It’s not hard to find statistics indicating that our skills at personal financial management are, shall we say, not well developed. Our levels of debt and over-consumption are huge, and this all was firmly established before the economic nosedive. The American savings rate going into the current recession, as everyone now knows, was practically non-existent. This was a dramatic decline from the 1950s to about 1980 when we saved on average 8% to 10% of income. And without some savings ethic, it’s hard to imagine a personal wealth management plan of any long lasting worth. Especially now, when the only semblance of “savings” for many of us lately has been in the form of 401Ks and home equity, both of which are about as rock solid as a pile of sand.
Collectively, we are all learning some harsh, but necessary, financial literacy lessons. Encouragingly, since September, our savings rate has increased to the point where we’re now being told we’re saving too much and that if we don’t spend more the recession will be longer and deeper. We are also coming to grips with the fact that typical American levels of consumption are probably not sustainable for the near future. So all of this raises a question. Does it have to take a major recession for us to learn how to be really smart with our money? Is the younger post-Millennial generation, now in middle and high school, going to be able to enter their spending years smarter regarding credit and savings than previous generations? Let’s hope so!
In order for our kids to have any chance of becoming financially literate there needs to be a commitment from educators, legislators, and other stakeholders to see that effective financial literacy programs are made available for students. And one critical component of any such program must be in career development. When students are taught about the principles of savings, investment, responsible use of credit, and checking account management there is a much greater chance of student buy-in if the instruction takes place within the context of each young person choosing a career that fits their interests and personalities. Think of it, would you want to be told to solve a bunch of abstract financial word problems on par with, “If a train leaves Philadelphia at 2:00pm traveling 80 mph and another train leaves New York at…” You get the picture, irrelevant and boring.
Now in contrast, imagine putting kids through a process in which they are told that each of them has promise and a unique set of developing interests and capabilities with which they should each get in touch. And further that their individuality can have a match with a career that can make life fun and interesting. With such an introduction, students can look at how the money earned from these careers can best be used to finance a reasonable and sustainable lifestyle.
I’m not just hypothesizing here. I’ve seen it happen as an educator. Career development is the most effective gateway to financial literacy for youth.
Of course, the biggest challenge is to get schools to even bother with teaching financial literacy at all. Abstract and impractical math concepts still seem to dominate and hold more value in math education than teaching kids how to be clever with finances. As for classes in economics, the concern seems to be much more to teach macro-economic principles than to cover the more practical basics of financial education.
However, for those schools and states that get it, teaching career and finances in tandem is a great service for the ones who will be in charge of the economy when we’re old and gray.
