If you’re reading this right now, you most likely have some interest in personal finance. Everyone coming here to Squirrelers probably cares about money in some way, shape, or form. Along those lines, there is probably at least a basic level of personal finance knowledge that many people have when reading posts here or on other personal finance blogs. Some of you go well beyond that, and might fall into the “expert” category.
Sometimes it’s a good idea to stop and think about this for a moment, while realizing that there is probably a staggering number of people out there with zero knowledge of money or how to handle it. One thing that reminded me of this reality is a study showing that many people don’t know with whom the U.S. fought for independence in the 1700s. Sure, that’s not exactly a topic within the personal finance sphere, but it jumps out as an example of how basic knowledge can be missing in so many people.
1 in 4 people apparently did not know that the U.S. obtained independence from Great Britain. Some people were unsure, and others even thought the U.S. broke off from places such as France, China, and Mexico. Seriously. And yes, these were actual U.S. residents surveyed.
I mean, if that’s the case, you can be sure that there are a ton of people with even less knowledge of money!
Here are some concepts that might be missing from the knowledge base of such folks:
- The reason to have one’s expenses be less than income
- Why a person shouldn’t automatically take on the maximum home loan for which he or she is approved
- The difference between wants and needs
- What rate of return is
- What stocks and index funds are
- Why saving for retirement is important
- Why social security, “the system”, or anybody else won’t be there to automatically take care of you when you’re old
- Why carrying credit card balances can be so bad
Not making fun of anybody, but just realistically saying that there have got to be plenty of people who simply just don’t understand the basics with money. If there are people thinking that the U.S. declared independence from France, China, or Mexico, you can be sure that there are people who think credit cards are a source of free money. Or something similar.
What’s alarming about this is that grown-ups with such knowledge (or lack of it) are actually advising their kids on careers and whether or not to go to college. While education can lead to wealth, going to the wrong school with high expenses and low ROI compared to cheaper alternatives could saddle a kid with massive student loan debt when young.
The blind leading the blind?
Anyway, where this all leads me is to the idea that there really should be a lot more basic financial education in schools. As in, starting at a young age. If we’re teaching history in school and 25% don’t retain basic historical facts, then you can bet that a far greater percentage don’t know money basics since those aren’t as much of a focus academically.
Actually, if we could get it to where only 25% of people don’t know simple financial concepts but 75% do, that would probably be a huge improvement. All that collective financial savvy could help a country make good financial decisions as well, including operating on a balanced budget and avoiding national debt. Keep going at our current rate, and we’ll have to fight for independence once again – this time financial independence.
So, for the greater good, here’s to teaching kids about money at a young age!
My Questions for You
What are your thoughts on personal finance basics being taught in schools?
Do you think that those of who read (or own) personal finance blogs sometimes lose sight of just how many people out there don’t understand simple money concepts?
As a side question, what do you think about those findings about knowledge of U.S. history?