Thinking Citizen Blog —Inseparability of Economic, Financial, and Business Literacy

Thinking Citizen Blog — Tuesday is Economics, Finance, and Business Day

Today’s topic: Stepping Back III: Inseparability of Economic, Financial, and Business Literacy

The last two posts focused on “economic literacy” and the inseparability of economics, ethics, politics, and history. Today, a look at another avatar of inseparability. You can’t really understand the economy if you don’t understand how businesses work — from both an operating and financial perspective. This is not easy. This involves math. Not advanced math. Fifth-grade math. Comfort with ratios. K-12 math curricula for non-specialists should focus on developing fluency in basic business and financial literacy (personal and public as well as corporate). Experts — please chime in. Correct, elaborate, elucidate.

PERSONAL, CORPORATE, AND PUBLIC FINANCIAL LITERACY ARE INSEPARABLE

1. How many high school graduates are prepared to make the most basic of personal financial decisions? How many have the analytical tools to do so?

2. But such personal financial illiteracy has consequences for civic literacy. No economic literacy without financial literacy. No civic literacy without economic literacy.

3. Such skills, like musical or athletic skills, take years to develop. The earlier you start the better.

INCOME STATEMENTS, CASH FLOW STATEMENTS, BALANCE SHEETS

1. Have you ever built an “earnings model”? for a business? for yourself? Have your parents shared with you their family budget? Do they have one?

2. How about a cash flow statement model? for a business? for yourself? Do you know what the government’s financial statements look like?

3. How about a balance sheet model? for a business? for yourself? What does the government’s balance sheet look like? What is the reported debt? What is the real debt? Does it matter?

Thesis: Every 8th grader should be comfortable with building back-of-the-envelope “models” for families, businesses, and local, state, and federal government (having started doing so in 5th grade if not earlier).

THE LOCAL BANK, THE LOCAL RESTAURANT, GOOGLE, APPLE

1. How do the income statements, cash flow, statements and balance sheets of companies in different industries differ?

2. How do the risks differ from industry to industry?

3. What level of debt is appropriate for different companies? What debt level is appropriate for you? for your parents? your grandparents?

NB: informed career decisions are not possible without an understanding of the risks and rewards of working at different companies or government agencies and why. The divorce of math, civic literacy, and career counseling is insane.

YOUR TURN — Please share:

a.) the coolest thing you learned this week related to business, economics, finance.

b.) the coolest thing you learned in your life related to business, economics, finance.

c.) anything at all related to business, economics, finance.

d.) anything at all