Personal finance lessons schools will never teach you about money
The reason I started creating and blogging on Medium in the first place was because of a lack of financial education in our school systems, in addition to other topics such as freedom and we(a)l(th)lness.
Our school systems teach us many subjects such as science, math, accounting, geography, history, the arts, and languages. But, it teaches us absolutely nothing about money.
As a child, you probably learned about money mostly from interacting with your family members and friends. You modeled their financial behaviors. At least that was certainly the case for me growing up. Do you remember one of your first ever money memories?
Many of us are thrown into the world as adults with no financial literacy to speak of. We are free to do whatever we want with our money if, in fact, we have any of it. Heck, we are even free to do whatever we want with money we do not have: debt. Ultimately, we are left to our devices to “figure it out”. Is that really the best option though?
I won’t speak for the whole general population, but in my family and social circles, money is usually a very private topic. It’s only discussed on a superficial level in my opinion. Conversations about money with my friends and acquaintances do not get beyond how expensive the next iPhone 10 is or comments about the housing prices and real estate in Philadelphia and New York. I have a feeling that it is less awkward to talk about sex than it is to talk about personal finance and money.
Most of what I learned regarding money, as a result, is from actively reading over the past five years, asking silly questions, and learning-by-doing (which is the best kind of learning aka experiential learning).
On numerous occasions, I have made a financial fool out of myself. From getting into student loan debt in college, to credit card debt in my early 20’s, and having to pay back a company I used to work for because of my dumb decision, these are just a few examples. Every humbling lesson was a crushing blow to my ego and checking and savings accounts. These are lessons that I am grateful for even if they were painful, too. If they never happened I would not be here humbly talking about them.
If financial literacy were taught as a lesson in our school systems, it would be much simpler for individuals to navigate personal finance as adults. It is certainly more helpful than beating brains of children with useless facts that they won’t remember after their multiple-choice tests anyways. And today, they can just look up the answers on Google anyways. Creators, artists, entrepreneurs, businessmen, businesswomen, managers, and leaders don’t care about how much you know. They care about speed, ethics, values, innovation, solutions, and results today.
Personal finance does not have to be a complex curriculum. Basic concepts would go a long way in providing an initial point of focus and real-world learning to whoever is truly interested in financial literacy. It would have certainly helped me knowing what I know now.
There are other streams of income besides a 9-to-5 job.
I’m not down on jobs, just up on opportunity here as 2020 will be here in 6 months. As I was growing up, I had the naive idea in my head that most adults have to adhere to the following script to live a comfortable life:
- Study hard in school. Always bring home A’s and B’s.
- Don’t fail or ask for help when you clearly know it will benefit you.
- Get a degree from a good college or university in a field that’s in high demand.
- Land a position at a big company that pays a great salary. lol =)
- Climb the corporate ladder if you want to earn more money.
- Work your way into middle (micro) management.
- Save and invest your money to become richer.
- Have a comfortable life in the suburbs with the money you earned and saved for 30–40 years.
- Treat yourself once in a while as a reward for working hard Monday through Friday.
- Ride the wave into the retirement sunset once you reach 65–67.
Times have changed
The 10 aspects above are how it worked before. The days of staying with the same company for 40 years in exchange for a pension with benefits are over. Heck, I’ve worked with 5 different companies now in the past 4 years since graduating from an elite college in Pennsylvania.
In the past half-century the pension system, the tax system, and the legal system have changed dramatically. Now, you’re responsible for your own retirement through a defined contribution plan (aka 401(k)) versus the defined benefit plans (aka pensions) of the past. You’re the one who has to make sure you’ll have enough money for you and your family later in life. But there’s just one issue — the average person today has very little direction on how to create opportunities, independence, financial freedom, and wealth for themselves today.
Schools are still teaching us the whole get good grades, a high paying job, and become a good employee deal — but the truth is, that’s not enough today. Now, people are job-hopping, the economy has had a few crashes with plenty more to come in the next 12–18 months, and there’s a lot of robots automating and replacing thousands of jobs today.
If you want benefits, a secure retirement, and something stable, a job isn’t the answer. Financial education and financial freedom are. And schools won’t catch up to the business owner, investor, and entrepreneur mindsets.
As adults, we know that are so many different ways to earn money. On one end of the spectrum is a full-time professional career, on the other is independently running your own business. And there are hundreds of possibilities between those two extremes.
There is the possibility of having a 9-to-5 career and having side hustles today. Another option is to split your time equally between a few jobs. There are also people who make a living from investing in the businesses of others. Shoot, there are even professional video game players today on Twitch, YouTube and so many other channels. Talk about kids' dreams coming true!
I am not belittling the importance of having a formal education to have a meaningful career. In certain professions, this is clearly important. You wouldn’t want to get an operation from a heart surgeon who doesn’t have a degree or the proper training from an elite medical school.
