see that corporate profits play another important role besides helping thrifty workers take early retirement. The more profits corporations make, the more federal, state, and local taxes they pay. Those profits are then taxed a second time in the shareholders’ personal tax returns when corporations distribute their profits to their shareholders in the form of dividends. The IRS takes a 37% cut of ordinary dividends at the highest tax bracket; it takes a 12% slice from us peasants. Millions of American households do not earn enough to have to pay any federal income tax at all. UBE would help to steadily shrink that segment of the population to everyone’s satisfaction. Corporate profits produce capital gains when people eventually sell shares of their stock. Taxes on those capital gains bring yet another stream of cash into government coffers. Then after the feds have finished taking their share of corporate dividends many states take a slice with their own income taxes. Finally, New York City and a few other towns help themselves to a cut of those profits by imposing municipal income taxes.
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By motivating more Americans to invest part of their savings in corporate stocks or in stock mutual funds Universal Business Education would hasten the happy day when corporate profits pump up the incomes of almost all workers and, consequently, the day when the taxes on those dividends and capital gains help the feds and the states to finance government programs and start paying down our massive national debt.
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Can the solutions to America’s social and economic problems really be as simple as adding business lessons to every public school’s curriculum? Although it’s no cure-all I believe Universal Business Education would allow us to finally take a step in the right direction. That’s because UBE would help America to generate more wealth and it would help us to spread that wealth more fairly than anything America has tried in the last hundred years. In the process of teaching all students how America’s mixed economy works Universal Business Education would finally help produce a genuine meeting of the minds on America’s social contract. Without that meeting of the minds our national discourse will continue to rise into a cacophony of partisan shouting matches that produces only an American Tower of Babel.
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That chaos could eventually help put a demagogue into the White House. If too many graduates of America’s public schools start blaming society for failing to prepare them to earn a living wage who could convince them otherwise? After all, would those unemployable grads be totally wrong? Can we honestly call grads “educated” when so many default on their college loans because they are unfit to make a living in the society they had trusted to properly educate them? In those circumstances a demagogue could appeal to enough voters to start steering our liberal democracy in an authoritarian direction. Universal Business Education would help produce more self-reliant, prosperous citizens immune to those appeals.
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The domestic benefits of Universal Business Education I’ve mentioned so far are the carrots. Global competition is the stick. While the business of America has always been business the business of the rest of the world will probably always be business, too, now that China, India, and most other nations have started to follow our free market example in recent decades. Some nations are already beating us at our own game. In this increasingly competitive world neglecting our children’s business education sets up so many American students to fail it sabotages our national prosperity if not our long-term survival. That’s why liberals and conservatives, socialists and capitalists, Republicans, Democrats, Libertarians, and everyone else should all see that Universal Business Education is necessary for not only individual prosperity and domestic social and economic justice but for national self-preservation as well.
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The success of Universal Business Education in America would also help those nations who choose to follow the good example of that success. Aren’t the tools for that imitation already in place? What’s to keep more workers around the world today from scraping together enough cash to go online to start investing in common stock mutual funds? For example, American Funds’ New Perspective Fund requires only a $250 initial minimum investment. Only the lack of the most basic business education keeps many foreign workers from investing the same way it keeps many American workers from investing.
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Another advantage is that Universal Business Education might convince many foreign workers that investing in mutual funds that grow and pay dividends in American dollars can shield their savings from inflation in their native lands. Dividends paid to foreign workers in American dollars might even help stabilize a shaky local economy if mutual fund investing were to catch on widely enough in a nation suffering from high inflation.
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Don’t laugh. Far stranger things have happened in living memory. For instance, within the last fifty years China shook off Chairman Mao’s rabid communist Cultural Revolution to embrace capitalist practices that today allow China to boast almost as many billionaires as America as well as the third largest stock exchange in the world in Shanghai. In the process China turned from a chronically famine plagued, agricultural economy into the high-tech “Workshop of the World”. Isn’t it far less of a stretch than that bit of recent history to think that within the next fifty years Peruvian miners, Angolan refinery workers, and Indonesian electricians can routinely invest part of their savings in common stock mutual funds? Universal Business Education could eventually help spread economic growth and social justice around the world far more effectively and far more efficiently than armed revolution ever did.
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Still laughing?
