Magical Financial Literacy

As I have been taking a course on mentoring others with their finances, I really started to notice this idea. The more I thought about it, the more upset about it I became. What idea? There is an expectation that as we become adults, we are financially literate and responsible. Yet, as I look around this country, read the statistics on debt and savings, and watch class after class take on crippling amounts of student loans to pursue degrees they may never use, it is very apparent that a lot of people are not very financially literate or responsible.

What do I mean by financially literate? Investopedia defines financial literacy as “the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.[1]” This, in my opinion, illuminates where a huge breakdown exists in our society today.

Looking at statistics, it is not difficult to see that many people are not excelling financially. Now, we will never know the circumstances of every situation, but as a general outline people have significant amounts of debt on cars, houses, student loans, credit cards, and sometimes Payday loans or “same as cash” purchases. They also tend to have little in savings to cover unexpected expenses, so when emergencies do happen, they tend to reach for the credit card. High debt, low savings, and little retirement savings would not be considered a good financial position by anyone. The question is why. What is causing so many people to fall into poor financial situations? Circumstances? Poor decisions? Lack of knowledge?

From discussing this with others and from my own experiences, I have found that a lack of financial literacy is a big part of the problem. And this is where I get so frustrated. So many

young people receive little to no real financial education or they receive education in all the wrong things. When I was in high school there was a basic course that taught us how to write checks and balance a checkbook, what loans and interest were, and some other basic financial concepts. But even that is missing from many US high schools.

What about at home? For many households, finances are a taboo subject. Given the state of many families’ finances, is it any wonder? We found ourselves in a poor financial position in 2018, and a large part of the problem was the fact that my wife and I rarely discussed

finances. We had never sat down and put together a budget; neither of us was tracking our expenses; and there was certainly no planning going on for future expenses.

So, young people aren’t learning about personal finance in high school, and they aren’t learning about it at home. (Yes, I realize I am generalizing here). How, then, can they be expected to handle finances responsibly when they turn 18? It’s as if we as a society expect financial literacy to just materialize in a young person’s brain when they hit the ‘magic’ age of 18.

This expectation is a dangerous one with serious consequences. I cannot understate this, and it is the root of the reason I get so frustrated with this topic. Because young people are (wrongly) expected to be (magically) financially literate, there is a shame attached poor

financial choices. People avoid talking about their financial struggles and forego seeking help because they are afraid of the judgement that will come with it. “How could you let your finances get that bad?” “Why would you sign up for a 14% interest car loan?” Judgements like these reinforce this notion that we are all financially literate and responsible when the data tells a completely different story. We have all made poor financial decisions, so to expect others not to is simply ridiculous. In fact, many of these decisions may be rooted in poor financial literacy, which is something that anyone can fix. It is simply a matter of making that choice to become better educated in personal finance. If we could all be a little more open about our finances, especially our struggles or our mistakes, I think it would tear down some of that shame barrier that so often keeps people from seeking help.

[1] https://www.investopedia.com/terms/f/financial-literacy.asp#:~:text=Financial%20literacy%20is%20the%20ability,management%2C%20budgeting%2C%20and%20investing