Any argument against teaching financial literacy can also be applied to pretty much any topic taught in schools.
You could also write the same clever-sounding contrarian think-piece about why teaching Home Economics doesn't make sense until you have your own home to run; teaching CPR doesn't make sense unless there's someone choking right in front of you; etc.
Using the logic underpinning this article, the only things taught in school should be how to play video games, how to find the best parties and how to get laid; since those are the only things actually relevant to students at that stage of their life.
Obviously studies will show that most students don't become financial wizards after taking financial literacy classes, because that's how it is with all education. How many kids who take English class become good writers?
Doesn't mean we shouldn't offer the knowledge for those willing to take it.
This is the question most kids ask when offered education. If you answer that first, everything else follows.
Start with why. (Thank you Simon Sinek.) Are there meaningful, ongoing benefits to learning how to make specific decisions with your money? Should you care enough to learn the more mundane details like reviewing expenses or filing your own taxes?
I know there are attempts, like showing those log graphs that try to impress upon young minds the long-term value of compound interest. I'm sure those help a few people, but I do wonder if there might be other more impactful concepts.
Personally, I get a great deal of satisfaction out of things like efficiency, self-reliance, and so on, but I don't know if valuing those things can be taught, or just develops organically. Regardless, I think you always need to impress upon students the motivations for their decision-making and try to help them care. The rest can come later.
> Start with why. (Thank you Simon Sinek.) Are there meaningful, ongoing benefits to learning how to make specific decisions with your money?
It's a great approach when the "meaningful, ongoing benefits" start to occur either immediately, or in the near future when you're living a life very, very much like the one you're living today.
The difficulty of doing that within the context of educating 5-18 (+/- 4) years olds is that benefits (and costs) of learning (or not) are far, far down the road, in a life that they can typically not even imagine with any degree of accuracy.
Yes, this is a very general insight, not just for education, but for any presentation: work backwards from what problem you're solving with the material. Then everything makes so much more sense!
This would have done so much for me, especially with the more abstract math classes that made no sense until much later. It would have been good if the math problems even approximated reality. Simple things like adjusting a recipe to a different number of people, applying taxes, calculating interest. Only shop class gave me the satisfaction of doing something concrete.
For me, there was no "aha!" moment in high school, and it made it very difficult to understand why I needed to care.
Excuse the smugness. Just providing counter perspective.
I know people, this does not help more people to easily understand the topic. But, lot of math like number theory was worked out as a intellectual exercise rather than application based.
Application followed theory. And people theorized for fun.
That can also make topics, abstract and unrelatable.
The thing I think you’re missing is that financial literacy is not like most subjects taught in schools. Schools teach math so that students can do sums; they teach reading so that students can read. But financial literacy, sex education and civics are not about knowledge; they are about *character: they are less about what students can do and much more about what they ought to do.
The methods used to inculcate character are, I think, different from the ones used to build knowledge.
From talking to people who, leaving high school, didn't know "obvious" things about finance, had a bad time, and course-corrected as soon as they figured it out: I'd say it's a lot more about knowledge than you're supposing.
You'd be amazed the things people with parents different from yours didn't pick up.
Is that the best way of thinking about it? I think the goal of all primary and secondaey education is to impart knowledge, build skills, and build character. Take sex ed. Building "practical skills", namely applying a prophylactic device to a banana. But it is also about teaching you that there are risks to certain behaviours that need to be considered. And being forced to discuss it sensibly and without giggling every 30s builds character.
Or take maths. Maybe it is reductive but I think the difficulty of it helps build character. Most kids need to do a lot of exercises and memorisation, and the feeling of accomplishment of getting it and doing well? That is character building. Obviously immensely useful too.
Civics (we had "social studies" and I don't recall ever discussing our political system, but at least in theory) involves:
- teaching facts about the system (how many representatives there are, how often elections are held, who is responsible for what, what do courts do, what do juries do, what do MPs do, what do the police do, how are they structurally different from civil servants or the media or universities etc)
- teaching skills (how to vote, how to think about political/societal structures, etc)
- teaching character (instilling civic pride, understanding the long and rich history that led us here today, etc)
I'd say character is necessary but not sufficient. You also need knowledge and motivation.
Knowledge keeps you from investing in ways that mostly lose money. Plenty of young people try to do the right thing, and screw it up.
Understanding compound interest can improve motivation. Exponential functions aren't really intuitive to most people. They tend to make linear projections, which causes people to underestimate the rewards from investments and the damage from debt.
(The article of course isn't saying we shouldn't teach kids this knowledge; it's proposing better ways to teach it.)
I don’t think it needs to be about what they ought to do. You can tell someone, if you abuse credit cards to buy a bunch of stuff you can’t afford, you’ll end up broke. They can make the “I don’t want to be broke so I won’t do that” connection on their own. Lay out the facts and consequences and you’re all set.
Same with sex. You don’t need to tell them not to get pregnant, or get someone pregnant, in high school. You teach them how to avoid it and what happens if they do it.
There is quite a lot of technical knowledge involved: what is inflation, how to defend against it. Various investment instruments, their risk profile. What are popular scams, how to recognize (credit cards is the most popular and dangerous scam IMO). Сompound interest, mortgage calculations, etc.
As to the "character", that's mostly learning about the mathematical concept of "less": spend less than you earn.
Financial literacy is not some magical thing that lies outside the realm of topics like math and history. It is math and history.
Building character might be needed to make good financial decisions, but the knowledge of the mechanics of how markets, debt, investment, compounding, pricing, fractional-reserve banking, etc. works are just concepts like any other. Teaching them is good.
Sure, we won't magically make people less prone to emotional decision making. Teaching about gravity doesn't make you less prone to it either, but understanding how it works is good.
How this "financial literacy can't be taught" thing became a meme I'll never understand. Like most things on the internet, it seems to be a hipster contrarian reaction to the "why isn't this taught in schools" comments you'd see all over the web in the 2000s.
How about we stop trying to get attention for having interesting contrarian "takes" and just try doing the common sense thing and work on improving it from there.
When I was in middle school we actually cooked and baked in home economics, we didn’t memorize recipes showed on an overhead projector. In Physical Education we ran the mile, didn’t want videos on optimal technique. I think this is the main point.
i think your examples are actually fantastic. a home ec class where kids actually cook something is much better than just reading a bunch of recipes. a CPR class where you practice on a dummy is better than just watching a video on it.
fwiw i had the same experience with money that the article talks about. my parents tried to impart alot of wisdom on me but it hits different when you have actual money in the market and see it go down.
Yes! My wife grew up in the SF Bay area in one of the wealthiest suburbs. They had water polo, cross country trips etc. They did not, however, have home economics! It makes me so sad, as I see her peers (and for a while, her) be relatively clueless on cooking at home.
Yes. I also did some sewing. And in shop class we did actual woodworking. I think active project based learning is best whenever it's possible and practical.
We had home economics for one quarter as part of a rotation through grade-school electives: art, home ec, drama, wood shop. We didn't learn much about cooking, but I did learn how to sew on a button and do some basic clothing repairs that have come in handy.
No. In our Home Ec course, we baked cookies, that was it. The rest of it was in the classroom. I imagine that the experience varies from one district to another.
Interesting thing to quote, given that JWZ hisself now says:
> If all the people who claimed to have been "inspired" by this piece hadn't been, and had just kept writing middleware for banks or whatever, the world might have been a slightly better place.
I've used the Heimlich maneuver once in my life. Interestingly, it was on a nurse anesthetist - who also knew enough to do the hands-around-neck choking sign to indicate what he needed, and turn around so I could do it. In the surgery lounge at a hospital. Popped out on first try.
You grossly misrepresent the points of the article!
I usually hate such one-liner responses, but in this case, really, it is the article that needs to be read, not my reply. I could not say nothing and let this stand though, the contrast between the comment and what is actually in the article is too large.