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Maybe historians will someday trace the roots of such a global, socio-economic revolution back to the days when American public schools started teaching fifth graders how to add up revenues and subtract expenses to calculate profits and losses. For that to happen business education must first start sinking deeper roots into American soil.
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As for that American soil, do you need motivation closer to home? OK. Would you throw your own child into a lake without first teaching her how to swim, in fact, without even yelling, “Sink or swim!” before she hits the water? It looks like some parents would do so since that’s how naively too many clueless grads dive into the waters of the real world. Too many come up for air gasping, “But it’s not supposed to be like this!” How could so many so-called “adults” not know that it always has been, and it always will “be like this”? Who should take the blame for their naivete? Parents? Grandparents? Teachers? School boards? Politicians? The graduates themselves? All of the above?
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Regardless of whom we blame for that ignorance the fact remains that unless one has been born into wealth or marries into it, or unless he wins a lottery his options have always been and will always be to sink or swim: to work or starve, or to beg, borrow, or steal to survive. The ancient wisdom still holds as true now as ever: either reap what you sow or survive on whatever crumbs others might care to toss your way – or don’t. Teaching students otherwise cripples many kids’ chances to prosper as adults.
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Only our schools can make sure all children learn about fundamental business principles. Where else can American kids learn about these other facts of life? At home? America’s income inequality, our wealth gap, and our soaring student loan default rate are just a few examples of how poorly our homeschooling approach to business education works for us these days. Homelessness, racism, and our epidemics of drugs and crime only begin to fill out the rest of that long list.
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Each public school district should adopt Universal Business Education at its own pace. That would be much better than Washington’s mandating a one-size-fits-all approach for the whole country. School districts in underprivileged neighborhoods would likely start teaching their students business fundamentals as soon as possible to help their students break free of the cycle of intergenerational poverty and start cycles of intergenerational prosperity. On the other hand, schools in affluent neighborhoods might see no great need to rush into business education since most of their students already enjoy cycles of intergenerational prosperity. Besides that, many affluent public school districts already offer business courses as electives, if not as required courses. Parochial schools and other private schools should quickly add business education to their curricula to keep from losing students to schools that teach business fundamentals.
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But regardless of how quickly school districts adopt UBE programs the personal financial revolution that has been allowing some workers to cultivate seven-figure nest eggs must not remain under the radar of today’s students the way it still remains under the radar of too many adults.
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So much for arguments in favor of adding business lessons to every public school’s curriculum. As for arguments against Universal Business Education, I cannot think of any. Can you? If you have a better idea let’s hear it. Or maybe you like the status quo; some people love it. The status quo has made many career politicians and some social justice warriors as rich as televangelists. But if you do not like the status quo, and if you do not have a better idea than Universal Business Education let’s get this discussion started.
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Collective action has not been America’s forte since World War II. Since 1945 too many of our Have-nots have grown up, grown old, and died waiting for effective solutions to be handed down by America’s best and brightest presiding in Washington, in state capitols, in city halls, in universities. Top-down decision-making like that has already buried one superpower, the Soviet Union, which trained its citizens to rely on government decisions for their economic well-being. Relying too heavily on government decisions can bury America, too.
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What then must we do?
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Back to Basics: power to the people! A better way to produce enduring social justice and long-term economic growth would be to start letting more economic decision-making float down to the individual, grass roots level. It’s worth repeating that Universal Business Education programs in our public schools would produce American citizens who can make more of their own personal decisions more effectively and more efficiently than politicians and government bureaucrats could ever make those decisions for them.
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I believe the least we can do to sow the seeds for those grass roots is to honestly share our thoughts on business education with family, friends, and colleagues whenever we take the time to seriously discuss America’s social and economic problems. How hard would it be to persuade rational people that teaching all children how to succeed in the real world makes sense in a democracy? What valid arguments could there possibly be against teaching all kids how to prosper? Lame excuses only fuel conspiracy theories about race, class, gender, and religion.
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If that word-of-mouth approach works too slowly for you then the internet offers ways to more quickly sow the seeds for those grass roots across America. Or you could instead concentrate locally to make sure your own children and grandchildren do not fall behind their peers for lack of a basic business education. In that case you could go “old school” by attending PTA and school board meetings to ask why a basic business education should be treated like forbidden knowledge taught only to children privileged enough to attend better schools. You could also pose that question to editors of newspapers and magazines. You could ask political candidates for their positions on Universal Business Education. And you could convince the activists, educators, and clerics who struggle to help children trapped in the cycle of intergenerational poverty that Universal Business Education can help kids to finally escape that trap and start cycles of intergenerational prosperity.
