Years ago, I showed up to help at a church home-building project. The supervisor took me down to the basement, gave me a hammer, had me raise it a little over my head, and left. After a while, I dropped the hammer and went upstairs and asked, “What am I supposed to do?” The answer was, “Just stand down there. That way you won’t do any damage.”
This gives you an idea of level of my carpentry/home repair skills. Now, in many times and places, especially in the past, those skills, along with hunting, butchering, and raising crops, were essential for basic survival. In such an environment, I wouldn’t do well at all.
I fare better in today’s world, because I am much more skilled at handling money than I am using carpentry tools. And, as I learned from the late Dick Wagner, a financial philosopher and my good friend, financial skills are 21st Century survival skills. Providing for yourself and your family requires knowing how to earn money and how to use it wisely.
Financial literacy includes knowing how to save and anticipate future needs, how to get value for what you spend, the importance of building an emergency fund, and the necessity of maintaining good credit. And these are just the basics. Money touches everything we do. It goes beyond just providing for our physical needs to affect our relationships, our emotional and physical health, our spirituality, and much more.
At the same time, as a society we don’t really value money skills. We don’t teach them. It’s rare for a course in personal finance to be a requirement for high school graduation. We hear more about sex education in schools than we do money education. I do have to give my state a little credit here; South Dakota does require a half year course in either personal finance or economics to graduate from high school. Even then, the fact that students choose between the two shows that educators still don’t understand the importance of personal finance and that it’s not the same as economics.
Money skills are not innate. They have to be learned. Right now, the only place most of learn them is from our parents—who were not taught money skills, either.
So it’s not a very bright picture. One program I know of, which I used to teach, is Junior Achievement that is taught in a lot of schools. It’s an excellent program, but an hour once a week for several weeks is just not enough to make a huge difference in somebody’s life.
Of course, financial literacy is only half the equation. Just because we have learned basic financial literacy doesn’t mean it’s going to be applied. As this podcast emphasizes, the emotions and beliefs around money are as essential as the technical knowledge. In many cases, they are more crucial when it comes to making positive changes in the way we deal with money.
Am I contradicting myself, then? First I say financial literacy is important and we don’t value it enough, and then I say it might not make that much difference. It’s not a contradiction. Financial literacy matters.
For a minority of people, knowing the facts is enough to shape wiser money behavior. For others, the knowledge needs to be there after they deal with the emotions and beliefs through financial therapy. It’s essential that we put the two together. The combination gives us the full range of 21st Century financial skills we need in order to thrive.
Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.