Digerati Life presents her thoughts and argues in favor of mandatory high school classes in money management skills. Most agree that financial illiteracy played an important role in the 2008 housing crisis and is the fundamental factor in the ongoing struggle families have with credit card and other types of debt.
The departure point in the debate is how to solve the problem. Many people are quick to jump on the bandwagon calling for classes in high school and elsewhere, mandatory testing, and the usual type of solutions. Many are willing to throw a lot of money at the problem. Some, in fact, would have a lot of money thrown their way if their solutions were adopted.
A different view is expressed by Lauren Willis. A professor at Loyola Law School of Los Angeles, she has written "Against Financial literacy Education." Ms. Willis does something not typically done in this debate. She brings to bear evidence, and she thinks in terms of costs and benefits. She finds that the costs far outweigh the benefits.
One of the difficulties, I believe, is that financial literacy is such a wide-ranging subject area and means different things to different people. Ms. Willis mentions the futility of turning people into "...financial experts." This, to me and I suspect many others, is a bit of a strawman argument. Few proponents of financial literacy would even put themselves forward as "financial experts." Most, themselves, use experts on complicated financial questions. They will have attorneys look over contracts and mortgages. They'll turn to financial advisors for investment advice and financial planners to do financial planning.
But, at the other end of the spectrum, there is the basic thinking about wants and needs. There is the basic understanding of compound interest and the value of saving and investing at a young age. There is the understanding of the basics of investing.
Extending these concepts to study how to think about buying a car or the analysis that goes into thinking about renting an apartment or even the whole subject of student loans is fairly straightforward. In fact, from the teacher's perspective, all of these subjects readily lend themselves to highly interactive classroom projects that students are interested in.
Even closer to home is the fact that there are really good blogs that speak to young people and cover these subjects in an entertaining way. I frequently recommend, for example, Ramit Sethi's blog to young people. Reading his blog for a year will ramp up people's financial literacy - both young and old.
The part that is not so easy is teaching when people need to get advice, when they need an objective analysis of whether they can afford the mortgage or whether they should take the adjustable rate loan or fixed rate loan.
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