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I believe most Americans want to see all children, especially our underprivileged kids, learn how to succeed in the real world. I believe that most Americans can understand that social justice and a strong economy are not mutually exclusive goals. I believe Universal Business Education can help America reach both of those goals. That’s why I believe we should start a national discussion on the best ways to start blending business lessons into every public school’s curriculum. The sooner, the better because this year – like every year – too many high school seniors are applying to college diploma mills. Too many teens are signing up for college loans they will inevitably default on. And too many students will graduate from our high schools and from our colleges unfit to make a living.
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Let’s stop digging America’s grave. Let’s start a national discussion about Universal Business Education. If we don’t then what will we say in a few more years when too many of today’s optimistic teens have turned into grown men and women trapped in low-paying, dead-end jobs who ask, “Why didn’t anyone teach us these things?” If they believe they are paying for the sins of their parents and grandparents who never “taught them these things” would they be wrong?
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Would they ever forgive us?
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Would we ever forgive ourselves?
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The “Universal Business Education” essay points out that some working-class Baby Boomers have ridden the longest bull market in stock market history to financially secure, early retirement. The “Grade School Math and Money” essay that follows tells how two popular financial tools developed in the 1970s have helped many Boomers finance that trip.
GRADE SCHOOL MATH AND MONEY
“Money makes money, and the money [that] money makes makes more money.”
~ Benjamin Franklin
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Retirement funds prudently invested in the stock market don’t just add up over time; they multiply. That accelerated growth explains how for the first time in history many working class heroes have taken early retirement with the help of million-dollar nest eggs that have continued to multiply for years if not for decades after they retired.
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Grade School Math
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When it comes to building a retirement nest egg addition is good, but multiplication is much better. Although savings can add up over time, if a worker just stashes his greenbacks under his mattress those savings do not earn any extra cash. The low interest rates offered by bank savings accounts are not much better. But when a worker invests in a solid stock index mutual fund his savings multiply or “compound” instead of just adding up. His “money makes money”. Although Albert Einstein called compound growth the eighth wonder of the world there is nothing mysterious or complicated about compounding; it’s almost too simple.
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Take, for example, the compound growth of the most popular type of retirement fund, the S&P 500 Stock Index mutual fund. These funds consist of the stocks of large corporations with proven track records. Solid S&P 500 funds are available from reputable firms such as Vanguard, Fidelity, T. Rowe Price, and Charles Schwab. While the S&P 500’s annual growth rate can vary greatly from year to year it has averaged about 9% to 10% over the last half century, and it will probably average about 9% to 10% over the next half century.
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At 9% per year the value of an investment doubles every eight years. So, while $1 stuffed under a mattress adds up to exactly $1 after eight years, the dollar invested in an S&P 500 Stock Index mutual fund should double to $2. That $2 doubles again to $4 by the investment’s sixteenth year. That $4 doubles again in the next eight years to $8 by the twenty-fourth year of the investment. By its thirty-second year the worker’s investment reaches $16. After forty years the dollar he invested from his first paycheck after high school, for example, will have doubled to $32 by the time the worker reaches his fifty-eighth year. And the nest egg doubles again to $64 if our hero works eight more years to full retirement age at sixty-six. No, compounding is not a get-rich-quick scheme; it is a slow-but-sure way to build wealth.
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Meanwhile, that dollar stuffed under a mattress is still just a dollar after thirty-two years, after forty years, after forty eight years.
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Now, if our worker adds another dollar to his retirement fund every year for thirty-two years then at a 9% average annual growth rate that investment snowballs to $164. It grows to $337 after forty years and to $684 if he retires after forty-eight years at the age of sixty-six.
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Instead of investing only $1 per year for our example plug in $1,000, $3,000 or any other amount to see how the compound growth of their investments has been turning many proletarians into millionaires.
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Contributions of $1,000 per year (averaging just $83.33/month or $2.74/day) produce balances of only $164,000 after thirty-two years and $337,882 after forty years when our high school grad will have turned fifty-eight. If he works to full retirement age at sixty-six then our worker’s nest egg will grow to only $684,280. Improvement needed.
