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By Peter Coy
Opinion Writer
I offer to pay you $200 in one year if you give me $190 today. Good deal or bad deal?
It’s the kind of math problem you might encounter in real life, as opposed to, say, whether the cosecant of a 30-degree angle is 1 or 2. You can imagine students perking up and paying attention when they realize that they need to know algebra to avoid being cheated on a loan.
Math and personal finance make a perfect fit. Students grasp concepts such as exponential growth and regression to the mean much better when they see how those subjects apply to their daily financial lives.
A survey in 2022 funded by the Bill and Melinda Gates Foundation found that 61 percent of parents of students said math education should be “relevant to the real world” but that only 21 percent said it was.
The drive for relevance goes beyond K-12 education. Some of America’s top universities are incorporating personal finance into their curriculums.
Harvard has a personal finance course in the economics department that’s taught by John Campbell, a past president of the American Finance Association. “Traditionally personal finance was regarded as a very sort of hands-on skill that you might teach to people who were going to a technical high school,” he told me. “There is, I would say, a modern movement to reconceive of personal finance as a subject with actually a lot more intellectual content.”
Last year Stanford hired Annamaria Lusardi, an expert in financial literacy, from George Washington University. In October she and other faculty members held a conference on teaching personal finance that included presenters from Dartmouth College, Loyola University in New Orleans, Pennsylvania State University, the University of Pennsylvania’s Wharton School and the Yale School of Management.
The question I opened this newsletter with comes from a finance-infused high school math curriculum, FiCycle, that was developed by a New York-based nonprofit, the Financial Life Cycle Education Corp.
It’s a good example in that answering it takes real algebra, the kind that makes a lot of students’ eyes glaze over. To know whether lending me $190 makes sense, you have to know the best alternative use of your money over the coming year. Let’s say it’s a savings account that pays 2 percent in annual interest.
You need to calculate the value to you today of receiving $200 a year from now. So you divide $200 by 1.02, with the 0.02 representing 2 percent interest. The answer is $196.08. That’s more than $190, so you should take me up on my offer. (You can ignore inflation because it affects your two options equally.)
In most high schools, personal finance classes are light on math, and math classes are light on personal finance. The FiCycle curriculum has plenty of each.
“The personal finance component is incredibly motivating for our high school students,” Philip Dituri, the director of education at Financial Life Cycle Education, who has a doctorate in math education, told me.
Dituri recalled one student who said she loved the FiCycle curriculum but hated algebra. “I thought, ‘Do I tell her it’s the exact same math?’”
Financial Life Cycle Education was founded in 2014 by Andrew Davidson, who runs a company that applies analytical tools to investment management. He has a bachelor’s degree in math and physics and an M.B.A. in finance.
Davidson told me that he kept calculus out of the curriculum to make it accessible to a wide range of students. “We think our course works for non-STEM students” but also for students in STEM disciplines such as finance, accounting, insurance and investment management, he said.
There is a national standard for personal finance education that was put together by the Council for Economic Education and the Jump$tart Coalition for Personal Financial Literacy. It emphasizes how to manage one’s finances. FiCycle focuses more on the underlying concepts. It’s about “how and why individuals and households transfer consumption over time,” Financial Life Cycle Education says.
I don’t want to put too much emphasis on FiCycle because it’s still small. Davidson said it’s being used in about 70 schools in about 20 states. The important thing is the idea that it’s promoting, which is that students learn math better through personal finance and personal finance better through math.
At Harvard, Campbell said, about a quarter of his students are the first in their families to attend college. “They want to bring expertise back to their families,” he said. “They’re some of the best students in the course because they’re interested in everything.”
I’ll have more to say in a future newsletter about other ways to promote sound personal finance, especially among disadvantaged populations.
Inflation in the eurozone currency area hasn’t fallen as quickly as was expected, making an interest-rate cut by the European Central Bank this spring less likely, Carl Weinberg, the chief economist of High Frequency Economics, wrote in a note to clients on Friday. He wrote that he nevertheless expects the bank’s governing council to make a “dovish pivot” in its comments after its meeting this Thursday.
“It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct or more uncertain in its success than to take the lead in the introduction of a new order of things.”
— Niccolò Machiavelli, “The Prince” (1532)
Peter Coy has covered business for more than 40 years. Email him at coy-newsletter@nytimes.com or follow him on Twitter. @petercoy
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