The article claims that teaching financial literacy is a "fallacy" ie. doesn't work because kids have no way to contextualize something they don't have a need for. So we should give them the need for the knowledge by instead helping all kids start a small business.
Again, the equivalent would be kicking children out of their parents homes and helping them find apartments so they can get experience in Home Economics.
Maybe we just start by teaching kids financial literacy the way our educational bureaucracy knows how to instead of fighting it because it's not perfect.
I mean ... once you put it that way, yes, I'm actually willing to bite that bullet! (Or at least a cleaned-up, steelmanned version of it.)
It's vanishingly unlikely that any student who learns "personal finance", with no practical application, is going to retain it for the 5+ years until they'll actually need to use it. Learning doesn't work that way -- with, as you note, a few exceptions for unusually motivated students ... who would probably be able to learn it on their own when the time comes.
Ditto for the famous meme about "why don't schools teach something useful, like doing my taxes?" Because it would come across as an ungrounded, garbled mess that you'd forget by the time it was actually relevant.
So yes, I'd say that generally, education should work by grounding lessons in some kind of practical application. And indeed, like the other comments note, that's how it works for some of your other examples, like actually cooking something for home ec, or doing CPR on a dummy (which mimics most of the dynamics of the real thing, even if imperfectly).
I think there's a real human need being expressed by the common complaint, "When are we ever gonna use this stuff?" I'd phrase it as, "You're not grounding this material in a way that allows me to reason about it, and what's important vs isn't."
So, to the extent that we want to prepare students for "the real world" -- in particular, things like "doing your taxes" and "evaluating a car loan" -- I'd say the best way to address it would be by teaching the (meta-)skill of "learning an unknown domain". (Yes, "learning how to learn" ... but as an explicit skill, not one applied to material that is itself too artificial.) That's something you could apply to practical problems, even if they're not the same ones students will be solving later.
Applying this insight to the teaching of literary analysis: frame it as refuting an internet comment that doesn't understand that a song is a metaphor.
In fact, one thing that frustrates me about how the teach estimation in math is that they teach a useless version of it: you do something that takes about as long as calculating the exact value, except you add some rounding steps because you're told you can't give an exact answer. What you should instead do is give a timed test, which much more problems that usual, and only require approximate answers. Then you're forced to save time by rounding.
Late edit:
>Using the logic underpinning this article, the only things taught in school should be how to play video games, how to find the best parties and how to get laid; since those are the only things actually relevant to students at that stage of their life.
Yes, it does annoy me when the education system neglects the teaching of some skills that don't come naturally to some students, but not other skills.
I think this debate about utility misses some of the functions of education that the Romans (like Aulus Gellius and Macrobius) discuss: they talk about education having three parts, namely utility, pleasure, and "cultitavtion" or "culture" (for lack of a better English word). Yes, some education does have direct practical application (utility) in life, but that alone is not sufficient. And, education must include pleasure and teach one how to take pleasure in things, or else it becomes an oppressive training in servility. But the third element, "cultivation," is the one that people today most often overlook. It's the Roman word for tilling soil, which you do not because it makes plants grow (that's sowing seeds) but because it prepares the ground for plants to grow when you do sow them. There are some educational activities that do not have direct and immediate utility but do open up new capabilities that can lead to future utility. Learning geometric constructions, for example, may not have immediate practical utility, but it may prepare the mind for trigonometry. Grade school art class never made anyone a Michelangelo or Monet, but learning to hold a brush or sculpt clay does promote fine motor skills that will enable one hold a pen later in education or maybe, with more practice, a scalpel in medical school.
Financial literacy for those who do not yet have wealth to manage, even if it doesn't seem practical in the moment, still opens up new capabilities to enable future growth.
There’s an interesting difference between learning how to do taxes and learning how to evaluate an auto loan, in that the latter is often adversarial. Thousands of highly-paid experts spend their days figuring out how to get you to take on more debt and pay more fees and interest. With taxes, you might have Intuit or whoever trying to get you to buy prep services you don’t need, but it’s small potatoes by comparison. You can at least get unbiased tax info directly from the source. Nobody from the IRS will try to upsell you on a seat massager option that’s only $10/month more (and it extends the loan term by two years but let’s just gloss over that).
I’m not sure exactly what it means here, but I think there’s a big difference when it comes to teaching people how to learn things that powerful vested interests want them not to know.
The article's argument is that experience is a better teacher than a person with a curriculum and a chalkboard, which I agree with, but the proposed solution: "so, let's just give them experience!" is a shallow proposition—I doubt anyone knows how to start 4 million small businesses per year, with meaningful revenue, using a workforce that hasn't (yet) graduated high school.
Experience is hard (if not impossible) to scale. And it could easily backfire: imagine the scenario where the experience is miserable and results in failure. What if the students' lesson learned is "why bother trying?"
The most effective way we have to scale experience is through simulation. And we know how to provide that pseudo-experience to young kids without a lot of investment: story telling.
Maybe we should scour the globe for compelling stories that teach lessons about delayed gratification, the value of saving, and self-confidence vs. vanity in terms of spending money, so that we could start telling them to students at an early age.
I have kids, there's no need for simulation. We have Roblox.
Which has been a surprisingly useful [1]real-world/low-stakes financial literacy course for them.
- They have been scammed.
- They have blown money on stupid useless stuff and cried with regret.
- They've applied for jobs (seriously, there was an application process and interview).
- They've made hundreds if not thousands of decisions balancing entertainment, commerce, utility, and budgeting.
It's all of the true feel-it-in-your-bones financial literacy that the article advocates for being delivered to them in the guise of blocky figures and them playing with friends.
1 - You buy Robux (the in-game currency) with real money, and for years, it's been the number one thing they've asked for as a gift.
Unfortunately you run the risk of your children learning "financial literacy" of the form "scamming people is lucrative, and gambling is fun and zero-consequence because it's all funny money anyway".
I mean I cut my teeth on RuneScape and it was the same kind of deal. I learned that cow hides rose in value as you bring them closer to the crafting centres and that middlemen who want to do it for you can take a generous cut for themselves.
Financial video games, where the player never sees "finance!" in any of the media marketing of the serious educational product sold as a toy. Seriously, the "rules" of finance pale in complexity when compared to how much intricacy and never-actually-pointless complexity put into simulation games. I expect there are already finance/stock/economic simulation games of a serious nature; make and promote watered down versions and market them in cooperation with serious money paid to the people that actually successfully sell pop culture game software. Yes, a hard sell, I know, I came from those industries, but it can be done.
The article also references a low capital required list of business ideas for high school children. No one is arguing for million dollar projects. The argument is for hundred/thousand dollar projects.
When I was at primary school - specifically, around year 5 when I was about 9 - our class did a "small businesses" unit. We had to create business plans including a marketing plan, and yes a financial plan. What were we doing, how much were the inputs, how much are the outputs, how much time, what do we make per hour?
We did it in groups although some did it individually. One group did a carwash that also made you a coffee while you waited. My team was three of us and we put on a school disco (actually two, senior and junior). We had to organise lighting, music, equipment. We had to sell tickets. It was so profitable it paid for the entire school camp for our whole class, and the next year's too.
I don't know how much we actually learnt and I am sure our parents helped but I doubt it was entirely ineffectual. Probably more useful than many of the other activities we did.
Point being: there is no reason kids can't experiment with business as children, whether it is a lemonade stand, a carwash or a school disco.
I also have to point out for the record that if ever there was a win for capitalism over top down social planning, it was that the disco organised mainly by three 9 year olds was not only by far the most popular and enjoyable social event of my entire time at school (including high school) but it was also as far as I know the most profitable.
When I was in elementary school, the class ran a business making and selling box kites. It was part fundraiser, part economics, part engineering.
We took orders, budgeted materials, then built the kites out of straw, string, and paper over the course a quarter. Something like this [1].
