Finance

Dollars and sense: Can financial literacy help students learn math?

Published

12 months ago

October 15, 2023

Dollars and sense: Can financial literacy help students learn math?

Inside a high school classroom, Bryan Martinez jots down several purchases that would require a short-term savings plan: shoes, phone, headphones, clothes, and food.

His medium-term financial goals take a little more thought, but he settles on a car — he doesn’t have one yet — and vacations. Peering way into his future, the 18-year-old also imagines saving money to buy a house, start his own business, retire, and perhaps provide any children with a college fund.

Martinez’s friend next to him writes a different long-term goal: Buy a private jet.

“You have to be a millionaire to save up for that,” Martinez says with a chuckle.

Call it a reality check or an introduction to a critical life skill, this exercise occurred in a course called Advanced Algebra with Financial Applications. The elective math class has been a mainstay in the charter school’s offerings for more than a decade, giving students a foundation in money management while they hone math skills. Conversations about credit, investments, and loans, for instance, intersect with lessons on compound interest, matrices, and exponential equations.

The school may be a front-runner in providing financial education, but in recent years, many others have followed suit. Since 2020, nine U.S. states have adopted laws or policies requiring personal finance education before students graduate from high school, bringing the total number to 30 states, according to the Council for Economic Education.

The surge comes as educators are scrambling to bolster students’ math skills, which plummeted during the pandemic and haven’t fully recovered. At the same time, a general dislike for math remains an obstacle among young people.

But do topics like high interest rates translate to higher interest among students? Tonica Tatum-Gormes, who teaches the course, says yes. She attributes better student engagement to them seeing the connection between math and their future financial well-being.

Students begin to understand that “yes, I need to learn decimals, and I need to learn fractions, and I need to learn percentages because I have to manage my money and I have to take out a loan,” Tatum-Gormes says.

Advocates say personal finance courses could pay dividends if students learn how to make wiser money decisions and avoid financial hazards. In the process, they may also develop an interest in math because of its practical applications.

The K-12 standards for personal finance education, as recommended by the Council for Economic Education, include topics such as earning income, budgeting, saving, investing, and managing credit and financial risk. Experts say it’s a course that doesn’t necessarily have to be taught by a traditional math teacher.

“The more math you add to financial literacy, frankly, the better it is,” says Annamaria Lusardi, founder and academic director of the Global Financial Literacy Excellence Center. “In many cases, to make a decision, you have to do calculations, so I think math is a very powerful tool. … Having said that, financial literacy is more than math.”

Idaho is one of the states where a new financial literacy curriculum is hitting classrooms. The state Legislature this year approved the course as a graduation requirement.

The new course will give students the chance to apply skills from their algebra, calculus, and economics classes to their real lives — computing their future student loans, rent payments, and income requirements.

“This was such a priority out of the gate because I heard from so many people during the campaign last year that our young people weren’t prepared with the basic financial skills they need to succeed in life,” says Debbie Critchfield, Idaho’s state superintendent of public instruction, who spearheaded the effort.

Experts say the subprime mortgage crisis that helped spark the Great Recession in 2007, followed by pandemic economic uncertainty and today’s inflationary period, may have heightened Americans’ desire for a solid financial understanding. Less than a quarter, or 24%, of millennials demonstrate basic financial literacy, according to the Council for Economic Education.

Advocates say that left untaught, teens and young adults may turn to questionable sources, such as TikTok or YouTube videos. Plus, children whose parents aren’t financially savvy can’t rely on learning at home, making it an equity issue.

In 2020, the NAACP issued a resolution calling for more financial literacy programs in K-12 schools.

In schools with predominantly Black and Hispanic student populations where there are no state-mandated requirements, only 7% of students have guaranteed access to at least a semester-long personal finance course. That figure rises to 14.2% for schools with less than a quarter of students identifying as Black or Hispanic, according to an analysis by Next Gen Personal Finance, a nonprofit that advocates for financial literacy education.

The equity consideration has been a driving force behind the financial literacy course at Capital City Public Charter School, which serves a student body that is 64% Latino and 25% Black.

