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Education for a Better World
Teaching Financial Literacy

In an increasingly mobile and complicated financial world, it’s more important than ever that Americans understand how to manage money. The Wall Street Journal interviewed two experts, asking them to debate whether college students should be required to take a course in personal finance. Annamaria Lusardi makes the case in favor:

It is time to extend that type of thinking to financial knowledge by making personal finance a required course at U.S. colleges and universities. For people—especially young people—to survive and thrive in today’s financial environment, knowledge of personal finance is a necessity.

We’re already seeing what happens when young adults juggle high-impact financial decisions without the benefit of financial knowledge. Take the well-known burden of student-loan debt. Student loans are the second-largest part of the consumer credit market, after mortgages. The lion’s share of that debt sits in the hands of millennials—and our research shows they worry about their ability to pay off those loans. As well they should. The default rate on student loans is sobering.

Lauren E. Willis makes the case against:

Financial offerings change too quickly for regulators to keep up, never mind educators. In addition, compared with the salesperson across the table, consumers will never be as knowledgeable about financial products and services—or about the psychological maneuvering with which they can be sold.

Common sense thus suggests that college courses won’t enable people to make the kinds of financial decisions society currently demands.

Read the whole thing and decide for yourself, but count us on the “for” side—insufficiently persuaded by Willis’ case. In fact, we’d go further: American K–12 schools should teach basic personal finance too. Understanding money is a vital skill for citizens. Consumer advocates often accuse banks and other institutions of taking advantage of unsophisticated citizens. They’re not wrong, but their solutions all focus on regulations to protect consumers. What if we also thought about teaching American consumers to be savvier savers, borrowers, and investors in the first place?

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  • Unelected Leader

    Americans need to save more, or at least invest more and earlier, not when they’re 40s and finally starting to think about retirement.
    Of course the problem for the middle class is inflation. It’s a total disaster.
    The dollar has lost 65% of its buying power in the last 35 years.

    You might not feel 1.5% or 2% each year, but after a decade you feel it, and after a 40 year work life it has gutted your wealth – eating up savings and returns on your pension or 401k.
    The deficit spending needs to stop. The worthless deficit dollar just keystroked into existence are a matter of national urgency, but the government can’t stop deficit spending at home without first remedying the trade deficit

  • D4x

    Might want to start with teaching everyone reading comprehension before trying financial literacy.

    • Boritz

      And can we please do this without math.

  • FriendlyGoat

    Aside from “save more and start sooner”, most of the financial literacy which should be taught to help young people avoid pitfalls will be opposed by the business community——because a lot of business is “in business” to be the pitfalls. None of these wish to be the subject of criticism (especially in K-12 schools) and none of these industries wish to raise future voters who can identify practices which should be more heavily regulated. In car depreciation, banking fees, consumer finance, rent-to-own, insurance products, lottery, casino gambling, multi-level sales, overdone weddings, phone plans, tattoo and cosmetology (among many other things) there is lots to scrutinize or avoid. One could expect schools to be harassed for dwelling on any or all of it.

    • Matt_Thullen

      Yes, I can see “Big Tattoo”, which has its insidious tentacles throughout all levels of American life and government, quickly squashing this initiative.

      In all seriousness, considering that the fastest-growing and most valuable businesses in the U.S. are solidly Democratic (e.g. Google, Facebook, Apple, Microsoft, Amazon), would you care to reassess your opinion?

      • FriendlyGoat

        No, of course not. The point is, you can’t do a comprehensive job of telling kids what they ought to know about their own personal financial life without stepping on a lot of toes which will scream when stepped on. As for tattoo, I see a lot of dandy body art for which a LOT of money was paid and which is NOT helping the life marketability of the persons on whom it was done. But tattoo is mostly small business as opposed to any “Big Tattoo” and is just one of the smaller issues.

        The fortune being made off of poorer people in banking fees (especially overdraft) is a bigger issue and it, for instance, really is “Big Banking”. Ditto the universe of high-interest lending. As for Democratic (politically) businesses which are making an undue killing off of young people, any or all of them are equally deserving of scrutiny together with those more usually associated with Republican politics.

    • Boritz

      My favorite is the burial services that say things like that economy model casket would be like burying your dearly departed in a tin can but if that’s what you want…

  • Andrew Allison

    Common sense suggests that educating college students as to the mistakes they’re making with student loans is shutting the stable door after the horse has left. As TAI suggests basic personal finance (including the real costs of a college education) should occur in high school. Of course, given the fact that one-in-four college entrants require remedial classes (https://www.washingtonpost.com/news/grade-point/wp/2016/04/06/remedial-classes-have-become-a-hidden-cost-of-college/?utm_term=.4b56dbf134a9), that may be asking too much. Perhaps, instead, a competent secondary education should be a pre-requisite for college entrance.

  • ——————————

    ‘Real’ financial responsibility as a way of thinking for most people can never happen when entire societies are built around consumerism. It is human nature to want more for less, and we have built our civilizations around that…and it will never be changed.

    Most people can’t even park in their garages because of all the stuff they own….

  • ვეფხისტყაოსანი

    Given that nearly half of college students believe that their student loans will be forgiven by the government — part of their overall belief that no one should ever be forced to do anything he doesn’t like and should always get whatever he wants, all courtesy of the Evuullll Rich — I don’t see this having any positive effect.

    Rather, they will learn that other kids got more “free money” than they did and redouble their efforts to catch up.

  • markterribile

    Can we fit the Rule of 72 into the high school math curriculum?

  • Boritz

    “What if we also thought about teaching American consumers to be savvier savers, borrowers, and investors in the first place?”

    This is not a realistic goal in a culture where voters selecting their political leaders are exempted from the need to display a photo ID on the basis that the ID acquisition process is too arduous for them to navigate.

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