I thought it was a really valuable introduction to econ and business for a group of 10 year olds. I remember calculating how long it would take to fulfill remaining orders, and if I could could make my own kite business and undercut the class price as a private business.
Many people I know need some lessons in basic financial literacy.
I’ve been living in an apartment for the past 18 months while saving to build a house and I’ll be here until the home is completed in October.
It has been very alarming watching how my neighbors behave and spend money.
I myself come from an impoverished background. Single mom, multiple violent stepfathers, no money, left home at 16 to escape the abuse, etc.
I slept hard for many months and I’ve been without a home on three different occasions.
However, I firmly believe that poverty is a choice for a lot of people and it’s never been more evident until I lived in an apartment complex.
My across-the-hall neighbors order food delivery 10+ times per week. Last weekend, from Friday afternoon until Sunday morning, they had food delivered 5 times.
I’ve only paid for food delivery once and that was when my son and I were stuck at home with Covid.
Many of my neighbors drive new $50k+ automobiles.
Then I hear the same across the hall neighbors arguing about money. She’s a teacher (I see her ID card hanging from the rearview of her CR-V. The husband works in a kitchen.
I’m guessing their combined gross income is maybe $100k and that’s being generous.
Yet they spend money on food delivery like they were making twice that amount.
My base salary is only $130k which is decent for Alabama, but I wouldn’t dare waste money on something like that.
I drive a 25 year old Land Cruiser that I maintain myself. Growing up poor, we didn’t pay anyone to do anything. I had to learn to repair things myself. I kept that habit through adulthood.
Sorry for the rant. It’s just wild seeing how some people live while also having to hear them complain about having no money.
A lot of people were conditioned to rely on food delivery when it was cheap. Pre-pandemic, restaurant food was much less expensive, delivery apps had low or no fees, and the options for tipping were much lower.
Now, of course, restaurant prices have skyrocketed, apps all charge significant fees and the tip expectation is around 20% (and don’t even get me started on how ridiculous it is to base tipping on food cost when none of the tip goes to anyone involved preparing the food and a 10lb bag of mashed potatoes is cheaper than a 1/2 oz container of caviar).
But people now expect their meals to be brought to their door and have a lot of resistance to going out to get it or, god forbid, preparing it for themselves.
The trick is finding enough self-respect for yourself to break that conditioning.
I was conditioned to smoke tobacco, waste money on crappy food, vote against my own self interests every two years at the ballot box, buy a new car every five years, hate people who looked or behaved differently than me, say 'yes sir' and 'yes ma'am' and do as I'm told, etc.
I still find myself trying to break away from the stuff I learned as a child and as a young man. It takes life long effort.
I suspect there's a cultural element that I can't speak for outside of my own bubble.
For example, I grew up in a rural area, large family, single income. I don't know exact figures, but adjusting for inflation, I suspect my dad was making what would today be $50K USD / year, feeding 4 kids (and a bunch of farm animals and pets.) Going to a restaurant was inconvenient and expensive. The food from animal husbandry and farm crops was labor intensive, but vastly cheaper. Every meal was cooked or prepared at home. (e.g. we'd have cereal or pancakes, sandwiches for lunch, a meal of meat and potatoes and vegetables.)
If there's a point in this, it's that going out or having someone else do all the work of making a meal was a special treat. It was rare, it was exciting, it meant something.
But I know as an adult with the means to live very differently, we order out at least once a week, which feels like a ridiculous luxury. It doesn't feel special. It just feels more like, well we didn't need to be prepared and have the ingredients we need here at home, so we'll settle for something convenient. (Though where we live, we do not do delivery, but have to drive 10-15 minutes for pickup. We're usually already out because we take our dog to the park regularly.)
Obviously there's a much bigger discussion on general financial literacy, defining "need", "quality of life", what we feel we deserve, whether we think about how today's decisions impact our future and if we care enough to do something about it. But at least in respect to ordering food, I think at least some of that is going to come from culture and family influence. In my specific case, seeing how hesitant the provider of my family income was to spend money also gave me reason to stop and think a bit before spending as an adult, even as my income grew well beyond what my birth family was getting.
I looked up the average cost of living in Alabama. It says it is 54k for a family. Do you think that is realistic?
The reason why I ask is that US incomes always confuse me. Incomes seem quite high and I understand that taxes are much lower than here (Finland).
As an uninformed outsider with these costs of living 100k for a couple seems quite nice and a gross income 130k appears absolutely rich. Am I missing something?
IlJust very curious always as some of the income programmers with my experience get in the US seem absolutely unachievable here.
The numbers made my eyes jump out a little, though I need to remember that "six figures" when I was a ten would be over $250,000 now, a few decades later.
And I'm in the U.S., Pennsylvania instead of Alabama, though they should be similar. (COL site says PA is 20% more expensive on average.)
Of note, Alabama is one of the cheapest states to live in nationally. I would think that a $100K USD income would still allow for a healthy amount of extravagance and savings, though that would require financial literacy.
An easy way to check is look up basket prices. Average rent in America is quite high, food costs are high, tipping culture and other fees make food delivery an expensive venture. 100k for 2 people is a lot of money on a global ecale, but it's not really "rich" in the US unless you spend extremely smart for many years.
The cost of living (and everything else) varies wildly in the United States. Finland is maybe analogous to Rhode Island—not Massachusetts (Sweden) or Connecticut (Norway), but close. Alabama is then more like Albania—quite a bit cheaper… but do you want to live there?
(Sorry to all the Albanians, it’s not really fair to compare you to Alabama.)
Middle class poverty traps look like what you describe. I don't understand the compulsion to spend all of what you make every month, and sometimes more, either.
I understand where you're coming from. Some examples from people I know:
* Person making around $40K buying a $50K new vehicle
* Software engineer making $100K+ in a low cost of living area asking if $5K is a good enough down payment for a home (at least they questioned it!)
* Consultant complaining about money while taking Uber back and forth to work every day and getting all groceries delivered on Instacart
However, these examples are from people who have the means to make these poor decisions and access to credit to do so. I think you understand this from having grown up poor, but it's worth illustrating for readers who may seen your comment and blame most poorer people for their situation.
There's "poverty," and then there's poverty. The bottom 20% of households in the US make about $22K per year. People I've known working in construction get paid entirely in cash and have no credit, often having to choose between paying the water bill or the electric bill after an unforeseen emergency. At the level where you are paycheck to paycheck, assuming the paychecks are regular, you can't save for emergencies because every day is spent triaging the basics.
I don't know of the veracity of his claim, nor the definition he was using, but Bernie Sanders claimed in Omaha, NE last night that "60% of Americans are living paycheck to paycheck". If true (and it likely is for some definition of this), seems worth knowing.
My wife’s parents come from poverty (they attained middle class around when she was 8-10) and she always says there’s “people who are good at being poor and people who aren’t.” We are fortunate to make a lot of money, but even then I order delivery maybe a few times a year. I had back to back meetings the other day and was feeling sorry for myself and ordered some kabobs on Grubhub and she flipped out, lol.
it's a pretty brutal version of "financial literacy" but it sounds like you had it. Not sure how you broke the cycle though; what made you aware of an alternative?
We have an entire generation of NOT poor western young adults who grew up during essentially zero % interest rates. Their parents financed lifestyles well beyond their means; that was their financial literacy education. None of your neighbours actually "bought" a $50K+ automobile. They are all paying bi-weekly (or weekly!) finance payments. Combine with our focus on immediate gratification and society is pretty messed.
And it wasn't just consumers! Nobody runnning a small business has had to figure out to make the math with double-digit business loans work for some time. Massive fiscal spending growth has also made many businesses viable on government borrowing.
My number one tools are arrogance and self-respect.
I spent a few months visiting a therapist once per week. He said my arrogance is probably the most significant driver behind my success.
Statically speaking, I should be dead, in prison, or broke with multiple illegitimate children or addicted to drugs and alcohol.
I kept telling myself that I was better than my family members and peers who made those choices. I had to distinguish myself from my entire family to succeed.
