Monday

Does a Financial Education Matter?


U.S. Senator Patty Murray (D-WA) has sponsored a bill, The Financial and Economic Literacy Improvement Act of 2009, that would “provide $250 million in grants annually to states to support teaching financial literacy in grades K-12 and at 2-and 4-year colleges.” Ben Bernake is all for financial education. The Federal Reserve Bank and Visa Inc. continue to promote Money Smart Week. The CARE Program provides free personal finance literacy programs in all 50 states. Almost half of the high schools across the country mandate a consumer economics class. McDonald’s is now teaching money skills to their 500,000 employees, as is Domino’s Pizza. (Their partner is Visa, who has admitted to some “light promotion.”) Professor Lauren Willis doesn’t believe any of it does any good and thinks more government regulation is the solution.

With all of this going on almost one third of high school seniors have credit cards and over half have debit cards. In the last 10 years bankruptcy has risen 96% among 18 to 24 year olds. One in five Americans believe the best way to get rich is to win the lottery. Most of us don’t have budgets and don’t check our credit reports. We all are aware of the mortgage meltdown and the foreclosures surrounding us, and every person reading this knows several families that live paycheck to paycheck.

With so many opportunities to learn how to get it right, why do so many of us screw up our finances so badly? The answer seems to me to be the same reason sex education doesn’t keep teens from having sex: we do it because we can and it feels good at the moment. Go ahead and rack up that credit card, you deserve it, and you won’t have to see the bill until next month anyway. What difference will a few hundred dollars more make? Buy all of those toys to fill up your garage and impress your neighbors. The bigger the house the better and you can always read the fine print on the mortgage application later. Budgets are not sexy and who wants to read through those boring credit reports.

Even with all of the personal finance educational opportunities that abound, sometimes it takes a little disaster to shake us up and make us pay attention. Every pregnant teen knows precisely what caused their condition, as does every credit card holder with a monthly carry over balance. Does more education keep either scenario from happening? Does a financial education matter? Only if we allow it to.

2 comments:

  1. It's not just finances. Big picture thinking is sorely lacking. You know, like consequences? TV shows (except for "Lost") resolve everything in a short time frame. Instant mashed potatoes, fast food, Jiffy lube, shoe repair while you wait. Our language is filled with such stuff. Patience is no longer a virture. Delayed gratification is passe. Boredom is hated. The line between needs and wants is smeared over until our heads spin trying to figure it out. What eighth grader really "needs" a cell phone? Will you REALLY die if you aren't like all your friends? A little selective deprivation would go a long way in helping our kids learn. Have them earn priveleges and work towards bigger goals. Be the "bad guy". Parenting isn't for wusses. In that character strenghtening context financial education has a chance of making a difference. Apart from that it's totally insipid.

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  2. Olivia - All very good points, thanks for the comment. Sounds like we are two peas in a pod.

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