“It’s an empowering course,” says Laina Cox, head of the school. “I think it gives our young people the language that they need and the voice when they’re in certain rooms and at certain tables.”

In Tatum-Gormes’ classroom, the conversation about savings goals turns into a math problem on the whiteboard. She’s asking students to calculate how much someone would need to save to create an emergency fund covering three months’ worth of expenses.

At her nudging, students piece together an equation, which she scrawls on the board. It’s early in the school year, but for students, the value of the dollar is already becoming apparent.

Martinez, who’s one of nine children, says he signed up for the course because he watched his parents struggle to make ends meet. He hopes that he walks away with knowledge about when to spend — and not spend — money.

“I just want to prepare myself for the things that are coming toward me,” he says.

Finance

HSBC and Tradeshift Launch SemFi to Transform Embedded Business Finance

Published

7 hours ago

October 6, 2024

Press Room

HSBC and Tradeshift Launch SemFi to Transform Embedded Business Finance

“Semfi from HSBC (derived from seamless, embedded finance) will embed HSBC payment, trade and financing solutions across a range of e-commerce and marketplace venues, including Tradeshift’s own B2B Network.

“This marks a transformative step in Tradeshift’s ability to deliver vital, value-adding services to our network, tackling a key challenge for businesses: access to liquidity, cash flow management and seamless financial integration within supply chains.

“With Semfi now in the mix, we’re ready to rapidly scale to meet the demand for these services across a broad range of businesses.”

What’s next for SemFi?

Although SemFi will launch first in the UK, HSBC plans to expand the service globally over time. The venture is designed to operate as a technology company rather than a traditional bank.

Clients will be onboarded by HSBC, and the bank’s balance sheet will be used for financing, but the goal is to offer a tech-forward solution that meets the evolving demands of businesses worldwide.

With HSBC supporting 1.3 million businesses globally and facilitating more than US$800bn of trade each year, SemFi is set to become a key player in the world of embedded finance. For SMEs, the ability to access HSBC’s services seamlessly within their e-commerce workflows could represent a significant step forward in efficiency and growth.

Finance

Emerson Electric Co. (EMR): Strengthening Market Position with Financial Confidence

Published

14 hours ago

October 5, 2024

Press Room

Emerson Electric Co. (EMR): Strengthening Market Position with Financial Confidence

We recently published a list of 10 Wonderful Stocks to Buy Now at a Fair Price. In this article, we are going to take a look at where Emerson Electric Co. (NYSE:EMR) stands against other wonderful stocks to buy now at a fair price.

In H2 of the year so far, there are signs that the S&P 500 index has been broadening beyond technology leadership and the index is reverting to a more normalized state. This means that there are several high-quality stocks outside of the popular names and investors are required to be diversified. This diversification should not be limited to the style level, but also to the stock level. Market experts opine that the AI theme has largely fuelled the narrow market. This concentration, along with an increase in passive investments, resulted in a significant cycle of consensus positioning and stretched valuations. This led to the vulnerability in the market, which resulted in a sharp correction in July and early August.

As per Fidelity International, when it comes to passive investing in the S&P 500, it demonstrates nearly a third of holdings in only 7 stocks. Considering their dominance, a stumble in performance means the index will see a significant impact, and the investors have already seen some mega-cap technology names that are unable to deliver on strong expectations.

S&P 500 Index – Transition and Concentration

The US equities saw an outstanding performance in H1 2024, with the S&P 500 Index rising 15.3%, as per ClearBridge Investments (A Franklin Templeton Company). The investment firm believes that solid earnings results and fiscal stimulus mitigated the influence of higher interest rates. However, the headline performance numbers, aided by a ramp-up in mega-cap stocks and, more specifically, semiconductor leadership, eclipsed the recent signs of deterioration below the surface.

Since the Mag 7 stocks have disproportionately driven earnings growth over the previous 2 years, ClearBridge Investments expects a rebound in earnings among small-cap stocks in the upcoming 12– 18 months. The investment firm believes that small-cap companies have seen the impacts of higher rates. In 2023, profits for Russell 2000 companies declined ~12%. This year, they are up ~13.6%, and for 2025, the projections hover at around ~31%. If this happens, there might be a broadening of the market which should provide an opportunity for active managers.