I am a hyper-critical individual and most of that criticism is towards myself. Every time I do something or make a purchase, I ask myself if I'm treating myself with respect.
Growing up poor or with money problems, seeing that struggle. One does come out different. One can potentially be more understanding when people are just continuing the lifestyle they grew up with. In this case, 2 working adults, one white collar, used to be enough to rent an apartment and eat out/ have deliveries regularly, no? That’s just a story of middle class erosion and financialization of the economy.
What makes very little sense to me is seeing people go from having very little to making a lot, and the increases in lifestyle to match income. Aka lifestyle creep. Things that 2 years ago were not even a wish are now taken for granted. And it’s all the same as everyone else.
> In this case, 2 working adults, one white collar, used to be enough to rent an apartment and eat out/ have deliveries regularly, no?
That’s not true. I grew up in the 1990s, and my dad had a white collar job working for a government contractor. I remember that he made right around the median family household income in the early 1990s, which was at the time double the income for all households. (My mom didn’t work then.) Our neighbors were professionals, white collar federal government workers, etc. Our house was 1,100 square feet. We rarely got even pizza delivery. Maybe we went to Sizzler or Pizza Hut a few times a month. We had one car until 1998 (a Toyota Camry). My dad worked right outside of DC and took a bus to the train station, and then took the Metro to the office.
I got that $50k automobile. And it’s absolutely worth it. It has warranty and I don’t need to spent few hours every month fixing things, that shouldn’t break. Land Cruiser is bad example because of very good build quality and excellent durability. I don’t know how it’s in US, but pretty much everywhere else Land Cruiser is luxury. I personally pay gladly additional 200€ in a month to not to do 4-6 hours chores.
But yeah, the food delivery is expensive. Never do this. Try to teach the young guys in the office, that cooking is not rocket science. 3 smallish pieces of okayish meat cost 5€, add some rice. Grab paprika, tomato or cucumber and you have super healthy 3€ meal. Instead of 7-10€ microwave crap from supermarket.
Financial literacy should be a topic in school. Repeated every couple years going from simple budget planning to mortgages, stock market and exotic derivatives. Plus a course about all the scams and basic computer security. Heck we even modeled back then strategies of fake company before graduation. But that was special school.
The "50k automobile" sounds like almost an aside in this conversation, but it's still bothering me.
I know there are reasons that new car prices have gone up so much in recent years, but is $50k still "reasonable" in the context of a financial literacy conversation? I too ended up going down the path of buying new cars when I became an adult, partially due to having no car repair education (something I only gained on my own later in life), partially due to living in apartments with no place to work on them early in my career, but mainly due to the incredible pressure to be able to get to work reliably in a society without adequate public transit.
But my new cars cost more like $18k (2009), $26k (2014), and $31k (2019). Each felt like a luxury at the time, having grown up with used cars generally 15-20 years older than the year we drove them in. Is $50k not still a good $20k more than a base model Camry? It sure still sounds like a luxury to me.
I buy a half-cow from a rancher every 6-7 months. I prepare all of my meals and all of my son's meals. I cook fresh meals for us six nights per week and take my lunch to work daily.
We eat out exactly once per week, and it's always the same place. It has counter service, so no tipping is expected.
It's the only restaurant in the area that prepares a meal better than I can at home. I know the owner, and we text each other occasionally and lift together at the same gym.
I've only had one issue at his restaurant, which was resolved by simply calling him.
My Land Cruiser costs me <$3k per year to own. That includes gas, insurance, and maintenance parts. I spent fewer than five hours on yearly maintenance for the four years I've owned it. The only exception was last year when I had to do the timing service, and that repair alone took me ~11 hours. It was much cheaper than the $2600 the import shop wanted for the repair.
I bought it because the 100 Series is probably the most reliable vehicle ever.
The article almost got it right ‘emotions, peer pressure, temptations’ and how people spend money on things they don’t need and then got it wrong by not actually saying what’s important.
Money management and financial literacy involves psychology along with math. So does sex education like the article compares it to. Having sex or spending money is not the problem. Nor is putting fear of the two in your head from a young age or the desire for it.
As Charlie munger said - psychology should be taught from a young age. Maybe the most important topic missing from education.
Spending money isn’t bad and having sex isn’t either. But saving for a future you’ve dreamt of and sex with a loved one is better. This involves less math and sex education and more psychology and mental well being.
If you are a 30 something politician looking for a change and understand psychology, you might want to visit schools and give children hope and mental well being tips. They might vote for you in 15 years.
Hell, you might want to visit communities and give adults hope and emotional well being tips and they might vote for you now. It's not just kids who need this and frankly adults probably realize they need it more than kids.
IMO a bunch of the problem is distress and short-term thinking.
You're not planning for 1, 2, 4 weeks out if you're constantly so stressed you're only thinking about today.
And if you're so overwhelmed you're only thinking about today, you're not noticing that you're spending impulsively 5, 6, 7 times a week, and that it adds up.
That's really been the key thing, the times that I've sat down and tried to talk someone through who was struggling with their financial planning.
They never really internalized doing this sort of planning regularly, for various reasons, and are so stressed by the day to day that they do not spend time thinking about much beyond the immediate, not just in terms of finances, so they're not trying to save for a goal, or a vacation, they're just trying to get through the day and pass out, so that kind of planning and feedback of "oh I need to not do that" just doesn't happen, much less learning to stop and think before buying things.
I don't have great advice on how to use this for better outcomes, though - sometimes, just making the suggestion when asked that they start to do this sort of planning regularly has been massively helpful for people, but I have, a couple times, had people ask for advice, only for it to become clear that they were looking for a rationalization to externalize their problems - that is, any proposal which required they change their behavior was off the table.
(The above, by the way, is also, I think, why there's so much backlash about RTO and similar - a lot of people who had been mindlessly struggling through the day, had time to themselves now, and did some thinking they never had the energy to do before...)
I think the problem with "financial literacy" is that it is taught too polite, it never mentions the true fact that our society is filled with professional organizations that use deception to get your money, and the investment world, the contracting world, and the employment world are filled to the gills with unethical players on both sides that are professional liars. They pose as one and deliver another, their entire careers, and get away with it because they understand how to hide their tracks with financial complexity. The majority of humanity falls prey to these predators, and they are in fact a significant proportion of every nation's economy. Every single company that is "hard to cancel" is one of these predators, entirely successfully, and that is thanks to our lack of financial literacy.
I don't think that is really the source of the issues for most people that are bad with money.
They spend more than they earn. They don't earn enough and they spend too much.
It is like blaming Cocacola for people being fat. Yeah they probably have some diffuse structural blame for the situation at a societal level but nobody is forcing anyone to drink a litre of coke a day or to fritter away their money on takeaways instead of investing it sensibly.
Could you blame advertisers for people spending money. Maybe? Do ads even work? They don't seem to work at all in politics so I doubt they do much anywhere else.
> It is like blaming Cocacola for people being fat.
> Do ads even work?
Coca-Cola spends four billion dollars a year on advertising. Generally speaking, ad revenues are in the order of trillions. It's hard to claim they don't work.
> They spend more than they earn. They don't earn enough and they spend too much.
Yeah, because Coca Cola (and other "businesses") convince them to spend.
> Yeah they probably have some diffuse structural blame for the situation at a societal level but nobody is forcing anyone to drink a litre of coke a day
Have you seen advertisements at all?
Nobody's forcing people to see/hear them. But they're shoved in your face wherever you go.
> Could you blame advertisers for people spending money. Maybe?
Not even just maybe. You're shortselling yourself.
> They don't seem to work at all in politics so I doubt they do much anywhere else.
You might want to double check how politics use advertisements.