My point here is that it would be beneficial to show children that there are basically unlimited possibilities to earn a living. They will no longer only say “I want to be a lawyer, engineer, financial advisor or doctor when I grow up”. They might even say “I want to work remotely from Bora Bora, Hawaii, or the Maldives. I want to become a full-time blogger or YouTuber when I grow up. I want to run my own e-commerce business and reinvest the profits in the stock market.” As you can see, the ideas and possibilities are limitless here.
For the children growing up today, I believe they will have more financial creativity in their future adult years. Their minds will be opened up to more ways to find that personally unique path that provides a sense of fulfillment, passion, lifelong skills gained, and financial stability.
“The mind, once stretched by a new idea, never returns to its original dimensions.” — Ralph Waldo Emerson
Working with money as a tool and resource for good
We are conditioned by our society that money is used to either pay for:
- Stuff we need — a roof over our heads, clothing, and food on the table.
- Stuff we want — a luxury vacation in Greece and a BMW.
The basic notion that is subconsciously implied to us says that if we are poor, we need to focus on using the money to pay for what we really need. If we are fortunate enough to have money left over, we can then spoil ourselves on luxury experiences or material items.
As I grew older, I learned that there is an entirely different paradigm to view money: using money as a tool and resource for good.
For a long time, I had the impression that wealthy people use money just to afford luxurious items and huge houses. This could not be further from the truth. I had this realization when I started to actively observe well-paid people who work in similar fields to mine in financial services, tech, marketing, and real estate. At first, I was observing out of mere curiosity and to the fact that these men and women-owned businesses of some sort. Later, the observations became a wealth of financial and life lessons.
I noticed that these people make deliberate efforts to use their money to improve themselves, their families, and the people around them. They hire coaches and personal trainers that are more experienced than themselves, pay for external consultants to look for blind spots, attend seminars, personal and leadership development workshops, and purchase so many books that broaden their minds and boo. As a result, they became more proficient in their profession and skilled in the marketplace, allowing them to get paid even more.
We all know the old adage: time is money. On the flip side, money can buy time. To a certain extent at least.
When your net worth crosses a certain threshold, you do not have to stand in line at the bank. If you have car problems, the workshop will send someone over to pick the car up from your house. You don’t have to clean the dirty kitchen or clothing in your own apartment. Someone, who you are paying, is doing these things for you.
Such privileges might merely seem like a display of wealth at first glance. However, the benefits need not be underestimated. Besides the very obvious advantage of saving time, it also frees your cognitive capacity to focus on tasks that you care more about and enjoy doing. Time is in fact money. We can always get more money, but we’ll never get our precious time back.
We know that children are fearless folks armed with bountiful creativity and energy. Imagine what would happen if they were taught at a young age that money can be used to save time and make themselves smarter. It would certainly be more helpful than the mainstream approach of conditioning them that money is there to buy toys that make them happy. Or, just trading their time for money.
Correlation between emotion and money
As adults, we know that our emotions and our relationship to money are heavily related to one another. The way we feel will affect our personal financial decisions. Conversely, changes in our financial situation will always affect our emotions.
Take a look at the U.S. stock market as an example. In our decade long bull market, a large number of people have been buying stocks driven by sheer greed. When there are more buyers than sellers, the stock prices rise even further, resulting in more greed. The case here would be our over-inflated balloon called the Dow Jones, as well as the S&P 500.
In a stock market crash, the spiral goes in the opposite direction. Stocks are sold because of fear. It takes tremendous emotional fortitude to not freak out and move against the herd mentality mindset. Most fortunes have been created in down markets, as well as companies coming to fruition as well.
“Be fearful when others are greedy and greedy when others are fearful.” — Warren Buffett
We make purchases based on emotions. Speaking for myself, I do on occasion purchase something at the end of a crappy day to feel better about myself. It is no secret that product manufacturers play to the tune of our emotions to sell us more stuff.
Did you know that Apple sells Mac accessories in the Space Gray color for $20 more than the same items in white? The items have identical technical specs. They differ only in color. It makes zero logical financial sense to buy the Space Gray version, yet there are millions of people who do. Don’t be one of those suckers.
This is proof that we are driven by our emotions to make buying decisions. It also applies to our personal finance decisions.
Wouldn’t it be amazing to instill awareness at an early stage with school children regarding the influence of emotions in money-related decisions? Imagine the kind of adults they will grow up to become.
What actions can we take about this matter?
In an ideal world, our schools would prepare children holistically for life and not only the job market. Despite the current level of awareness that our school system is hopelessly outdated, it may take a while for us to see any significant changes.
But, we can still make a conscious effort to be more open to discussing personal finance and money, especially with younger ones and the current children growing up in America, and around the globe. We’re just getting started.
My Very Best,
Donovan E. Vogel