Financial Education: How We're Missing the Boat

Mark Twain purportedly observed, "Everybody talks about the weather but nobody ever does anything about it." I get the same feeling about financial literacy. Everybody talks about promoting money know-how but few do anything about it.

Money isn't the weather, folks. We can change the way people conduct their personal finances. But lasting change must include teaching financial wares to kids in school. We have to reach the K-12 generation before they develop bad habits. If we can show them simple concepts about saving and living within their means, and about risk, how markets work and the time value of money by the time they finish high school we'll all be better off.

Yet our national strategy for financial literacy (yes, we have one) offers astonishingly little guidance in this area. The official document that sets the agenda for eradicating stupid money decisions in America was seven years in the making. (See what I mean about a lot of talk and no action?) It was written by the Financial Literacy and Education Commission, which includes reps from 22 federal agencies including the Department of Education and U.S. Treasury.

The commission was authorized in 2003; it developed an initial strategy in 2006 and then took until last month to deliver its updated tome, which is overwhelmingly centered on outreach programs for adults.

Adults need help. No doubt. The sub-prime mortgage fiasco proved that -- if it wasn't already obvious. So fine, let's reach them wherever we can and offer guidance. But if we're going to avoid the next financial crisis we can't wait until our kids have grown up before teaching them this stuff.

The financial literacy document is 12 pages long; it mentions the word "schools" just three times and only as part of a longer string of places where financial education resources should be directed. That string includes "career and technical centers" and "the workplace."

So, ok, the kids have not been forgotten. But it's not enough to merely include them. They should be the focus. This new document will set the agenda for how we promote individual financial empowerment for the foreseeable future. Every federal agency will hew to it and so will a lot of private entities. There should be a whole section that talks about how to achieve financial education in our schools; it should call for a mandate to teach money as a required part of every curriculum.

Right now the only mandate seems to be that we reach out to adults who most likely are already in some kind of financial stress. That's not good enough.

One explanation for this approach is the Obama Administration's emphasis on measurable results. Behavior change is easy to document with adults, who after an educational session or two might start to save more or pay down debts. It's not so easy with kids. We can test them before and after coursework and learning games and know what they retained. But we don't know for sure how that knowledge will translate into financial decision making as adults.

Some good research is being done in this area. But we need more. In these austere times, until we have scientific evidence that teaching kids about money in school is worthwhile the movement to require financial education for kids will struggle -- and, as always, you'll have to make the difference at home.

Photo courtesy Flickr user outragousart2008
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· Taking Financial Education to the Next Level
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