The underlying philosophy is also partially problematic. That is, the idea that the next generation can just budget their way out of a problematic macroeconomic situation. Houses are utterly unaffordable now compared to 30 years ago, and no amount of budgeting will change that. But "financial literacy" shifts the blame and makes it out as an individual inability to budget. It's still useful to learn about how to use a credit card, and how not to, but that is not the root cause. Besides, the big three, medical debt, and student loan debt, credit card debt, and maybe car loans could be tackled at the macro-level, too, but that would be government overbearance again, wouldn't it...
Financial literacy has tons of fallacies but this article really only covers one of them.
The research I've read on the subject, experts nowadays are tending towards preferring "just in time" teaching. If you learned about mortgages and 401ks in 12th grade, that's not much help if you don't get a 401k until you're 22 or a mortgage until you are 25.
And that shows another issue: what does anyone even mean by "financial literacy". Does it include lessons about individual stock picking? About claiming Social Security early? About optimising taxes? About checking for better insurance every few years? About college savings plans for children?
I think the biggest fallacies is 100% seperation of "there is school, then there is work".
It's stupid to think that after school no more teaching is needed. I hate that after leaving university it is difficult to find out what is taught current students, what are the new theories and tools that have been introduced in the last 10 years.
It would be much better to start working alongside being in school, so you can learn about taxes and compound interest while earning money.
> I think the biggest fallacies is 100% seperation of "there is school, then there is work".
A agree very strongly with this. Not so sure about your solution if pushed too young
School level education should focus on mental development and learning how to learn. Given this, applying this to learning practical skills is a lot easier.
I think that link is interesting because a lot of people are taught things, maths in particular, in ways that leave them unable to apply it. People say they never used the maths they were taught in school, but that is because they do not have the grasp of it required to apply it to real life problems. Of course, going back to my earlier point things taught in school do not have to be directly useful (funnily enough no-one suggests kids should not be taught art or literature because they are not useful) so there does seem to be a particular issue with maths.
> hate that after leaving university it is difficult to find out what is taught current students, what are the new theories and tools that have been introduced in the last 10 years.
Or to learn new subjects and fields. IN the UK it has become a lot harder than it used to be - distance learning is a lot more expensive and adult education has been cut back.
Sure, you don’t need to know the exact details. But you should absolutely leave high school knowing that you need to think about retirement savings sooner rather than later, or you won’t have shit. I remember seeing a chart in high school related to compound interest and how much more someone who started saving earlier had by retirement. That chart was easy to grasp.
And for mortgages, you should definitely learn that renting savings you money compared to owning in a lot of situations (even after accounting for selling the house), especially if you don’t know you’ll live there more than a few years.
Like… where the fuck else is someone going to learn this if they don’t have parent smart enough to teach them that. It’s not like college covers this.
Exposure early doesn’t mean you’re an expert at managing finances when you hit adulthood. That won’t happen. But it can do enough to make you broadly aware of what you should be thinking about — which then means you can look it up more later.
But if you go by comparing yourself to others, you might think it’s normal and good to rack up credit card debt to have nicer clothes or something. You should be aware at how costly credit card debt is, and how easy it is to avoid that.
Like we’re not talking about small optimizations. There are a lot of things that can be extremely expensive and stressful for you if you don’t even know to think about those things.
Also, for topics like compounding, it can be used immediately in life. Money is a nice example, but small increments everyday leading to big changes is a foundational life lesson.
Idk, I can't help but conclude lots of the things I learned in school were actually quite helpful. As a child for example I learned about insurance theory and that stuck with me. I didn't actually insure anything myself for at least another decade, but the theory stuck. Which is that an insurance company just smooths over the costs of a rare event that happens to one individual, by spreading it out over many individuals, none of whom know whether they will or won't be confronted with said event. And that the average cost of insurance (in a competitive market) is therefore tracking closely the average cost of the event, plus some profit and admin fees of the insurance company. Which means for most people it's not worth insuring events that you can easily cover yourself (e.g. losing your phone).
I learned these things at age 15 or so. Sure I could've learned them later, but there's something about knowledge is that it builds on earlier building blocks and compounds. When certain things 'click' in your head, they open the door to new knowledge and areas of learning. There is power in learning early, because knowledge is cumulative and compounding to some extent. It's the reason why a 40yo is a more valuable employee than a 20yo, on average.
That's not to say that every topic must come as early as possible, or that education is perfect. There's certainly better and worse ways and timing to teach personal finance for example. But I am quite happy I was introduced to some concepts sooner than later. Even just to prime myself such that, when I am reintroduced to the topic later, I feel somewhat familiar and confident to dive into it again.
Certain topics don't really connect with everyone. Virtually everything I learned as a child in Chemistry was useless because it didn't resonate with me. While my gf went on to study biochemistry, and is clueless about finance. But neither of us know whether chemistry or finance would resonate with us, before being taught the subjects. Schooling for children also has a discovery function in that sense. It's not just about teaching what sticks, it's about discovering what sticks, and what is interesting. That's why a wide breadth of subjects can be a good idea, even if a significant portion doesn't end up being meaningful to someone at that age.
My 11 year old knows about mortgages. The longer you understand something, the better use you can make of it. Just in time delivery of mortgage math learning is borderline predatory.
When I was about 4 there was a financial downturn here. Lots lots their jobs and mortgage rates were quite high.
I still quite vividly recall watching the news with my parents, and there was a family crying in a hallway as some officials locked up the door to their apartment. Not understanding what was going on, I asked my parents why they were crying, and they said because they couldn't pay their mortgage and so they had lost their home.
Lets just say I didn't need any more lessons regarding mortgage payments.
If you are an American I think learning about what a 401k is, why it is good, how to calculate why it is good is really important to learn ahead of time. Then when it comes time to get a 401k, you can check and understand why it is still valuable and you can understand whatever new thing might be available. But you know what’s going on. That’s the “financial thinking”.
Readit News
You could also write the same clever-sounding contrarian think-piece about why teaching Home Economics doesn't make sense until you have your own home to run; teaching CPR doesn't make sense unless there's someone choking right in front of you; etc.
Using the logic underpinning this article, the only things taught in school should be how to play video games, how to find the best parties and how to get laid; since those are the only things actually relevant to students at that stage of their life.
Obviously studies will show that most students don't become financial wizards after taking financial literacy classes, because that's how it is with all education. How many kids who take English class become good writers?
Doesn't mean we shouldn't offer the knowledge for those willing to take it.
This is the question most kids ask when offered education. If you answer that first, everything else follows.
Start with why. (Thank you Simon Sinek.) Are there meaningful, ongoing benefits to learning how to make specific decisions with your money? Should you care enough to learn the more mundane details like reviewing expenses or filing your own taxes?
I know there are attempts, like showing those log graphs that try to impress upon young minds the long-term value of compound interest. I'm sure those help a few people, but I do wonder if there might be other more impactful concepts.
Personally, I get a great deal of satisfaction out of things like efficiency, self-reliance, and so on, but I don't know if valuing those things can be taught, or just develops organically. Regardless, I think you always need to impress upon students the motivations for their decision-making and try to help them care. The rest can come later.
It's a great approach when the "meaningful, ongoing benefits" start to occur either immediately, or in the near future when you're living a life very, very much like the one you're living today.
The difficulty of doing that within the context of educating 5-18 (+/- 4) years olds is that benefits (and costs) of learning (or not) are far, far down the road, in a life that they can typically not even imagine with any degree of accuracy.
This would have done so much for me, especially with the more abstract math classes that made no sense until much later. It would have been good if the math problems even approximated reality. Simple things like adjusting a recipe to a different number of people, applying taxes, calculating interest. Only shop class gave me the satisfaction of doing something concrete.
For me, there was no "aha!" moment in high school, and it made it very difficult to understand why I needed to care.
Excuse the smugness. Just providing counter perspective.
I know people, this does not help more people to easily understand the topic. But, lot of math like number theory was worked out as a intellectual exercise rather than application based.
Application followed theory. And people theorized for fun.
That can also make topics, abstract and unrelatable.
