How many of you grew up in a house that talked about money? I’m not referring to your parents complaining they are broke, having to pick up a second shift or arguing over the bills. No. I am talking about serious money conversations like doing a budget together, cutting on expenses, tax planning, etc. I bet most people reading this will say that these are all things they had to learn as adults, and I bet some still haven’t figured out the basics.
Financial literacy is defined as the ability to understand how money works in the world: how someone earns it, how that person manages it, how he/she invests it.
Based on that definition, if you don’t understand money at a personal level, you are not financially literate. Many of us aren’t and most of us who are, we learned late in life, either through some serious mistakes or after watching others crash and burn. But that is no way to allow our children to go through life. Can you imagine if kids only started protecting themselves AFTER they got an STD? We wouldn’t wait for a girl to get pregnant before telling her about birth control pills. We teach sex education in school, why not personal finance?
A lack of financial education can have devastating consequences. Just look around at the devastating effects of foreclosures, bankruptcies and other outcomes of poor financial decisions. 50% of all marriages in this country fail within the first five years, with money being cited as the #1 cause for divorce. A lack of understanding of how money works while living in a capitalist society can have devastating effects. Having a firm grasp of personal finances allows us to make informed decisions in important financial matters, making us less desirable targets for predators and criminals who look to abuse and swindle us out of our hard earned resources.
I often hear about people who are victims of scams or predatory lenders. While no one is immune, I truly believe that proper education will truly reduce the number of people who do fall victim to these scams. Some of the scammers don’t even put a lot of thought into their con and when I hear them I am usually appalled that some of them work since they don’t even make sense. But to someone who has no understanding of money, it might seem reasonable.
Ultimately, that is why I advocate for financial education. This is why I hope it will find its way into school curriculum earlier and earlier with time, until financial literacy is no longer impressive but becomes a normal part of our lives. In the meantime, I encourage everyone to talk to their children and teach them what they know. No matter how little you think it is, it will still be more than you knew at that age and they will have less of a knowledge gap to close when they are left to fend for themselves in the real wold.