Friday, January 6, 2012

The Three R's and Financial Literacy

The popular debate on education seems to focus on two areas. The first is STEM - Science, Technology, Engineering, and Mathematics. The second is literacy in the traditional sense of reading, writing, and comprehension. While these areas definitely merit attention, I believe a third should be given equal weight, namely financial literacy. What good is an improved income to a STEM literate if they make nothing of it due to a lack of financial savvy?

Several college-aged nieces and friends visited a few years ago. In exchange for 24/7 access to the well stocked fridge, I asked them to complete a financial literacy questionnaire. The poor results were quite an eye opener. And I didn't ask about the effect of Federal Reserve policy on foreign exchange rates either. This was all basic stuff related to consumer credit, compounding, saving and investment vehicles, insurance, and similar.

In all fairness to my nieces and friends, no one had ever told them what they needed to know. More importantly, nothing in their lives thus far had provided the motivation to go find the information on their own.

The role motivation plays in learning shouldn't be underestimated. For example, many believe the closest they'll ever get to a million dollars is if they win the lottery. In reality, almost every working American is a millionaire of sorts. Consider that the 2010 poverty threshold for a family of four was a bit over $22,000. Bump that to $25,000 and multiply by 40 years of employment and what have you got? One million dollars. So the average American will have at least one million flowing through their fingers in their lifetime. Recognizing that you're a "millionaire" yet as unlikely to achieve financial security as anyone else provides the motivation to become financially literate.

Sadly, even the motivated are challenged by traditional materials with their textbook prose and emphasis on formulas, charts, and graphs. I have tried to remedy that with my book Someday Is Not a Plan - A Guide to Understanding Money in Plain English. The book listens in on conversations between twenty-something Larry and his retired uncle Roger as they talk about money. Larry starts out in debt, living paycheck to paycheck, with no hope for progress. But as his education proceeds, he sees that financial security is possible and not as difficult as he had imagined. Most importantly, Larry discovers that it is his thinking about money which has to change the most. By the end, Larry is transformed from misguided dreamer to master of his future. Visit for more information and to preview the book.

1 comment:

Barbara Figge Fox said...

Dave, you make the dry and/or unpleaasant facts palatable! I'm going to think about the person(s) I should give this to1