Watch CBS News

Financial Education: How We Got Here and Where We're Going

The financial education movement in this country is no accident, and it would be wrong to conclude that it springs chiefly from the Great Recession, which for most of us remains in full bloom. For fun, I decided to trace the movement by studying the use of two key terms, dating to 1800.

The results are shown below. But before you get there let me explain how we got to a point where it's more important than ever for kids to learn about money in school and at home.

The concept of financial literacy is about 15 years old. It emerged in the middle 1990s, when despite a robust economy and healthy government budget on its way to surpluses personal bankruptcies were hitting record highs almost every year. A group of economists gathered in Washington D.C. to sort through this baffling condition and ultimately concluded that as a society we had reached a little-understood tipping point.

For the first time in many years, the group found, long-term financial security for most Americans depended primarily on the personal decisions they made about things like saving, spending and borrowing. Less important were institutional benefits like Social Security and private pensions, which had backstopped the population for generations but were in decline.

Traditional pensions and Social Security were being replaced by the likes of 401(k) retirement and 529 college savings plans, and in this shift the onus was being placed on the individual to make wise choices about how much money to set aside and what mutual funds to own. By the middle 1990s our safety nets had sufficiently disintegrated to where we began to recognize that personal responsibility was the new key to a secure future.

We also started to realize that most Americans weren't up to the task of figuring this stuff out -- evident in the soaring bankruptcy rate at a time when opportunities abounded.

The group meeting in Washington determined that financial literacy for all Americans must become a national priority. They formed the core of what is now the JumpStart Coalition for Personal Financial Literacy and by 1996 the movement was off and running.

Now to the graphic, which traces the decline of the social safety net and rise of personal responsibility through two key terms. The red line graphs the rate of use of "social security" in published books since 1800. The blue line graphs the term "on your own" over the same period. Both were charted using the Google Ngrams tool.

See how "on your own" began to appear more often around 1980, which is when the first real warnings of eventual pension problems began to surface and the media began to howl that we are increasingly on our own in an ever more complicated world. See also how "social security" begins a sharp decline about the same time as the media had less reason to highlight the term amid a cultural shift from government guarantees to personal financial choice.

This is a perfect image of a nation coming to grips with the most important financial trends of our day -- moving from the 1960s-era welfare state to what George W. Bush called an ownership society. The crossover comes about 1999. Punctuating this tipping point, I wrote a cover story for TIME in January 2002 declaring, "You're On Your Own, Baby!" That cover is pictured above.

Notice that the trend lines are intact -- despite ObamaCare and recession-inspired moves toward socialized housing and other assistance the past couple years. The era of personal responsibility is not going away; it will be with our kids throughout their life. If they are really going to be on their own don't we owe them an education that will allow them to manage their financial affairs well?

Yes, we do. The financial literacy movement has a long way to go.

Top image courtesy of Time; chart by Bank of Dad
More on MoneyWatch:
· 6 Steps To Your Kids' Financial Security
· Financial Education: How We're Missing the Boat
· Financial Education at School: Is It a Pipe Dream?
· Taking Financial Education to the Next Level

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.