It's amazing to me how people well above the poverty line find a way to spend it all -- a house they can't afford, cars they can't afford, student loans to the tune of hundreds of thousands... It's a damn shame financial skills are not taught in this country.
Incorrect - 30% of households don't live paycheck to paycheck because "math and arthmetic are taught" -- basic financial literacy isn't even taught at the college level which leads many into school loans they will have a very hard time paying back.
I'm not sure about that, my impression is a lot of people know they should save for tomorrow but they just aren't very good at resisting the temptations. Just like smokers know smoking is bad for them and the over weight know they shouldn't indulge.
If we wanted to do something about it then we need to look at schemes like the UK workplace pensions. It's compulsary for employers and opt-out for employees. It has resulted in many more people saving for retirement.
Financial literacy is arithmetic and basic math. Addition of pay, subtraction of monthly expenses. Interest is not difficult to calculate, either.
We give everyone the tools they need. If they are still incompetent that is on them.
You have to take an online course about understanding student loans and interest before you can accept a federal loan. The idea that students don’t know what they are getting into is absurd.
What people aren't taught is good financial sense and what to prioritize in life. We can't pretend that every child has educated family members to teach them this. And ignoring this means perpetuating a cycle of pain and suffering because the uneducated poor have kids too, and they'll be the ones teaching them how to live their lives. There were no classes that could've prepared me to invest into appreciating asset X instead of depreciating asset Y, which is a trap people fall into far too often to just ignore as a fact of life. There's nothing in the typical school curriculum that could ever teach some people that money should be prioritized toward important needs (housing, good food, etc.) instead of frivolous wants. Especially considering that entire industries are based around trying to part these people from their money year after year. Horrible from an environmental standpoint too.
Not saying you're wrong btw, just throwing something out there.
I hear what you are saying but it’s 2020. If you don’t have basic financial literacy it’s because you don’t care.
And fundamentally I don’t understand how someone could be short on paying bills every single month and not think to themselves “gee maybe I should search the internet to help solve this repeated problem that I have.”
Somehow 33% of people can’t pay their bills every month but smartphone penetration is greater than 66%. How do so many people have access to the entire knowledge of humanity in the palm of their hand but also have not EVER searched on the internet for financial advice?
I can't help but wonder if everyone downvoting people preaching personal responsibility are also part of the problem. As a society today (in America at least), we're increasingly condemning those preaching personal responsibility in almost every venue, or at least every liberal venue. There's still some push for personal responsibility amongst conservatives.
In a way, this appears to be a result of recency bias and our collective forgetting that preaching personal responsibility was once the norm in western societies. While I'm an atheist myself, long before there was any government social safety net, the church provided this safety net, but when it did, that safety net came with the expectation of learning lessons like "God helps those that help themselves".
As a society, yes it's important to have empathy for other who have made mistakes. Even Judeo-Christian religion makes room for this lesson through stories like the prodigal son. But you can't just have empathy without accountability unless you're willing to accept that more people will become a burden on the productive than if you have a culture of accountability.
You've got to have a balance between both empathy and accountability and squelching voices promoting accountability, but downvoting for example, throws this balance out of whack.
This isn't new, most religions have something to say about usary. If anything has changed it's the increase in media manipulation, marketing and easy credit. My parents didn't have a credit card because they didn't exist at that time.
At an individual level if you are over spending then yes, sort it out. But when half the population can't deal with a financial emergency then the problem is clearly systemic.
People have an excuse for everything while holding all of human knowledge in the palm of their hand.
It’s not 1975. All of human knowledge is a few taps away. If you are ignorant on finance it is because you don’t care or don’t want to know. Either way, it’s on the individual.
The trouble is we don't just leave them to it, instead we bombard them with advertising and messaging encouraging them to go out and live beyond their means.
You can't justify a laissez faire approach unless you also turn off the propaganda.
It really isn’t. You can get into complicated topics but at the core it is simple arithmetic. Addition of what you earn and subtraction of what you spend.
