Let’s Stop Overlooking the Elephant in the Room: Financial Education
I've always felt like I was living the American dream. Never for a moment did I ever feel like I couldn’t reach the stars if I wanted to. Growing up in the quaint town of Angwin, up in the hills north of Napa in California, I was expected to be a good Korean girl at home, and a fun-loving American at school. My parents are immigrants from South Korea and instilled in my brother and me extreme discipline, which meant not only getting the best grades and winning piano competitions but also being disciplined with money.
My mother was relentless about teaching me lessons about budgeting and saving. For example, I was told to avoid spending money on small things, because I wouldn’t then be able to afford the important things I need in life. The lessons were simple and practical, and I happily grew up thinking my upbringing in Angwin was the norm.
That is until I grew up and faced reality.
When I met my future husband, who immigrated from Serbia, I learned that when he came to the US on a scholarship for grad school, he had a total of $2,000 in his pocket. He thought he wouldn’t be able to make ends meet. Little did he know that he was much better off than most of his grad school classmates who were swimming in tens of thousands of dollars in student loan debt. I sure as hell was.
Let’s face it, going through any life event — going to school, getting married, buying a home or car, expanding your family to retiring — comes with a hefty price tag. And unfortunately, just the thought of money gives the majority of us stress and anxiety.
But why is that? Here are a few reasons to start:
“Americans love to talk about how much they hate talking about money,” according to Joe Pinsker’s article on this very issue. We’re more comfortable talking about mental health, addiction, marital problems, race, and sex. My view is that we feel like our value as humans somehow becomes material or debased when you expose your pay or accounts. And actually, there are a ton of scientific and psychological reasons why we don’t talk about money (widening wealth gap, denial, guilt, moral hazards, and others), but whatever they are for each of us, that to me means that too many of us are trying to figure out how to manage our finances and learn about money on our own.
And left to our own devices to learn about complicated topics isn’t easy. How many times have you searched online for financial answers, relied on the advice of friends and family, went with the first option available, or simply did nothing because it ends up being too complicated to figure out? Relying on others for financial direction at every turn in life is far from ideal.
Choice overload is real
Which will you choose? Maybe one or none?
When presented with too many options, we feel anxious and dissatisfied, and those feelings intensify when it comes to important life decisions. And in an increasingly complicated financial world with more and more products and services being offered every single day, it’s becoming harder for us to make decisions. For example, studies on 401(k) plan participation rates reported in the Journal of Financial Services Research show that increasing the number of mutual funds offered in a 401(K) plan actually had a negative effect on participation.
Personal finance concepts and the lingo that comes with it is hard to decode
We don’t grow up learning about personal finance through a formal curriculum in school since the majority of states don’t mandate it. That means for most of us, understanding all the jargon that comes with personal finance and deciphering which money topics should be considered chapter 3 versus chapter 10 material in our lives is hard to piece together, let alone practically apply in our lives. For example, say you’re interested in short selling or trading options on your own (and there are now a bunch of companies offering free tools to help you do that). Before you jump into that, you should have a basic understanding of taxes, debt management, and savings, so that you’re making measured decisions that make good sense for you in your current stage in life. If you make the wrong trade, you may find yourself in a deep hole. And unfortunately, we’ve seen this play out over and over again.
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These reasons and more are leading to an increasing level of financial stress for too many hardworking people in the US, and the pandemic further highlights the need for solutions that focus on financial education. And it matters because our attitudes about money and personal finance play such a big part in our overall happiness.
The stats speak for themselves:
- Younger adults report the highest levels of stress about personal finances than any other segment. 63% of Millennials report being financially stressed (USfinancialcapability.org).
- 60% of Americans are living paycheck-to-paycheck (Schwab). There are more payday loan stores than there are McDonald’s franchises in the US (NYTimes).
- Financially stressed Americans pay $170 billion a year in bank fees alone (Financial Health Network). That’s about $1,500 in fees per US household.
- Nearly half of Americans don’t have any emergency savings (USfinancialcapability.org).
- US consumers owe a total of $14 trillion (NY Federal Reserve). That’s over $110,000 of debt per US household and that number is growing fast.
Living paycheck-to-paycheck and having more debt that we can keep track of shouldn’t be the norm in our society, but it is.
We need to find better ways to increase basic financial literacy so that more of us feel empowered to make informed, smarter decisions about money. And we need to start with the younger adult generations. If the younger adult generations are feeling so stressed, how are they to guide the future financial wellness of our even younger generations?
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“An investment in knowledge pays the best interest.” — Benjamin Franklin
For me, I’ve learned not to take what I was taught by my mother for granted. My upbringing wasn’t the norm, and I’m lucky for that. All of those childhood lessons on personal finance have had a lasting impact on how I budget, save, pay down debt, invest, and live my life.
Many fintech companies all around the world have launched noble missions, democratized access to personal finance tools, but have overlooked the big elephant in the room: the need for and focus on basic financial education.
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