Before joining the world of market research, I was a financial advisor and ran my own office for a large financial services firm. In order to prepare me for this, I had to undertake an intense training program, where I learned about bears, bulls, calls, puts, dividends, diversifying portfolios, balanced mutual funds, and the list goes on and on. It was a ridiculous amount of material and although I successfully attained the licenses and training necessary to advise clients, I had anxiety that I would be presented with questions that I didn’t have the knowledge to answer. To my surprise, the majority of my clients would come to me with extremely simple questions. Some, so simple, that I could have answered when I was 16 based on knowledge from my high school math classes. It was mindboggling how often perfectly functioning adults did not understand simple financial/investment concepts, like how interest on a credit card works or the difference between putting money in a C.D. at the bank versus investing in the stock market. This brings me to my point…why is financial literacy not a mandatory part of the U.S. school curriculum?
According to a recent Ipsos poll, only 13% of American adults said they were taught about investing when they were in school. That leaves too many people to fend for themselves, or be lucky enough to have had parents who both understood the concepts themselves and knew it was important enough to teach to their kids.
With this data, is it a huge surprise that so many Americans have filed for bankruptcy, foreclosed on a property, had a vehicle repossessed, struggled to pay back education loans, not saved enough to comfortably retire, and so many other financial setbacks that common folks have experienced over the past few decades?
I get it. Credit cards, financing education costs, car loans, and investing in the stock market didn’t become popular until more recent times. So, it makes sense that Gen X had to mostly rely on being self-taught (41%) or not taught at all (38%). Looking on the bright side, the Ipsos data shows that millennials are significantly more taught about investing by schools (29%) or parents (21%) versus the older age groups. This indicates that Americans have begun to understand the importance of financial literacy. However, I’m hopeful that we can do one step better for Gen Z by encouraging the education system to add financial/investment literacy to the curriculum and making it a priority to proactively teach our kids about it too. Make it fun! Borrow a dollar from your child and return it to them the following week with an extra nickel, explaining that they made interest on it. Or, you can keep the dollar and tell them that China’s economy slump impacted the stock market, so they lost their investment (then buy yourself a candy bar with their dollar for being such a good parent). Either way, the point is to expose them to real world financial and investment models at a young age.
If more Americans understood common financial and investment concepts, could that lead to fewer bankruptcies? Fewer people with crippling debt? Could we avoid a future financial crisis like we experienced in 2008? Maybe…maybe not. But, at least we could say we tried.