Financial literacy is about exercising self control and utilizing skills that are already taught and known.
Financial literacy includes knowing what various financial instruments are for.
Knowing how to think about your budget beyond the expenses that you have every single week or month.
Knowing how a credit card works and why that makes it dangerous. Knowing ways to avoid that danger (with or without a credit card).
Knowing what a bank account is for and how to open one.
Knowing what investing is, why it's a good thing, and where and how to get started with it.
Knowing what a credit score is, what goes into it, and why it's important.
Those are all important components of financial literacy. They involve knowledge that not everybody is exposed to. Using that knowledge does often require being able to add/subtract/multiply/divide.
But while math competency is necessary for successful budgeting and financial management, it is by no means sufficient for either.
Lifestyle creep is a real thing. It almost got me too till I started ratcheting down pretty much everything. Mine wasn't so much due to material things, but more like eating out all the time, and driving to neighboring cities on a whim.
This shows financial education is needed, but more important it shows that the basic income is too low for the temptations available. In my opinion there are way too many temptations and people aren't thought how to resist them. When I say temptations I'm referring to gadgets, travelling, fashion. Everybody wants to be part of the newest trends and that's the main issue. Also, nobody wants to live in a studio or with a roommate up until 35, but I feel like a house isn't a priority anymore.
— Will, did you really make two and a half million last year?
— Yeah, sure.
— How did you spend it all?
— It goes quite quickly. You know, you learn to spend what's in your pocket.
— Two and a half million goes quickly?
— All right, let's see. So the taxman takes half up front, so you're left with one and a quarter. My mortgage takes another 300 grand. I send 150 home for my parents, you know, keep 'em going. So what's that?
— 800?
— All right, 800. Spent 150 on a car. About 75 on restaurants. Probably 50 on clothes. I put 400 away for a rainy day.
— That's smart.
— Yeah, as it turns out, 'cause it looks like the storm's coming.
— You still got 125.
— Yeah, well I did spend 76,520 dollars on hookers, booze and dancers. But mainly hookers.
— 76,5?
— I was a little shocked initially, but then I realized I could claim most of it back as entertainment. It's true!
While this story might be about someone making 2.5 million. It's as relevant for people making $200k or even $50k. You learn to spend what's in your pocket.
Will teaching basic financial skills in school actually help? We teach basic health skills like nutrition and exercise but look at America as a whole, we're unhealthier than ever yet we still teach health in school. We can teach basic financial literacy but I don't think by and large it'll change anything.
It boils down to a common mistake: knowledge != habits
You can teach people things, but if they don't actually apply them and make them habits, then no benefit is gained from that knowledge.
What's worse is we now have a body positivity movement now de-emphasizing classes like physical education that helps form those habits and is part of having a balanced life. Besides physical education, we have de-emphasized home economics as well, which is also a class where one learns how to prepare meals at home, which is another key component of being able to make healthy affordable meals.
Coursework needs to move on from theory and into the realm of practice. Maybe we should require students to maintain a budget as part of passing each grade. What did you earn? How did you spend it? What did you do to increase the amount you earn and what did you do to increase the amount you spend. It wouldn't be a bad idea to have students maintain bank accounts and finances as part of their basic education. It's not that you can't spend it or make unwise investments, but doing so should require thoughtful reflection put down into words on paper and the idea that you need to demonstrate that you've learned something when you make a mistake of spending money on something you shouldn't have or when you make an unwise investment that doesn't produce returns.
33 comments
[ 1.7 ms ] story [ 119 ms ] threadIf we wanted to do something about it then we need to look at schemes like the UK workplace pensions. It's compulsary for employers and opt-out for employees. It has resulted in many more people saving for retirement.
We give everyone the tools they need. If they are still incompetent that is on them.
You have to take an online course about understanding student loans and interest before you can accept a federal loan. The idea that students don’t know what they are getting into is absurd.
Not saying you're wrong btw, just throwing something out there.
