EG Consults worked with an on-line education firm to develop a course on basic financial education for adults.

Leveraging broad experience in banking, clear recognition of the benefits of investing and great enthusiasm for promoting financial education, EG Consults developed a web based curriculum and course material (excerpts are presented below). The goal was to grab people’s interest, engage them with accessible content, make them understand was important and give them some ideas on what to do next.

The Value Proposition

The owner of FinEd, an on-line education company, wanted to expand its on-line course catalog, recognizing increased demand for on-line classes during the pandemic of 2020. The owner’s initial focus was teaching high school kids about the financial world, the players involved and the roles they take. Her curriculum included the elements of trading and how money is made and lost. The great enthusiasm of her high school students often resulted in conversation with their parents, many of whom felt that their own financial education was lacking. These parents, all with busy lives, had often put off learning about investing and money management. Many found the topic confusing or intimidating. Many felt that brokers and financial advisors were focused on sales and commissions and not on empowering clients to make informed choices.

The owners wanted to develop a financial education curriculum for adults from an independent viewpoint with a common sense, accessible approach. On-line delivery offered potential clients more scheduling flexibility and expanded the potential reach of FinEd.

Excerpts from Web Based Curriculum Developed by EG Consults

For Many People It’s Hard to Get Started

In the same way that some people hate to deal with technology, home repairs or the dentist, many people are reluctant to deal with money issues and investing. It doesn’t help that financial advisors often use confusing terminology, seem unable to answer straightforward questions and are influenced by their sales incentives. Many people put off taking an active approach to investing which has real consequences.

Investment Strategies Take Time To Play Out

Investment strategies take years to play out as most people accrue the savings that go into investments over time. Compounded returns or “returns on your returns” also build over over time. For example, if I invest $100 for a year and get a return of 7% at the end of the year I now have $107. The returns I get in year 2 on my $7 return from year 1 is a compounded return. As time goes on, the compounded returns become a major if not dominant portion of overall investment value.

The sooner you develop your knowledge and raise your comfort level the sooner you can begin making smart decisions for your financial future.

On the Benefits of Investing

The potential benefits from a smart investment strategy are HUGE. For example a starting investment of $10,000 with a 4% annual rate of return will grow to more than $100K after 10 years and more than $400K after 30 years.

Investing is Easier Than You Might Think

High quality investments are available and accessible, without any kind of special experience or knowledge. Every mutual fund company offers low cost mutual funds and ETFs that mimic the performance of the S&P500 and other major U.S. stock indices. The S&P, which includes 500 companies across market sectors is considered a broad representation of the U.S. stock market. The argument for broad representation or “diversification” is that you avoid putting too many chips on a single company or a single market sector. The S&P index continues to grow at a rate that exceeds many individual stocks.

Let’s Take a Look at S&P Performance

The S&P 500 has done great over time, but the road can get bumpy. The chart below has a general upward shape over the 20 years illustrated, but “corrections” happen. Examples are the 2008 credit crisis and the COVID pandemic. In 2009, the S&P had a 38% annual loss from the Credit Crisis.

It is convention to look at average returns over a period of time to smooth out the impact of any given year. We have illustrated 5 year averages below. So for example, the 2009 loss of 38% drags down the 5 year average from 2009 through 2014. BUT in most years since 2013 the 5 year average gain has been above 10%.

Cash Management versus Investment Management

We have been looking at historic performance and it is important to understand that history is not a guarantee of what will happen in the future. It is absolutely possible that the market could come down and stay down for a while, as has happened before.

It is essential to have a cash management strategy that is separate and distinct from investments. This will prevent the need to sell investments at the worst possible time, when the market is down. For example, investors that for whatever reason had to sell in 2008 missed the great run up that began around that year.