Hate to break it to you, but financial education doesn’t work. And I’m not the only one saying it.
An article from the Pacific Standard states: Another study, from 2009, tested the financial literacy of recent high school graduates who had taken a highly regarded personal finance class. They did no better than graduates who had not taken the class. One of the study’s authors, the economist Lewis Mandell, was a founder of the modern financial literacy movement, but the evidence has prompted him to turn his back on the mainstream financial literacy paradigm. “Financial education doesn’t work when it’s given in advance of when the consumer needs it,” he says flatly.
Think about the wealth of financial literacy resources out there. How much stuff is out there for people to use? How many seemingly smart people make the wrong choices when it comes to their finances?
Take me for example. I consider myself a pretty smart lady. I was raised by two academics, brought up to value books and the importance of education. I wasn’t afraid to let my opinions known and was a pretty good judge of character. I paid my way through college with two jobs and only borrowed $6000 in student loans. I know the value of a dollar and never used the extra money I had in college to spend on drinking or shopping sprees.
That was, until I graduated. I was in a relationship and I thought he was the one. I mean, he moved to Australia for me for goodness sakes! And so I did what I thought was logical at the time: paid for everything. I’m talking about rent, groceries, trips around Australia and New Zealand.
That was, until I moved back to Canada and he broke up with me. It was around that time I realized I was not only heartbroken, but $9,000 in credit card debt.
So what happened? I clearly had a good head on my shoulders. I know how to pay my bills and balance a checkbook.
It all boils down to how I felt about myself and the emotional need I desperately wanted to fulfill. I, like millions of people out there, used money to mask a problem I was too scared to solve.
Here’s the thing: it’s not that financial education doesn’t work, it’s the way it’s being presented. Throwing educational materials out there is simply a band aid solution.
When I was an elementary teacher, I taught ELL students who really struggled with the English language. Now I wasn’t their first teacher. It wasn’t that the previous teachers didn’t teach them anything, it was that when I had them, they had already forgotten everything that was taught before. And so no matter how many great lessons plans I had or educational materials that were perfect for their academic level, nothing was sticking.
I had an ambitious goal of creating a tourism website from scratch with these students. Many thought I was nuts. If they can’t string a simple sentence together, how on earth would they be able to do field research, gather notes and write them in a way their audience can understand?
But I did it. Eight months later we had an opening party for their parents and the whole school to show off their website. I simply stood on the sidelines while these seven and eight year olds explained the entire process from start to finish.
I’m not kidding when I say a few adults grilled these kids. Some asked how they managed to determine tourist attractions, to writing a paragraph, to understanding how to take notes and getting feedback from their audience to refine their website.
So how was I able to do these things but some other teachers didn’t?
Simple: I looked at the components I needed to foster in my students BEFORE I could put any educational material in front of them.
It’s not about making it relevant to them. It’s about building a sense of trust and a safe environment where they feel they can take calculated risks and still be ok. And in turn, they’ll want to take action. And as they get frustrated and want to give up, they need to feel that pushing through will get them to places they’ve never imagined On top of that, they’ve got to feel a sense of responsibility. That their choices matter, and that even the tiniest thing they do will have consequences years down the line.
It’s easy to throw up a bunch of blog articles, podcasts or even courses. But have financial companies considered the stuff that comes before that? Things like protecting consumers so that they’re less susceptible to fraud? Or helping them find role models so they feel safe and can have someone to turn to without feeling like they’re selling something or trying to rip them off?
Most importantly, is there a way we can all foster a sense of self responsibility (without enabling their destructive behaviors) so that people can rely on themselves to secure their financial future?
I obviously don’t have the answers. But what I do know is that if we don’t have these conversations with the right kinds of people and organizations, millions of people will continue to get themselves into consumer debt, stay in poverty. Worse yet, millions of people will pass on these types of behavior onto their children.
For now, the best way is to create a community of people who care and who people can trust without feeling like they’re being sold to. Talk to those in debt one on one. Find cautionary tales to show people consequences of their behaviors. Give counseling to those who need it. Then, and only then, can financial education work.
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