Monthly Archives: July 2020

PERSONAL FINANCE KPIs

Posted on July 25, 2020 by Melissa Hart

Most every organization uses metrics to determine success. Also referred to as key performance indicators (KPIs), these numeric measurements can be used to assess financial success and progress toward goals. When selecting personal financial KPIs, be sure to: (1) identify what’s important to you for your financial goals; (2) create a system to track your progress, in writing, with a computer file, or an app; (3) involve all household members in the decision process.

Some common KPIs you might consider monitoring include:

Credit score, which is affected by missed debt payments and involves your ability to access loans in the future.
Savings rate is vital for future major purchases and planning for retirement. Financial advisors recommend saving 10-15 percent of your income.
Discretionary spending measures a person’s level of expenses related to meals out, fancy clothes, vacations, and other non-necessities, so money can be saved for more important goals.
Net worth (total assets minus total liabilities) measures financial health progress, which can increase by paying off debts and increasing saving and investing.

More creative KPIs are available for advanced personal financial planning. The Financial Health Index combines several financial metrics to provide a measure of overall financial health. The Financial Independence Number indicates the amount of money needed to live off the investment returns of your net worth. Living Within Means Index measures if necessary expenses are covered by a person’s income.

For additional information on KPIs for personal finance, go to:

Article #1

Article #2

Teaching Suggestions

Have students create a visual design that might be used to monitor progress for one or more personal finance key performance indicators.
Have students talk to others about actions they take to monitor their financial progress.
Refer students to the Road Map/Dashboard feature at the end of each chapter of Personal Finance or Focus on Personal Finance to view additional examples of key performance indicators.

Discussion Questions

What are the benefits and limitations of personal finance KPIs?
What are other KPIs that might be valuable indicators of personal finance success?

Categories: Chapter 1, Chapter 2, Financial Planning | Tags: Financial Planning, Financial ratios, money management | Leave a comment

Financial Literacy for Children

Posted on July 18, 2020 by Melissa Hart

A lifetime of skillful financial decisions starts with experiential learning at a young age. To increase financial literacy for the next generation, consider these actions:

Give children a payday. Instead of a weekly allowance with simply giving money, create a system of earning these funds. Connect their household chores to earned amounts with a weekly payday. This practice can teach a child that people are paid for work to earn money for their living expenses.
Create awareness of opportunity cost. Every financial decision has trade-offs. Once money is spent, that money is not available for other uses. Keeping money in a clear jar allows the young person to visually see what funds are available, and when the money is gone.
Allow children to experience borrowing. If a child wants to buy something but does not have the money, set up a signed loan agreement with repayment terms. Also create a plan for the amount owed to be taken from future household earnings. Have the young person physically pay the money to better understand how credit works.
Connect them in the budgeting process. Include children in the discussion of family finances and the household budget to help them understand where money is spent. Consider creating a chart with spending amounts, or use slips of paper representing money that are used to pay the bills each month.
Teach wants vs. needs. Shoes or a clothing item may be a need but not a high-fashion version. To cover the cost of the higher-priced item, young people should be required to earn the amount for the additional expense.
Use money games. These activities can help children understand earning, saving, wise spending and other basics of money management for a financially sound future.

For additional information on financial literacy for children, click here.

Teaching Suggestions

Have students conduct online research to locate other actions used by parents to teach their children smart spending and wise money management.
Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.

Discussion Questions

What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
Describe possible money management learning activities for children that involve creative use of technology.

Categories: Chapter 1, Chapter 2, Chapter 5, Credit Cards, Financial Planning | Tags: Financial Planning, money management | Leave a comment

20-Year-Old Robinhood Customer Dies by Suicide After Seeing a $730,000 Negative Balance

Posted on July 11, 2020 by Melissa Hart

“On June 12, 2020, Alexander E. Kearns, a 20-year-old student at the University of Nebraska, took his own life after believing he had lost over $730,000 trading options.”

While home from college and living with his parents because of the Coronavirus, Kearns opened an account with Robinhood—an online brokerage firm that uses technology to encourage everyone to begin investing and participate in the U.S. financial system. As stocks experienced huge price swings during spring 2020, Kearns began experimenting with trading options.

After using a speculative technique that involved put options, Kearns believed that he had lost over $730,000. In reality, his negative balance may not have represented a negative balance at all, but rather a temporary balance until the stocks underlying his option investments were posted to his account. And yet, because of a timing and reporting issue, he became despondent and took his own life.

Because of privacy issues, Robinhood won’t provide details of Kearns’ account, but the brokerage firm is making major changes to their trading platform—especially for option trades.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

Stress the importance of learning all you can about any investment before you begin an investment program.
Review the risks involved in the more short-term speculative techniques of day trading, investments that use margin, selling short, and options.

Discussion Questions

Robinhood, like many financial service firms including E-Trade, TD Ameritrade, Charles Schwab, Fidelity, and Merrill Lynch now allow investors to open an account with no initial investment and offer commission-free trading. Would you be tempted to open an account and begin investing given the current economic environment?
In the note he left, Alexander Kearns asks a simple question, “How was a 20-year old with no income able to get assigned almost a million dollars worth of leverage?” He also admits in his note that he had “no clue” what he was doing. What mistakes did he make when he began investing? How could you avoid making the same mistakes?