Financial Education in Schools

by Mr. Cheap

A number of personal finance bloggers and gurus have made the statement that our school systems do an awful job of providing basic financial literacy and this needs to be fixed. When “Rich Dad, Poor Dad” Robert Kiyosaki makes this statement, he means that the school system should teach people to be entrepreneurs, not employees. When Derek Foster says this he means an understanding of stocks and how to evaluate and purchase them. When Suze Orman says this, she means students should be taught about FICO scores, living within your means and avoiding credit card debt.

I think this is the first problem with teaching “financial literacy” in schools, it means different things to different people. Like the idea we should teach “spirituality” in school. Who’s spirituality? As soon as you get into any specific investment, you’re going to get people who feel strongly about the issue. Mutual fund investors will sneer at fixed income investors, passive investors will sneer at mutual fund investors, gold bugs will sneer at equity investors, ad nauseum.

There’s a core of personal finance that almost everyone will agree with, such as “spend less than you earn” so perhaps it would make sense to teach that? Again, I’m not so sure. I think everyone already knows that they should spend less than they earn. It’s like losing weight, everyone knows how to do it (eat less food, eat healthier food and exercise more) but the devil is in the details: execution is the hard part.

In computer science there’s an unusual phenomena that there’s a double bell-curve for people learning to program. A bell curve occur with most traits if you sample a population. If you measured men’s chest sizes, you’d find that there were a small number of men with thin chests, a small number with barrel chests, and a large clustering with average size chests. With programming ability in a first year computer science course there are TWO distributions. One hump is the normal distribution of the students who “get” programming, the other hump is the normal distribution of the students who don’t. Many approaches have been attempted, but this separation persists. I’m suspicious that with personal finance there’s a similar divide. Some people get it, some people don’t.

Beyond this, there seems to be a philosophy that schools are a magic machine that we can program to produce whatever type of people we want: 13 years latter they’ll start coming out as ordered. As close to a life-long student (I’ve spent about 20 years in school full-time so far) I’d say that far more than teaching me specific facts and information, I’ve learned HOW to learn. When I get interested in a subject (recently its been DRiPs), I have the tools to attack the subject and learn more about it. School tries to teach us how to write properly, but after 12 years of English courses, have a look at the blogosphere and see how poorly we’re performing.

Much like personal hygiene, morality, manners and nutrition, I think instruction about personal finance comes from our parents. Whether they explicitly teach us about these things or not, we learn from them.

Its not something we can pawn off on the educational system.

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