Opportunities Apart from Magnificent Seven

Companies that are unable to meet hefty expectations might see a disproportionate sell-off, and the stocks riding the wave of AI might be significantly exposed considering the amount of capital deployed versus the uncertain future environment. Given such trends, Fidelity International believes it is unsurprising that so far in H2 2024, there have been signs that the S&P 500 is broadening beyond tech leadership, with some non-tech sectors surpassing the broader market.

There are abundant high-quality stocks apart from the popular names. This means that dozens of companies in the S&P 500 continue to offer a return on invested capital (ROIC) and earnings growth of more than 30%. This is true for several other quality metrics, reflecting an underappreciated depth of opportunity in the broader US equities.

While diversification remains critical, even looking beyond the Magnificent Seven might not necessarily offer the required diversification considering that the US market remains heavily weighted towards growth sectors like IT. As per Fidelity International, diversified portfolios need negative correlations between assets, but few styles provide consistent negative correlations to quality growth companies. That being said, cyclical value and defensive value remain 2 key exceptions.

To get a negative correlation, the investors are required to avoid an overlap at the stock level. As of now, the US market provides a range of attractive stock opportunities that offer this valuable diversification.

As per ClearBridge Investments, the top 5 stocks now constitute ~27% of the S&P 500 and the top 10 make up ~37%. As per the investment firm, this concentration might stagnate near current levels, with mega caps delivering solid, but slower, earnings growth in comparison to the recent past. The investment firm expects that diversified portfolios should outperform in the upcoming 12–18 months.

With this in mind, we will now have a look at 10 Wonderful Stocks to Buy Now at a Fair Price.

Our methodology

We first sifted through multiple online rankings and ETFs to identify quality stocks with wide moats. Next, we selected stocks that were trading at a forward P/E of less than ~23.65x (since the broader market trades at a forward multiple of ~23.65, as per WSJ). The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Engineers analyzing a complex network of process control software and systems.

Emerson Electric Co. (NYSE:EMR)

Expected Earnings Growth: 23.4%

Number of Hedge Fund Holders: 51

Forward P/E Multiple (As of September 30): 18.45x

Emerson Electric Co. (NYSE:EMR) is a technology and software company, which provides various solutions for customers in industrial, commercial, and consumer markets.

Emerson Electric Co. (NYSE:EMR) has a wide economic moat, which is mainly based on switching costs, and on brand intangible assets. Moreover, the company’s strong geographic presence and diversified customer base further solidify its moat. Emerson Electric Co. (NYSE:EMR) remains confident in its financial health and strategic initiatives. The company continues to focus on integrating National Instruments and potential share buybacks.

The company expects its backlog to increase YoY as it enters FY 2025. Emerson Electric Co. (NYSE:EMR) has been adjusting its strategy to focus on growth areas like innovation and renewable energy investments while, at the same time, managing softer segments. Therefore, Wall Street analysts are optimistic about the company’s future performance and its strategic positioning in the global automation market.

The company sold its remaining interest in the Copeland joint venture, hinting at the fact that Emerson Electric Co. (NYSE:EMR) is focusing on simplifying its portfolio. It highlighted that demand in process and hybrid markets, which is being led by a constructive capex cycle, has been meeting expectations. In Q3 2024, its operating leverage performance exhibited the benefits of its highly differentiated technology. For 2024, Emerson Electric Co. (NYSE:EMR) anticipates net sales growth of ~15% and operating cash flow of ~$3.2 billion.

Redburn Atlantic initiated coverage on 8^th July on the shares of the company. It gave a “Buy” rating and a $135.00 price target. Insider Monkey’s Q2 2024 data revealed that Emerson Electric Co. (NYSE:EMR) was part of 51 hedge funds.

Overall, EMR ranks 7th on our list of Wonderful Stocks to Buy Now at a Fair Price. While we acknowledge the potential of EMR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than EMR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.