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How about annual contributions of $3,000? (That’s $246.60/month or $8.22/day. Some workers spend more than that every day on cigarettes.) Contributions of $3,000 per year produce balances of $492,110 for our worker after thirty-two years and $1,013,647 after forty years. And it hits $2,052,841 if he likes his job well enough to work to sixty-six. That’s more like it.
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Better yet, contributions of $4,000 per year ($328.80/month or $10.96/day) produce nest eggs of $656,147 after thirty-two years, $1,351,529 after forty years, and $2,737,121 if he works until he turns sixty-six.
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Some thrifty workers have no trouble annually sinking $3,000, $4,000, or more into a retirement fund. For many that means just having 10% or more from each paycheck withheld in an employer-sponsored retirement plan. But other workers will never add that much cash to their nest eggs every year even if their employers offer to match the workers’ contributions to their retirement funds dollar-for-dollar as many employers do. That’s because life can get in the way of thrifty resolutions: illness, children, grandchildren, unemployment, divorce, not to mention expensive habits like keeping up with the Joneses and addictions like alcohol, tobacco, drugs, and gambling. Nevertheless, I suspect that most of today’s older workers who have saved almost nothing for retirement would make the sacrifices, the career choices, and the lifestyle changes necessary to cultivate fat retirement accounts if they had their working lives to live over again. For some that would have meant making major lifestyle changes. But for many others those sacrifices would have meant merely nurturing moderately thrifty habits like habitually sinking a chunk of their annual tax refund into a retirement account instead of rushing to the mall with their tax refunds to shop ‘til they drop.
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Cultivating a fat retirement fund during one’s working life is only half the job of providing for a comfortable retirement. The other half is further cultivating that nest egg to keep it growing for years if not for decades after the worker retires. The part of his retirement funds he keeps invested in an S&P 500 Index mutual fund can keep doubling on average every eight years for the rest of his life. That continued growth is the key to a financially secure retirement.
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All these numbers look good in theory, don’t they? For many workers they look good in real life, too, especially for households with two wage earners, each of whom has his or her own nest egg. The seven-figure retirement funds of American workers help explain how the number of millionaires in America surged to over 21 million in 2021. With a population of over 330 million that means 6.3% of the population were millionaires. One out of every sixteen Americans owned assets of over one million dollars. These days the millionaire next door might well be a sheet metal worker, a forklift operator, a mail man, or a teacher.
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Get the picture? The thrifty worker’s investment returns eventually surpass his wages year after year. At that point he can prudently consider early retirement. The worker realizes he does not have to work anymore unless he wants to when he realizes his retirement funds can continue to multiply for years, if not for decades, after he retires.
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Two 1970s Personal Finance Tools Launch a Quiet Revolution
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Baby Boomers are the first generation in history to have had the chance to invest for most of their working lives with the help of two personal finance tools developed in the 1970s: stock index mutual funds and Individual Retirement Accounts (IRAs). Those revolutionary tools have helped many Baby Boomers prove that million-dollar retirement funds lie within the reach of the average American worker.
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First, stock index mutual funds allow the worker to prudently invest in a widely diversified stock portfolio without having to know much about stocks. He just has to realize that the overall stock market will probably continue to grow at an average rate of about 9% to 10% per year in the next half century the way it has in the past half century. No expertise is required because stock index funds manage themselves as far as buying and selling shares of individual companies are concerned. For example, in the case of the S&P 500 Index mutual funds the S&P dumped old dogs like Sears from the five hundred companies the S&P tracks to make room for young pups like Amazon.
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Second, while the worker’s stock index fund is managing itself the other revolutionary tool, the IRA, turbocharges his investment by sheltering his growing nest egg from taxation. No part of his investment is bled off every year by the Internal Revenue Service. The entire balance continues to grow. In the case of the traditional IRA the feds tax only the withdrawals a worker makes after he retires. The funds that remain in his account can continue to multiply tax-free for years if not for decades for the rest of his life. And in the case of the Roth IRA the Internal Revenue Service never takes a dime. Even when he dies the balance of his Roth IRA bypasses the IRS and goes straight to his heirs without being taxed at all. Such intergenerational wealth transfers have helped many Americans leave something for their children and their children’s children other than just debts and funeral bills.
