Why personal finance should be part of school curriculum

Over the decades that I have been asked by people about their personal finances, I have never ceased to be amazed by the abysmal level of knowledge that they have about this subject. People who have worked successfully at their professions for years and have deep skills and competence in their chosen vocation, have no idea how investments, insurance and even banking works. One typical pattern is of successful people earning crores of rupees in their careers, and investing it all in real estate. Now, as they near the end of their working life, some of them are realising that if at all there ever was any logic in this kind of financial management, it certainly isn’t there now.

One is tempted to ask, why does this happen? However, that’s the wrong question to ask, and more than a little patronising. Instead, the question to ask is, “Why shouldn’t it happen?” Why should we expect people—even educated people—to have a proper idea about how the world of personal finance works? How would they know? Who do we think would tell them, or teach them?

The uncomfortable answer to these questions is personal finance is not part of any education that anyone receives in school or college, nor is there any trustworthy way to acquire such knowledge. Sure, people can turn to the media, as readers of this column are doing. However, it is a sort of a chicken-or-egg situation. To seek out, filter and evaluate the learning and information that is available in the media, one must already have a basic level of knowledge. However, a complete lack of knowledge is the problem to begin with.

In effect, the only sources of knowledge that seek out and actively tries to carry the message to the audience are the sellers of financial products themselves. However, this education is actually just a sales message, and is a cure worse than the disease. It’s almost a rule that the more lucrative a financial product is for its sellers, the worse it is for the end users.

In fact, some months back, I wrote in these pages about how a study had shown how financial literacy was negatively correlated with the quality of personal financial management. The reason was that most of what passes for financial literacy is actually happy talk about what wonderful financial products are available, with little attention paid to the actual fundamentals which would enable people to take their own decisions.

Typically, young people get to know about money only in the ways they deal with it. They get it from their parents, and they spend it. They see their parents swipe cards at shops and ATMs, and that’s all. Of course, things like this should ideally be taught by parents. However, that’s another chicken-and-egg situation because our starting point was that the parents don’t know anything much either. There may actually be only one solution to this problem, which is the universal inclusion of personal finance as a topic in formal education. It just makes sense that there should be some small element in that education that’s focused on taking care of that money.

Of course, it goes without saying that the chances of this actually happening in any meaningful way are slim. Practically speaking, the capability of the Indian education system to actually create any desirable outcomes is probably receding rather than advancing. Even so, the sooner there is a realization that something like this is needed, the greater the chance of something being achieved.