And fundamentally I don’t understand how someone could be short on paying bills every single month and not think to themselves “gee maybe I should search the internet to help solve this repeated problem that I have.”
Somehow 33% of people can’t pay their bills every month but smartphone penetration is greater than 66%. How do so many people have access to the entire knowledge of humanity in the palm of their hand but also have not EVER searched on the internet for financial advice?
In a way, this appears to be a result of recency bias and our collective forgetting that preaching personal responsibility was once the norm in western societies. While I'm an atheist myself, long before there was any government social safety net, the church provided this safety net, but when it did, that safety net came with the expectation of learning lessons like "God helps those that help themselves".
As a society, yes it's important to have empathy for other who have made mistakes. Even Judeo-Christian religion makes room for this lesson through stories like the prodigal son. But you can't just have empathy without accountability unless you're willing to accept that more people will become a burden on the productive than if you have a culture of accountability.
You've got to have a balance between both empathy and accountability and squelching voices promoting accountability, but downvoting for example, throws this balance out of whack.
This isn't new, most religions have something to say about usary. If anything has changed it's the increase in media manipulation, marketing and easy credit. My parents didn't have a credit card because they didn't exist at that time.
At an individual level if you are over spending then yes, sort it out. But when half the population can't deal with a financial emergency then the problem is clearly systemic.
It’s not 1975. All of human knowledge is a few taps away. If you are ignorant on finance it is because you don’t care or don’t want to know. Either way, it’s on the individual.
You can't justify a laissez faire approach unless you also turn off the propaganda.
Financial literacy is about exercising self control and utilizing skills that are already taught and known.
Knowing how to think about your budget beyond the expenses that you have every single week or month.
Knowing how a credit card works and why that makes it dangerous. Knowing ways to avoid that danger (with or without a credit card).
Knowing what a bank account is for and how to open one.
Knowing what investing is, why it's a good thing, and where and how to get started with it.
Knowing what a credit score is, what goes into it, and why it's important.
Those are all important components of financial literacy. They involve knowledge that not everybody is exposed to. Using that knowledge does often require being able to add/subtract/multiply/divide.
But while math competency is necessary for successful budgeting and financial management, it is by no means sufficient for either.
— Yeah, sure.
— How did you spend it all?
— It goes quite quickly. You know, you learn to spend what's in your pocket.
— Two and a half million goes quickly?
— All right, let's see. So the taxman takes half up front, so you're left with one and a quarter. My mortgage takes another 300 grand. I send 150 home for my parents, you know, keep 'em going. So what's that?
— 800?
— All right, 800. Spent 150 on a car. About 75 on restaurants. Probably 50 on clothes. I put 400 away for a rainy day.
— That's smart.
— Yeah, as it turns out, 'cause it looks like the storm's coming.
— You still got 125.
— Yeah, well I did spend 76,520 dollars on hookers, booze and dancers. But mainly hookers.
— 76,5?
— I was a little shocked initially, but then I realized I could claim most of it back as entertainment. It's true!
(Margin Call, 2011)
https://en.wikipedia.org/wiki/Parkinson%27s_law
You can teach people things, but if they don't actually apply them and make them habits, then no benefit is gained from that knowledge.
What's worse is we now have a body positivity movement now de-emphasizing classes like physical education that helps form those habits and is part of having a balanced life. Besides physical education, we have de-emphasized home economics as well, which is also a class where one learns how to prepare meals at home, which is another key component of being able to make healthy affordable meals.
Coursework needs to move on from theory and into the realm of practice. Maybe we should require students to maintain a budget as part of passing each grade. What did you earn? How did you spend it? What did you do to increase the amount you earn and what did you do to increase the amount you spend. It wouldn't be a bad idea to have students maintain bank accounts and finances as part of their basic education. It's not that you can't spend it or make unwise investments, but doing so should require thoughtful reflection put down into words on paper and the idea that you need to demonstrate that you've learned something when you make a mistake of spending money on something you shouldn't have or when you make an unwise investment that doesn't produce returns.