I’m Not Against Academic Education But Financial Education Needs To Be Taught. Sex Ed Is Required. Why Isn’t Financial Ed?
“Your future is created by what you do today, not tomorrow.”
Who else feels as if we’re overworked, underemployed, underpaid, deemed unfit in companies’ compensation plans and more powerless than ever before? Let’s admit it, American capitalism has failed us and is looking for change. However, there’s still room for optimism and future growth.
I feel committed to being one of the people who’s there to help millennials, the next generation, go on to become critical outside-the-box thinkers. The reason that is, for lack of better words, is that we haven’t failed, the system has failed us. This isn’t 1975, 1989, 1993, or 2007 anymore. Things have to change in our fast-paced, data, numbers driven and ever-changing world.
How much, at 18 years of age, did you really know about credit cards, savings accounts, student loan repayment plans, 401(k)’s, IRAs and interest rates at school? Why is sexual education mainstream in kindergarten through 12th grade schools, but financial education is not. The result of this poor-minded thinking is that the U.S. ranks 14th — behind Israel, Canada, Australia, Singapore and much of Europe — in financial literacy. That’s according to a giant survey of over 150,000 people in 148 countries which was conducted by Standard & Poor’s and Gallup in 2014. Wonder where we rank today?
Let’s face it, American’s are stumped by the simplest financial questions. Even myself, working full-time for an insurance startup, two-plus years in the financial services industry, running my own business, doing consulting, and blogging about many topics, don’t have all of the answers figured out.
Only about 50% of Americans can answer this question correctly: Suppose you need to borrow $100. Which is the lower amount to pay back: $105 or $100 plus 3%? (Answer: $103.)
Furthermore, we sit and wonder at night, debate at work, lecture in classrooms, or go back and forth in oval offices why millions of Americans, as well as folks living internationally, have serious money problems. I’ve said it before and I’ll reiterate it again here, 75% of individuals in America live paycheck to paycheck. There’s simply not enough month at the end of the money and I can definitely understand how people feel. Nearly 50% of the people in this country say they don’t have enough money saved to cover even a $400 emergency expense, and 33% of Americans regularly carry credit card debt. Do you know what that’s ultimately doing to us? It’s crippled our debt-burdened economy. We cannot be fueled by debt any longer. Take a stab at the average credit card balance? $15,000 according to data from the Federal Reserve and NerdWallet. They’re certainly being generous, and we won’t even get into the carrying cost of student loan debt or mortgaging your life away with a traditional business or 30 year loan on a house.
Sadly, the American Dream isn’t possible without understanding how to save, invest, take risk and use debt wisely. The reason why this is a gigantic problem is because America places almost the entire burden of life’s biggest financial decisions on the shoulders of individuals. It begins with whether to go to college and take out student loans. The average debt load is now $29,000, which again seems pathetically low because I’m aware of plenty of individuals $100,000, $200,000, $300,000 or even $400,000+ in debt.
Furthermore, then people get out into the world and start working (keep your fingers crossed they find a JOB) and have to navigate choosing health care, dental, insurance plans, contributions to a company 401(k), if you’re fortunate enough, not to mention when and how to start saving for retirement. What kind of Millennial is truly thinking about all of those things and not partying every Friday and Saturday night? Sounds like a lot of responsibility at 22, 23 or 24?
We need to start this process and self-education in K-12 schools. Think about it, any year we delay by not adding financial education, one more generation is going out of high school without those skills, knowledge and expertise.
People aren’t making good choices and definitely struggle to make great choices. I myself have been there and done that! Outdated advice is to shoot for at least $1,000,000 in retirement or qualified savings. But why does the typical American family have only a little more than $100,000 saved for retirement by their early 60’s? That’s fucking 10% of the recommended amount. I wish anyone the best attempting to live off of that for 3–5 years in retirement….let alone from 65 to 85, or 88, or 90+ years of age. Oh but don’t worry I’ll depend on the government to help supplement my income in retirement. Have you heard anyone say that before? Best of luck with the average monthly social security check coming in just below $1,200 per month. Could you truly live off of $14,000 a year? Go ahead try it and let your parents, friends and family let you know how you make out in any given city in America.
It doesn’t even matter, regardless of the encouraging signs that Millennials are saving earlier for retirement than prior generations, because most are still putting less than the recommended amount (which I would say is 10%–15% of your salary) away in savings or an investment account. I’ll admit it, I don’t even come close to that. However, at least I have a plan in place to pay off my debt to where I can actually start accumulating wealth for myself, my parents, and future family.
Financial education alone won’t fix all of the problems American’s face. But consider that since schools invested in sex ed in the 1980’s and 1990’s, teen pregnancies have declined dramatically. Imagine what we could do and what could happen if people learned the basics about money. It’s the engine that keeps us all churning at the end of the day.
Right now about 17 states currently require students to take a personal finance 101-type class, according to the Council for Economic Education. Where was this when I was in school in the 2000’s? Was in it a college course? I must have missed that one with all of the high pollutant theory of economics, marketing and business whirling around in the air out west. With that being said, these programs are generally completed in one or two grades only. It’s not drilled into students minds year after year, like mathematics, writing, reading, science, or now, technology.
The reality is while-collar families and kids tend to be a lot more financially literate than working class or blue-collar families. Wealthy, or rich kids, learn about money at home — or at their private schools. Let’s admit it, poor or middle class kids do not. It’s yet another reason why our system, plan and models are so antiquated and flawed. That’s why we have a top 5–10% and a bottom 90% of individuals financially in the United States.
As school years start, pass, and continue to repeat these cycles as they always will, here’s a cause worth fighting for: ask why financial education isn’t part of your local school’s curriculum. When we finally include financial education into the school system in an on-going manner it will hold the key to making our future generations financially literate. Financial freedom is available to those who learn about it and work hard for it.
Action Steps Moving Forward:
- Pick up and invest in personal finance books, business books, Rich Dad Poor Dad, and actually read all of this great information and stories hundreds, if not thousands of individuals are willing to provide for us!
- Invest in self-education because formal-education will only get you so far in life.
- Have a serious talk about money, finances, and the future with your parents, friends and family members. It may be awkward or uneasy to talk about at first but at least it isn’t politics, religion, sex or anything else out of the ordinary at the dinner table.
- Find a mentor and/or mentors who are willing to teach you these principles.
- Have short term, moderate, and long term plans set in place for the future because the only way to predict your future is to create it!
My Very Best,