Why Everyone Needs To Be Educated in Finance

An article in Britain’s Daily Mail shows why everyone needs to be educated in finance. See here. The family in question lived in a nice house, but kept refinancing in order to pay bills. They weren’t worried because house prices kept going up, until of course they started coming down. Now they are living in an apartment and can’t afford the down payment for another house.

These people made lots of mistakes. The first was assuming that house prices would always rise, and the second was doing all this refinancing in order to get money. The writer points out that they didn’t use the money from refinancing to buy luxuries, that instead it was used for “school fees and upkeep of the house.” But these are things that a homeowner should be able to pay without refinancing. The writer also talks of their interest-only mortgage payments, which meant they were not actually building up equity. So, when she talks about how they “spent years climbing the property ladder,” she is deluding herself. They were basically renting the house from the bank.

People like her are why I insist that our schools need to spend more time on basic personal finance (and less time on the postmodern goop and self-esteem nonsense that they seem to be so good at purveying). These people bought an expensive house, and I assume they are well-educated, yet they didn’t understand some basic things. Even reading this book would have helped since it would have discouraged her and her family from thinking of her house as an asset. Too late now.