Saturday, March 11, 2023

A Course in ‘Financial Literacy’ Makes Good Sense

Recently, I read an article that discussed the requirement in some states that high school students must take and pass a course in “financial literacy” in order to graduate. The course is an explanation of the basics of personal money management, such as how to create a monthly budget, how to save for emergencies, how to get out of debt, and how to build wealth for the future.

I wish they had something like that when I was in high school, as this is kind of a sore subject in my family. Our kids, who are now adults, often remind my wife and me that we taught them nothing about personal finances when they were growing up. We reply, “No, we taught you everything we knew,” to which they exclaim, “Exactly! Because you knew nothing!”
Well, they’re not wrong. I left college with a degree in Business Management, and back then if you needed someone to explain to you how a large corporation could take accelerated depreciation on manufacturing equipment for tax purposes, I could do it. Or if you needed someone to tell you the difference between a Balance Sheet and a Profit & Loss statement, I could do that, too. And I was very knowledgeable about the details of the Sherman Antitrust Act of 1890 (which has come in handy exactly zero times in the last four decades).

However, if the subject was personal finances, I was clueless. When I look back now, some of the things I believed about money management were delightfully naive. (I’m using the phrase “delightfully naive” because it sounds a lot better than “frighteningly stupid.”)

For example, when a bank issued me a credit card when I was 22, I didn’t quite make the connection between all the wonderful items I was purchasing and the fact I was going to have to PAY for them — with real money — at some point soon. Also, I couldn’t understand why a different bank was sending me nasty letters, filled with high-falutin’ words like “overdrawn” and “negative balance.” There can’t be a problem, I told myself, since I still had plenty of unused checks in my checkbook. I’m exaggerating here, of course. But unfortunately, I’m exaggerating only slightly. My comprehension of personal money management was truly non-existent. 
I don’t want to blame my parents for my lack of knowledge — even though my kids now blame me. My father gave me the best advice anyone could ever receive. He told me, “Get a job, show up on time everyday, and do what they tell you. If you do that, everything will work out.” 

He was right. Things did work out in the long run because I eventually followed his advice. But it would’ve been nice if he had explained to me what a monthly budget was, or if I faced the situation where there was “too much month at the end of the money,” then I either needed to decrease spending or increase income, rather than my preferred technique: have another beer or two (or 12) and vow to think about it some other time.  

I don’t know exactly what high schools are teaching in these new “financial literacy” classes. But whatever is being taught, it has to be better than nothing. If kids who graduate from high school know what a personal monthly budget is, and if they understand that a credit card is not the same thing as winning the lottery, then they’ll be in much better shape than I was with my “delightful naivete” (also known as “frightening stupidity.”)
And I’m pretty sure these kids' lives will not be ruined if they never learn the details of the Sherman Antitrust Act of 1890.

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