The Financial Literacy FAIL

Financial literacy fails because it addresses only one problem:   It focuses on facts and figures while largely ignoring behavior.

This is insane.

This is like promoting sex education that talks about penises and vaginas while never discussing what it’s like to be madly in love with somebody so in love that your brain stops working and you just end up being ‘CLOSE’ anyway.  For sex education to be effective, it has to deal with real-world circumstances and behavior.  It has to teach about psychology and emotions, not just body parts!

The same is true with financial literacy.

Literacy = “… the ability to use printed and written information to function in society, to achieve ones goals, and to develop one’s knowledge and potential.”

  1. Folks are too influenced by a barrage of media, admitting they are influenced by it but ADMIT and recognize it and then NOT fall prey to the temptation to buy just because they have great marketing.
  2. THINK about spending. Ensuring that each dollar has a purpose before it even comes into their hand.   Stop spending on impulse and be deliberate about where those dollars go.

Instead of teaching Americans about credit cards and rates of return, we need to be teaching them about behavioral finance.  We need to be showing them how to break free from the marketing messages that are all around.  We need to be showing them how to set (and achieve) personal goals, especially financial goals.  We need to teach skills like conscious spending.

Ultimately, if we want Americans to be smarter with their money, we need to encourage them to consume less media — to avoid advertising — and we need to teach them to master the emotional side of personal finance.  We need to show them how to change their BEHAVIOR.  We need to appeal to their self-interest.  We need to help them find intrinsic motivation to save.

Each of us needs to dig deep inside to find what it is that’s important to us, what it is that brings us joy, and we need to prioritize that instead of all the other garbage.  I’m not suggesting that we abandon traditional financial literacy completely. But I think a constant push for more financial education is a waste of time and is not enough.  To truly be successful, financial education has to address the behavioral side of money because that is absolutely the biggest piece of the puzzle.

What do you think?  Have you seen this happen in your life?   Leave a comment below.

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