Illusion of Fluency: If you read a text or watch a video explanation several times it is not uncommon for the human mind to mistake familiarity with mastery of content. This is particularly true if the explanation covers a complex topic in a lucid and easy-to-follow format. Under these circumstances it’s possible to convince yourself that it’s all pretty simple and you knew it all along. [1]

Not until you are asked to produce explanations yourself will you realize what you truly do and do not recall. This makes testing and feedback integral to the learning process. It also suggests that learning may not always feel natural. If fluency illusions result from lucid presentations of concepts, it follows that struggling with the material can be beneficial to learning: 

“We usually think of interference as a detriment to learning, but certain kinds of interference can produce learning benefits, and the positive effects are sometimes surprising. Would you rather read an article that has normal type or type that’s somewhat out of focus? Almost surely you would opt for the former. Yet when text on a page is slightly out of focus or presented in a font that is a little difficult to decipher, people recall the content better.” [2]

If you find yourself struggling with the quiz questions, resist the urge to look up answers immediately. Do your best to answer and then retrieve the answer. It will enhance the learning process.

The Power of Handwritten Notes: There is only so much that can be accomplished with multiple choice and fill-in-the-blank quizzes. These formats are helpful because they provide the ability to immediately show results, which is critical to the learning process. But between the two, research shows that fill-in-the-blank is more effective because it requires retrieving the answer from memory without the ease of selecting from a list of options. It follows, that writing answers in longhand takes this benefit a step further, even more so than typing:

“Students who took handwritten notes generally outperformed students who typed their notes via computer, researchers at Princeton University and the University of California at Los Angeles found.” [3]

Vocabulary: In my experience, people who claim that they simply cannot understand finance don’t spend enough time on vocabulary. The math is pretty simple. It’s just explained in a different language. Learn the language and everything else will follow. For more on this topic please read the following: ASM On Learning. 

To help with this I have created the following exercise: Complete the pages that follow by hand (see PDF notes available for download), and without any aids. For each of the three primary financial statements, write the purpose of the financial statement at the top of the sheet in three sentences or less, and then write each of the missing line items on the three financial statements from top to bottom. Make sure you know the definition of each line item. If you find yourself struggling with any of the vocabulary, take the time to stop and write down the definition (write a definition in your own words).

Additional questions specific to the financial statement visible on the page will be included at the bottom of the page. Think through the significance of these additional questions as you answer them.

1. Peter C. Brown, Henry L. Roediger III, Mark A. McDaniel, Make it Stick: The Science of Successful Learning (Cambridge: The Belknap Press of Harvard University Press, 2014), p. 116
2. Peter C. Brown, Henry L. Roediger III, Mark A. McDaniel, Make it Stick: The Science of Successful Learning (Cambridge: The Belknap Press of Harvard University Press, 2014), p. 87
3. Hotz, Robert Lee. “The Power of Handwriting.” The Wall Street Journal 5 April 2016. Print