The methods used to inculcate character are, I think, different from the ones used to build knowledge.
You'd be amazed the things people with parents different from yours didn't pick up.
Or take maths. Maybe it is reductive but I think the difficulty of it helps build character. Most kids need to do a lot of exercises and memorisation, and the feeling of accomplishment of getting it and doing well? That is character building. Obviously immensely useful too.
Civics (we had "social studies" and I don't recall ever discussing our political system, but at least in theory) involves:
- teaching facts about the system (how many representatives there are, how often elections are held, who is responsible for what, what do courts do, what do juries do, what do MPs do, what do the police do, how are they structurally different from civil servants or the media or universities etc)
- teaching skills (how to vote, how to think about political/societal structures, etc)
- teaching character (instilling civic pride, understanding the long and rich history that led us here today, etc)
Knowledge keeps you from investing in ways that mostly lose money. Plenty of young people try to do the right thing, and screw it up.
Understanding compound interest can improve motivation. Exponential functions aren't really intuitive to most people. They tend to make linear projections, which causes people to underestimate the rewards from investments and the damage from debt.
(The article of course isn't saying we shouldn't teach kids this knowledge; it's proposing better ways to teach it.)
Same with sex. You don’t need to tell them not to get pregnant, or get someone pregnant, in high school. You teach them how to avoid it and what happens if they do it.
As to the "character", that's mostly learning about the mathematical concept of "less": spend less than you earn.
Building character might be needed to make good financial decisions, but the knowledge of the mechanics of how markets, debt, investment, compounding, pricing, fractional-reserve banking, etc. works are just concepts like any other. Teaching them is good.
Sure, we won't magically make people less prone to emotional decision making. Teaching about gravity doesn't make you less prone to it either, but understanding how it works is good.
How this "financial literacy can't be taught" thing became a meme I'll never understand. Like most things on the internet, it seems to be a hipster contrarian reaction to the "why isn't this taught in schools" comments you'd see all over the web in the 2000s.
How about we stop trying to get attention for having interesting contrarian "takes" and just try doing the common sense thing and work on improving it from there.
fwiw i had the same experience with money that the article talks about. my parents tried to impart alot of wisdom on me but it hits different when you have actual money in the market and see it go down.
Proposing the teaching of financial literacy when the children are baffled by arithmetic is absurd.
— Jamie Zawinski <https://www.jwz.org/doc/groupware.html>
> If all the people who claimed to have been "inspired" by this piece hadn't been, and had just kept writing middleware for banks or whatever, the world might have been a slightly better place.
> I wish I had never published this.
This would actually be amazing if possible.
“Operator, I need CPR lessons, now”
Like Neo in the Matrix - “I know Kung-Fu”
I usually hate such one-liner responses, but in this case, really, it is the article that needs to be read, not my reply. I could not say nothing and let this stand though, the contrast between the comment and what is actually in the article is too large.
The article claims that teaching financial literacy is a "fallacy" ie. doesn't work because kids have no way to contextualize something they don't have a need for. So we should give them the need for the knowledge by instead helping all kids start a small business.
Again, the equivalent would be kicking children out of their parents homes and helping them find apartments so they can get experience in Home Economics.
Maybe we just start by teaching kids financial literacy the way our educational bureaucracy knows how to instead of fighting it because it's not perfect.
It's vanishingly unlikely that any student who learns "personal finance", with no practical application, is going to retain it for the 5+ years until they'll actually need to use it. Learning doesn't work that way -- with, as you note, a few exceptions for unusually motivated students ... who would probably be able to learn it on their own when the time comes.
Ditto for the famous meme about "why don't schools teach something useful, like doing my taxes?" Because it would come across as an ungrounded, garbled mess that you'd forget by the time it was actually relevant.
So yes, I'd say that generally, education should work by grounding lessons in some kind of practical application. And indeed, like the other comments note, that's how it works for some of your other examples, like actually cooking something for home ec, or doing CPR on a dummy (which mimics most of the dynamics of the real thing, even if imperfectly).
I think there's a real human need being expressed by the common complaint, "When are we ever gonna use this stuff?" I'd phrase it as, "You're not grounding this material in a way that allows me to reason about it, and what's important vs isn't."
So, to the extent that we want to prepare students for "the real world" -- in particular, things like "doing your taxes" and "evaluating a car loan" -- I'd say the best way to address it would be by teaching the (meta-)skill of "learning an unknown domain". (Yes, "learning how to learn" ... but as an explicit skill, not one applied to material that is itself too artificial.) That's something you could apply to practical problems, even if they're not the same ones students will be solving later.
Applying this insight to the teaching of literary analysis: frame it as refuting an internet comment that doesn't understand that a song is a metaphor.
In fact, one thing that frustrates me about how the teach estimation in math is that they teach a useless version of it: you do something that takes about as long as calculating the exact value, except you add some rounding steps because you're told you can't give an exact answer. What you should instead do is give a timed test, which much more problems that usual, and only require approximate answers. Then you're forced to save time by rounding.
Late edit:
>Using the logic underpinning this article, the only things taught in school should be how to play video games, how to find the best parties and how to get laid; since those are the only things actually relevant to students at that stage of their life.
Yes, it does annoy me when the education system neglects the teaching of some skills that don't come naturally to some students, but not other skills.
Financial literacy for those who do not yet have wealth to manage, even if it doesn't seem practical in the moment, still opens up new capabilities to enable future growth.
I’m not sure exactly what it means here, but I think there’s a big difference when it comes to teaching people how to learn things that powerful vested interests want them not to know.
Dead Comment
Experience is hard (if not impossible) to scale. And it could easily backfire: imagine the scenario where the experience is miserable and results in failure. What if the students' lesson learned is "why bother trying?"
The most effective way we have to scale experience is through simulation. And we know how to provide that pseudo-experience to young kids without a lot of investment: story telling.
Maybe we should scour the globe for compelling stories that teach lessons about delayed gratification, the value of saving, and self-confidence vs. vanity in terms of spending money, so that we could start telling them to students at an early age.
Which has been a surprisingly useful [1]real-world/low-stakes financial literacy course for them.
- They have been scammed.
- They have blown money on stupid useless stuff and cried with regret.
- They've applied for jobs (seriously, there was an application process and interview).
- They've made hundreds if not thousands of decisions balancing entertainment, commerce, utility, and budgeting.
It's all of the true feel-it-in-your-bones financial literacy that the article advocates for being delivered to them in the guise of blocky figures and them playing with friends.
1 - You buy Robux (the in-game currency) with real money, and for years, it's been the number one thing they've asked for as a gift.
What are the downsides to Roblox in your experience? It feels like crack cocaine for kids
We did it in groups although some did it individually. One group did a carwash that also made you a coffee while you waited. My team was three of us and we put on a school disco (actually two, senior and junior). We had to organise lighting, music, equipment. We had to sell tickets. It was so profitable it paid for the entire school camp for our whole class, and the next year's too.
I don't know how much we actually learnt and I am sure our parents helped but I doubt it was entirely ineffectual. Probably more useful than many of the other activities we did.
Point being: there is no reason kids can't experiment with business as children, whether it is a lemonade stand, a carwash or a school disco.
I also have to point out for the record that if ever there was a win for capitalism over top down social planning, it was that the disco organised mainly by three 9 year olds was not only by far the most popular and enjoyable social event of my entire time at school (including high school) but it was also as far as I know the most profitable.
We took orders, budgeted materials, then built the kites out of straw, string, and paper over the course a quarter. Something like this [1].
I thought it was a really valuable introduction to econ and business for a group of 10 year olds. I remember calculating how long it would take to fulfill remaining orders, and if I could could make my own kite business and undercut the class price as a private business.
https://www.instructables.com/Tetrahedral-Kite-1/
Later, in court:
- Your Honor, honestly, I thought "small" businesses could only use child labor.
I’ve been living in an apartment for the past 18 months while saving to build a house and I’ll be here until the home is completed in October.