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Accidental Millionaires
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Some Baby Boomers learned about this financial revolution almost by accident while they themselves were unwittingly making this history. They gradually learned by watching their nest eggs grow year after year while they automatically plowed five percent, ten percent, or more of every paycheck during their working lives into retirement accounts invested in one of the popular S&P 500 Stock Index mutual funds. Yes, almost by accident. After all, who can now claim with a straight face that they knew when they started working in 1986, for example, that the S&P 500 Stock Index would rise from 209 in ’86 to 4,766 at the end of 2021, or that the DOW Jones Industrial Average would rise from 1,537 to 36,338 by then?
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There’s no mystery, no magic, no foul play here. The S&P 500 Index soared to those heights simply because of the steady growth of the 500 companies that the S&P tracks. Companies that satisfied consumer demand accounted for much of that growth. Household names in the S&P 500 include Coca Cola whose share price rose from $0.68 in 1986 to $54.24 by the end of 2021 while, Colgate Palmolive climbed from $0.87 per share to $79.79, Clorox went from $2.17 per share in ’86 to $164.27, and Target shares soared from $1.79 to $227.50 by the end of 2021.
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Consider the irony. On one hand, many thrifty Baby Boomers were almost accidentally proving that million-dollar retirement funds lie within the reach of the average American worker. On the other hand, at the very same time many more Boomers – including almost half of all Americans now in their fifties – had saved little of nothing for retirement.
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Why the huge difference between the Haves and the Have-nots? Too many Have-nots never learned in school, at home, or anywhere else how much their teenage career plans - or their lack of career plans - mattered. They never learned that students who fail to prepare themselves for gainful employment should not count on financially secure working lives let alone comfortable early retirements. They never learned in school that workers who start saving and investing on their first job right out of school can easily cultivate wealth over four decades, but workers who put off saving and investing until well into middle age have little chance to enjoy a financially secure retirement at any age. And many Have-nots never learned in school that two-paycheck families with one or two children can probably afford to cultivate not only hefty, boring retirement funds but also riskier, more lucrative investments as well. However, single-parent households with three, four, or five, or more mouths to feed? Not so much.
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Now that so many Baby Boomers have proved the value of those two wealth-generating tools developed in the 1970s it would be a crime to fail to pass along these new facts of life to all children, especially to America’s underprivileged kids. It would be a crime to keep the news about this quiet, personal finance revolution under the radar of most students the way it still remains under the radar of most adults. Only Universal Business Education can make sure we pass along that knowledge to all children. The sooner, the better. In the process of teaching all children how to prosper UBE would make not only a rewarding career but also a fat retirement fund and early, financially secure retirement the rule rather than the exception in America.
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The best time to start learning about grade school math and money is not a decade or so before a worker hopes to retire. The best time to start learning these lessons is at least a year or two before he graduates from high school so he can make mature decisions about his career, education, and training. Better yet, his business education should start before he graduates from middle school or even from grade school. Yes, grade school. The “Universal Business Education” essay, (p. 2.), points out that many business functions require only grade school math: addition, subtraction, multiplication, and division. That’s why I believe that every public school district in America should start blending basic business principles into the curricula of its grade schools no later than the fifth grade.
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Why bother? Because I believe Universal Business Education would eventually help America to generate more wealth and to spread that wealth more fairly than anything we’ve tried in the past hundred years. I believe that most of America’s social and economic problems would then start to solve themselves.
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Florida passed a law in March of 2022 that will require students to pass a financial literacy course for high school graduation. That’s a big step in the right direction towards giving all children a practical education that can actually help them pursue their American dreams. But that big step is still just a first step that will fall far short if it does not go on to provide students with a basic knowledge of the bigger picture of the real world that only a broader business education can show them.
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Two shortcomings of Florida’s financial literacy requirement stand out. First, financial literacy is just a small part of a basic business education because it deals primarily with managing assets one already owns. For example, the Florida course will cover bank accounts, balancing checkbooks, interest rates, investments, insurance, taxes, and credit cards. In other words, it will deal with personal finance. As important as personal finance is, those lessons will teach students what to do once they land a steady paycheck, but those lessons will not teach them much about how to land that steady paycheck in the first place, let alone how to successfully go on to pursue a rewarding career. That’s where a broader business education would help.
