M is for Money

This recession has many causes - corporate greed, an excess of debt and poor planning. But when it comes to individuals and their financial woes, it is clear that a lack of financial literacy is a major factor. Because of this, financial education for the masses is finally gaining attention on a national level.

Like many people, I learned about money the hard way. I made every mistake in the book, ran up too much debt and had no savings. I was living paycheck to paycheck, without realizing how precarious my situation was. I had no money management skills because I was never taught any. For whatever reason, we are each on our own when it comes to our financial education. But soon that may change.

Given the huge scope of the economic collapse, policy makers can’t ignore the factors that created this mess. Many are realizing that Americans are financially illiterate, unable to grasp even simple financial concepts. Providing some amount of education into basic money management and financial concepts like interest, compounding and amortization would go a long way to helping people manage their money. Unfortunately there is no one right way to handle money, but there are many wrong ways to go about it. A financial education will provide the foundation for good money management, but it won’t guarantee success. So where will this education come from and what will it teach?

Last January, a presidential advisory panel on financial literacy recommended mandatory financial education for K-12 grades and a course for college students before they take out student loans. Unfortunately, there is no funding to implement these ideas. Meanwhile several states have taken up the initiative themselves, though most still have no financial education requirements.

What to teach is even less clear, money management is rooted in basic mathematical principals which can be taught. But good financial habits like saving money every month and avoiding consumer debt require regular practice, most school aged children don’t have the opportunity to develop these skills. Hence many experts feel that employers should step in to help educate their workers on finance. Unfortunately, most workplace money education is limited to presentations by financial companies looking to gain control of your money, they are not without motive.

Whatever initiatives come out of this crisis, money management will remain a skill that most people have to learn on their own through trial and error. A basic financial education will certainly help consumers and individuals make better financial choices, but it won’t teach them the habits necessary for financial security.


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