It has been very alarming watching how my neighbors behave and spend money.
I myself come from an impoverished background. Single mom, multiple violent stepfathers, no money, left home at 16 to escape the abuse, etc.
I slept hard for many months and I’ve been without a home on three different occasions.
However, I firmly believe that poverty is a choice for a lot of people and it’s never been more evident until I lived in an apartment complex.
My across-the-hall neighbors order food delivery 10+ times per week. Last weekend, from Friday afternoon until Sunday morning, they had food delivered 5 times.
I’ve only paid for food delivery once and that was when my son and I were stuck at home with Covid.
Many of my neighbors drive new $50k+ automobiles.
Then I hear the same across the hall neighbors arguing about money. She’s a teacher (I see her ID card hanging from the rearview of her CR-V. The husband works in a kitchen.
I’m guessing their combined gross income is maybe $100k and that’s being generous.
Yet they spend money on food delivery like they were making twice that amount.
My base salary is only $130k which is decent for Alabama, but I wouldn’t dare waste money on something like that.
I drive a 25 year old Land Cruiser that I maintain myself. Growing up poor, we didn’t pay anyone to do anything. I had to learn to repair things myself. I kept that habit through adulthood.
Sorry for the rant. It’s just wild seeing how some people live while also having to hear them complain about having no money.
Now, of course, restaurant prices have skyrocketed, apps all charge significant fees and the tip expectation is around 20% (and don’t even get me started on how ridiculous it is to base tipping on food cost when none of the tip goes to anyone involved preparing the food and a 10lb bag of mashed potatoes is cheaper than a 1/2 oz container of caviar).
But people now expect their meals to be brought to their door and have a lot of resistance to going out to get it or, god forbid, preparing it for themselves.
I was conditioned to smoke tobacco, waste money on crappy food, vote against my own self interests every two years at the ballot box, buy a new car every five years, hate people who looked or behaved differently than me, say 'yes sir' and 'yes ma'am' and do as I'm told, etc.
I still find myself trying to break away from the stuff I learned as a child and as a young man. It takes life long effort.
For example, I grew up in a rural area, large family, single income. I don't know exact figures, but adjusting for inflation, I suspect my dad was making what would today be $50K USD / year, feeding 4 kids (and a bunch of farm animals and pets.) Going to a restaurant was inconvenient and expensive. The food from animal husbandry and farm crops was labor intensive, but vastly cheaper. Every meal was cooked or prepared at home. (e.g. we'd have cereal or pancakes, sandwiches for lunch, a meal of meat and potatoes and vegetables.)
If there's a point in this, it's that going out or having someone else do all the work of making a meal was a special treat. It was rare, it was exciting, it meant something.
But I know as an adult with the means to live very differently, we order out at least once a week, which feels like a ridiculous luxury. It doesn't feel special. It just feels more like, well we didn't need to be prepared and have the ingredients we need here at home, so we'll settle for something convenient. (Though where we live, we do not do delivery, but have to drive 10-15 minutes for pickup. We're usually already out because we take our dog to the park regularly.)
Obviously there's a much bigger discussion on general financial literacy, defining "need", "quality of life", what we feel we deserve, whether we think about how today's decisions impact our future and if we care enough to do something about it. But at least in respect to ordering food, I think at least some of that is going to come from culture and family influence. In my specific case, seeing how hesitant the provider of my family income was to spend money also gave me reason to stop and think a bit before spending as an adult, even as my income grew well beyond what my birth family was getting.
And I'm in the U.S., Pennsylvania instead of Alabama, though they should be similar. (COL site says PA is 20% more expensive on average.)
https://www.usnews.com/news/best-states/rankings/opportunity...
Of note, Alabama is one of the cheapest states to live in nationally. I would think that a $100K USD income would still allow for a healthy amount of extravagance and savings, though that would require financial literacy.
(Sorry to all the Albanians, it’s not really fair to compare you to Alabama.)
100k is an awesome salary for a young single adult in most of the country.
100k is much less awesome when you pay $3200/m for daycare for two kids, and $890/m for family health insurance.
My two-bedroom apartment is now $1400 per month, and that's for a decent but not exactly nice apartment.
I could never support myself and my son on $54k here in Auburn.
It's a faux 'status symbol' thing. The idiom is "Keeping up with the Joneses" (https://en.wikipedia.org/wiki/Keeping_up_with_the_Joneses) and it is a self inflicted syndrome.
* Person making around $40K buying a $50K new vehicle
* Software engineer making $100K+ in a low cost of living area asking if $5K is a good enough down payment for a home (at least they questioned it!)
* Consultant complaining about money while taking Uber back and forth to work every day and getting all groceries delivered on Instacart
However, these examples are from people who have the means to make these poor decisions and access to credit to do so. I think you understand this from having grown up poor, but it's worth illustrating for readers who may seen your comment and blame most poorer people for their situation.
There's "poverty," and then there's poverty. The bottom 20% of households in the US make about $22K per year. People I've known working in construction get paid entirely in cash and have no credit, often having to choose between paying the water bill or the electric bill after an unforeseen emergency. At the level where you are paycheck to paycheck, assuming the paychecks are regular, you can't save for emergencies because every day is spent triaging the basics.
We have an entire generation of NOT poor western young adults who grew up during essentially zero % interest rates. Their parents financed lifestyles well beyond their means; that was their financial literacy education. None of your neighbours actually "bought" a $50K+ automobile. They are all paying bi-weekly (or weekly!) finance payments. Combine with our focus on immediate gratification and society is pretty messed.
And it wasn't just consumers! Nobody runnning a small business has had to figure out to make the math with double-digit business loans work for some time. Massive fiscal spending growth has also made many businesses viable on government borrowing.
I spent a few months visiting a therapist once per week. He said my arrogance is probably the most significant driver behind my success.
Statically speaking, I should be dead, in prison, or broke with multiple illegitimate children or addicted to drugs and alcohol.
I kept telling myself that I was better than my family members and peers who made those choices. I had to distinguish myself from my entire family to succeed.
I am a hyper-critical individual and most of that criticism is towards myself. Every time I do something or make a purchase, I ask myself if I'm treating myself with respect.
What makes very little sense to me is seeing people go from having very little to making a lot, and the increases in lifestyle to match income. Aka lifestyle creep. Things that 2 years ago were not even a wish are now taken for granted. And it’s all the same as everyone else.
That’s not true. I grew up in the 1990s, and my dad had a white collar job working for a government contractor. I remember that he made right around the median family household income in the early 1990s, which was at the time double the income for all households. (My mom didn’t work then.) Our neighbors were professionals, white collar federal government workers, etc. Our house was 1,100 square feet. We rarely got even pizza delivery. Maybe we went to Sizzler or Pizza Hut a few times a month. We had one car until 1998 (a Toyota Camry). My dad worked right outside of DC and took a bus to the train station, and then took the Metro to the office.
But yeah, the food delivery is expensive. Never do this. Try to teach the young guys in the office, that cooking is not rocket science. 3 smallish pieces of okayish meat cost 5€, add some rice. Grab paprika, tomato or cucumber and you have super healthy 3€ meal. Instead of 7-10€ microwave crap from supermarket.
Financial literacy should be a topic in school. Repeated every couple years going from simple budget planning to mortgages, stock market and exotic derivatives. Plus a course about all the scams and basic computer security. Heck we even modeled back then strategies of fake company before graduation. But that was special school.
I know there are reasons that new car prices have gone up so much in recent years, but is $50k still "reasonable" in the context of a financial literacy conversation? I too ended up going down the path of buying new cars when I became an adult, partially due to having no car repair education (something I only gained on my own later in life), partially due to living in apartments with no place to work on them early in my career, but mainly due to the incredible pressure to be able to get to work reliably in a society without adequate public transit.