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A broader business education involves much more than just personal finance. It concerns the big picture. That means teaching kids how goods and services are marketed, produced, and exchanged in a market economy. In the process of absorbing fundamental business principles each student would also learn how to make more informed decisions about achieving his American dream whether that dream includes a career in commerce, medicine, the construction trades, education, or any other field.
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The second reason Florida’s new financial literacy law falls short is because learning even the most basic business fundamentals would require more than just the single semester the Florida law mandates. In fact, it would require more than just one year. The earlier those business lessons start, the better. The “Universal Business Education” essay explains why fifth grade math class is not too early to start teaching kids about business. Middle schools could then blend in accounting, the language of business, which kids would find to be far easier than their Spanish and French lessons. Then high school students could confidently handle courses in finance, management, and marketing in time to help them avoid pitfalls like predatory lenders and college diploma mills when they start making career decisions.
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Florida’s financial literacy requirement for high school graduation is a first step in the right direction towards teaching students how to make their way in the real world. But a broader business education must follow if students are to grasp the big picture well enough to further explore that world in their quests for their American dreams.​
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________________________________________FLORIDA’S NEW FINANCIAL LITERACY REQUIREMENT: IMPROVEMENT NEEDED
If you’ve made it through the essays of this website so far you probably expect an appeal for money right about now. No such luck. You can’t get off that easily.
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I would ask for money if I wanted the Universal Business Education Movement to grow into a formal organization with offices, lobbyists, employees, and bills to pay. That is not the case. Organizational development would soon require the UBE Movement to water down its message in order to broaden its appeal to try to make it mean all things to all people. In that case this movement would eventually join the endless parade of good intentions that have become parts of the problems they were supposed to solve. “It Takes a Village”, “No Child Left Behind”, and “Common Core” come to mind. America’s epidemics of racism, crime, drug addiction, and homelessness show how well those “solutions” are working for us so far.
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Another reason I’m not asking for money is because I’m not trying to make a buck on this idea. I’m not spending much on it, either. Take a closer look at this website. Does it look like I’ve paid for professional help? After a few years this site’s pathetic forum should tell you all you need to know about my geezer tech skills.
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No, the Universal Business Education Movement is not a professionally designed and managed organization. Instead, it seeks to be a grass roots movement that is much too important to depend on the skills of a technophobe like me. America’s children deserve better. America deserves better. The best I can do is to urge you to follow the advice near the end of the UBE Essay about sowing the seeds for this grass roots movement. That message bears repeating here:
“I believe the least we can do to sow the seeds for those grass roots is to honestly share our thoughts on business education with family, friends, and colleagues whenever we take the time to seriously discuss America’s social and economic problems. How difficult would it be to persuade rational people that teaching all children how to succeed in the real world makes sense in a democracy? What valid arguments could there possibly be against teaching all kids how to prosper? Lame excuses only fuel more conspiracy theories about race, class, gender, and religion.
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“If that word-of-mouth approach works too slowly for you then the internet offers ways to more quickly sow the seeds for those grass roots across America. Or you could instead concentrate locally to make sure your own children and grandchildren do not fall behind their peers for lack of a basic business education. In that case you could go ‘old school’ by attending PTA and school board meetings to ask why basic business principles should be treated like forbidden knowledge taught only to children privileged enough to attend better schools. You could also ask political candidates for their positions on Universal Business Education. And you could convince the activists, the educators, and the clerics who struggle to help children trapped in the cycle of intergenerational poverty that Universal Business Education can help kids to finally escape that trap and start cycles of intergenerational prosperity.”
You can help spread the seeds of the UBE Movement to every school district in the nation by sharing your thoughts on this subject in any other forums and social media that deal with social justice, economic growth, politics, or education. Universal Business Education in America depends on it.
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The internet is big enough for more than just one UBE website. So, if you want to start your own website to promote business education in our public schools, more power to you. You certainly have my blessing. If you think it would help mention the link to
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www.universalbusinesseducationmovement.com
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But if you will not help spread the word then maybe you think Universal Business Education is not such a good idea. After all, some people love the status quo even if it is turning our cities into drug infested combat zones dotted with homeless encampments. Will the Universal Business Education Movement then die when I die? Will democracy in America continue to dig its own grave? That’s up to you. What do you think?