Schools teach children a range of important subjects that prepares them for adulthood, from history and sciences to languages and math. But there is one field where schools worldwide are failing children, and that’s personal finance. By not teaching children from a young age how to manage their money, they become adults who can’t make good financial decisions. If we want to have our children grow up as fiscally responsible adults, we need to start teaching personal finance in schools and highlight the value of financial skills and tools.
How personal finance is taught today
Unless you study finance, economics, or a similar subject at university, today’s financial literacy comes mostly as a do-it-yourself style. There are thousands of online resources to learn about personal finance pillars, like buying a house, saving for retirement, and family planning. But this type of self-help education is inadequate for what most adults need.
For one thing, most people don’t bother learning about financial topics until they are well into their adult life. This means they have spent decades with poor financial habits that are difficult to unlearn. Also, once you have a full-time job and a family to take care of, there is not much time left for you to learn the ins and outs of financial matters. If you want to learn about a retirement plan but have to help your children with their homework, it’s very clear which choice you’re going to make.
You can get your information from an online publication or newsletter, but these leave a lot to be desired. According to John Robinson, co-founder of Nest Egg Guru, anyone can create an investment newsletter, making them susceptible to scammers.
“The rules that the Securities and Exchange Commission applies to financial planners and registered investment advisors include a few exceptions,” says Robinson. “One of them is if you’re in the business of producing newsletters. If you’re not dealing with clients individually, but you’re just a general newsletter publication, you don’t need to register it as an investment advisor or financial planner,” he said. “There are lots of investment newsletters out there that are reasonably well-known and are pretty; I would say, shady.”
This lack of continuity across financial education makes it hard to know who to trust. You can read various books and search across the internet with help on your personal finance questions, only to find contradictory answers, leaving you with even more questions. This can only be solved with standardized financial education, which puts everyone on the same playing field.
Even well-educated people don’t understand finance
The lack of financial education around the globe is troublesome. And don’t think this is a problem that doesn’t happen in your country. According to a 2018 study by howmuch.net, Estonia has a 54% financial literacy rating, Germany has 66%, Italy sits at 37%, and Spain has a 49% rating. Even though these ratings aren’t some of the world’s worst, it can certainly be better.
Rebecca Shoval, the founder of the financial site Money Funnies, has seen how crazy it is that even our society’s most educated people don’t have a clue when it comes to their finances. “I’ve had conversations with very well-educated friends, medical doctors, and college professors who don’t understand introductory personal finance,” says Shoval. “And ironically enough, even many people who work in the finance industry know more about corporate finances than their own.”
The problem is, without a solid foundation of financial education, you are more likely to fall into common financial pitfalls that are otherwise easy to avoid.
The repercussions
Today’s model for financial education can be quite harsh. First, there are too many financial predators lurking, waiting for their opportunity to pounce on the unsuspecting consumer. For instance, payday lenders can seem like a reasonable thing for someone looking to get quick cash, but without understanding how they work, and their extremely high interest rates, it’s easy to get taken advantage of.
This is one reason why it seems that even middle-class, hard-working people have a hard time staying ahead when it comes to their finances. Taking on unnecessary debt, not taking advantage of tax breaks, and failing to invest wisely are all pitfalls that are easy to fall into without the proper education.
The result of low financial education is a lack of confidence in making critical financial decisions. Without such an education, we are all left to fend for ourselves in a complicated financial system.
Teaching finance doesn’t have to be hard
It may be that educators and school administrators are scared to venture into the complex topic of finance with young children. But there are easy ways to get young kids thinking about money that is both beneficial and easy for them to understand.
One area that could be extremely helpful is learning about budgeting. Teaching budgeting in schools would be simple and easy to integrate. From a young age, children understand the value of money, and some even receive an allowance from their parents. Budgeting skills can be given to students using things they are familiar with, making the subject more relatable. For instance, children could be put in different scenarios where they are given a fixed amount of money and asked to spend it wisely. After the scenario plays itself out, the students can talk about why they spent their money the way they did.
As students get older, they can begin to learn about progressively more complicated topics. Ideas like taxes and interest can be taught to kids as they become teenagers and start to see these things come up in their lives outside of school. Understanding these topics at a young age will only help these students prepare to go off to university and beyond.
A much-needed change
We have created an environment where only a select few have the financial knowledge to succeed. This must change if we want everyone to play on an equal playing field and enjoy a financially stable life. Without financial education in schools, each individual is left to their own devices to understand complex financial matters that aren’t easy to comprehend. Wouldn’t life be easier if adults didn’t have to learn financial literacy the hard way? Of course, it would. So, let’s campaign for better financial education, so the next generation of children can become financially smarter adults.