But my new cars cost more like $18k (2009), $26k (2014), and $31k (2019). Each felt like a luxury at the time, having grown up with used cars generally 15-20 years older than the year we drove them in. Is $50k not still a good $20k more than a base model Camry? It sure still sounds like a luxury to me.
We eat out exactly once per week, and it's always the same place. It has counter service, so no tipping is expected.
It's the only restaurant in the area that prepares a meal better than I can at home. I know the owner, and we text each other occasionally and lift together at the same gym.
I've only had one issue at his restaurant, which was resolved by simply calling him.
My Land Cruiser costs me <$3k per year to own. That includes gas, insurance, and maintenance parts. I spent fewer than five hours on yearly maintenance for the four years I've owned it. The only exception was last year when I had to do the timing service, and that repair alone took me ~11 hours. It was much cheaper than the $2600 the import shop wanted for the repair.
I bought it because the 100 Series is probably the most reliable vehicle ever.
Money management and financial literacy involves psychology along with math. So does sex education like the article compares it to. Having sex or spending money is not the problem. Nor is putting fear of the two in your head from a young age or the desire for it.
As Charlie munger said - psychology should be taught from a young age. Maybe the most important topic missing from education.
Spending money isn’t bad and having sex isn’t either. But saving for a future you’ve dreamt of and sex with a loved one is better. This involves less math and sex education and more psychology and mental well being.
If you are a 30 something politician looking for a change and understand psychology, you might want to visit schools and give children hope and mental well being tips. They might vote for you in 15 years.
You're not planning for 1, 2, 4 weeks out if you're constantly so stressed you're only thinking about today.
And if you're so overwhelmed you're only thinking about today, you're not noticing that you're spending impulsively 5, 6, 7 times a week, and that it adds up.
That's really been the key thing, the times that I've sat down and tried to talk someone through who was struggling with their financial planning.
They never really internalized doing this sort of planning regularly, for various reasons, and are so stressed by the day to day that they do not spend time thinking about much beyond the immediate, not just in terms of finances, so they're not trying to save for a goal, or a vacation, they're just trying to get through the day and pass out, so that kind of planning and feedback of "oh I need to not do that" just doesn't happen, much less learning to stop and think before buying things.
I don't have great advice on how to use this for better outcomes, though - sometimes, just making the suggestion when asked that they start to do this sort of planning regularly has been massively helpful for people, but I have, a couple times, had people ask for advice, only for it to become clear that they were looking for a rationalization to externalize their problems - that is, any proposal which required they change their behavior was off the table.
(The above, by the way, is also, I think, why there's so much backlash about RTO and similar - a lot of people who had been mindlessly struggling through the day, had time to themselves now, and did some thinking they never had the energy to do before...)
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They spend more than they earn. They don't earn enough and they spend too much.
It is like blaming Cocacola for people being fat. Yeah they probably have some diffuse structural blame for the situation at a societal level but nobody is forcing anyone to drink a litre of coke a day or to fritter away their money on takeaways instead of investing it sensibly.
Could you blame advertisers for people spending money. Maybe? Do ads even work? They don't seem to work at all in politics so I doubt they do much anywhere else.
Is the planet even round? It don't seem to be round everywhere I look so I doubt it is round anywhere else. :)
Please ask an LLM to explain the basics of epistemology to you.
Coca-Cola spends four billion dollars a year on advertising. Generally speaking, ad revenues are in the order of trillions. It's hard to claim they don't work.
Yeah, because Coca Cola (and other "businesses") convince them to spend.
> Yeah they probably have some diffuse structural blame for the situation at a societal level but nobody is forcing anyone to drink a litre of coke a day
Have you seen advertisements at all?
Nobody's forcing people to see/hear them. But they're shoved in your face wherever you go.
> Could you blame advertisers for people spending money. Maybe?
Not even just maybe. You're shortselling yourself.
> They don't seem to work at all in politics so I doubt they do much anywhere else.
You might want to double check how politics use advertisements.
The research I've read on the subject, experts nowadays are tending towards preferring "just in time" teaching. If you learned about mortgages and 401ks in 12th grade, that's not much help if you don't get a 401k until you're 22 or a mortgage until you are 25.
And that shows another issue: what does anyone even mean by "financial literacy". Does it include lessons about individual stock picking? About claiming Social Security early? About optimising taxes? About checking for better insurance every few years? About college savings plans for children?
How much ground do we need to cover?
It's stupid to think that after school no more teaching is needed. I hate that after leaving university it is difficult to find out what is taught current students, what are the new theories and tools that have been introduced in the last 10 years.
It would be much better to start working alongside being in school, so you can learn about taxes and compound interest while earning money.
People also have much better ability to learn math when they can use it for solving problems outside of the classroom: https://www.reddit.com/r/TheWire/comments/1it269l
A agree very strongly with this. Not so sure about your solution if pushed too young
School level education should focus on mental development and learning how to learn. Given this, applying this to learning practical skills is a lot easier.
I think that link is interesting because a lot of people are taught things, maths in particular, in ways that leave them unable to apply it. People say they never used the maths they were taught in school, but that is because they do not have the grasp of it required to apply it to real life problems. Of course, going back to my earlier point things taught in school do not have to be directly useful (funnily enough no-one suggests kids should not be taught art or literature because they are not useful) so there does seem to be a particular issue with maths.
> hate that after leaving university it is difficult to find out what is taught current students, what are the new theories and tools that have been introduced in the last 10 years.
Or to learn new subjects and fields. IN the UK it has become a lot harder than it used to be - distance learning is a lot more expensive and adult education has been cut back.
And for mortgages, you should definitely learn that renting savings you money compared to owning in a lot of situations (even after accounting for selling the house), especially if you don’t know you’ll live there more than a few years.
Like… where the fuck else is someone going to learn this if they don’t have parent smart enough to teach them that. It’s not like college covers this.
Exposure early doesn’t mean you’re an expert at managing finances when you hit adulthood. That won’t happen. But it can do enough to make you broadly aware of what you should be thinking about — which then means you can look it up more later.
But if you go by comparing yourself to others, you might think it’s normal and good to rack up credit card debt to have nicer clothes or something. You should be aware at how costly credit card debt is, and how easy it is to avoid that.
Like we’re not talking about small optimizations. There are a lot of things that can be extremely expensive and stressful for you if you don’t even know to think about those things.
I learned these things at age 15 or so. Sure I could've learned them later, but there's something about knowledge is that it builds on earlier building blocks and compounds. When certain things 'click' in your head, they open the door to new knowledge and areas of learning. There is power in learning early, because knowledge is cumulative and compounding to some extent. It's the reason why a 40yo is a more valuable employee than a 20yo, on average.
That's not to say that every topic must come as early as possible, or that education is perfect. There's certainly better and worse ways and timing to teach personal finance for example. But I am quite happy I was introduced to some concepts sooner than later. Even just to prime myself such that, when I am reintroduced to the topic later, I feel somewhat familiar and confident to dive into it again.
Certain topics don't really connect with everyone. Virtually everything I learned as a child in Chemistry was useless because it didn't resonate with me. While my gf went on to study biochemistry, and is clueless about finance. But neither of us know whether chemistry or finance would resonate with us, before being taught the subjects. Schooling for children also has a discovery function in that sense. It's not just about teaching what sticks, it's about discovering what sticks, and what is interesting. That's why a wide breadth of subjects can be a good idea, even if a significant portion doesn't end up being meaningful to someone at that age.
I still quite vividly recall watching the news with my parents, and there was a family crying in a hallway as some officials locked up the door to their apartment. Not understanding what was going on, I asked my parents why they were crying, and they said because they couldn't pay their mortgage and so they had lost their home.
Lets just say I didn't need any more lessons regarding mortgage payments.
1) Bob who invests $1000/mo from age 20 to age 30, then nothing afterwards
2) Alice who starts investing $1000/mo from age 30 all the way to age 60.
3) Johnny whose mum invested $200/mo from his birth to age 18, then nothing afterwards.