Why Don’t Schools Teach Financial Understanding?

“Teaching students how to handle money is about more than dollars and cents. It is about character and responsibility”.

That being said, school is the first place which makes a child come out of his cocoon and gears themselves up to become part of the world outside the home. Isn’t Financial Understanding intrinsic to the development of a child and providing him or her a more stable life?

One thing we can do is teach Students to have multiple income streams and not just get a job and live paycheck to paycheck.

Firstly, what exactly do I mean by Financial Understanding? By this, I want to refer to money management which includes budgeting, savings, good debts, bad debt, investing, assets and liabilities.

In the USA, 1 in 4 student loan borrowers is either delinquent or in default.

With statistics portraying such a dismal picture, why are schools still not taking the initiative to teach Financial Understanding?

There are in fact several factors at play here. Schools and the government incentivize debt. The cost of education has skyrocketed over the years. While at the same time salaries have remained almost stagnant. Throw in inflation and one can see how it is becoming harder and harder to pay off student loans.

It is very difficult to build a national consensus on a topic like Financial Understanding. My understanding of spending wisely can vary vastly from yours. Most of us learn about finances from our parents who for the most part have no financial understanding as well. I grew up in a military family where I learned that we join the military, serve then when we get out we find a job and buy a house. Needless to say, this results in the unending cycle of “legacy” lessons year after year from one generation to the next.

How many of you were taught that owning a home was an asset?

I know that's what my parents taught me. Well, there is a group of people that do not teach this to their children. The rich. They teach their children that a home unless you are earning rental income, is a liability.

Now back to learning Financial Understanding in school. Only one in five teachers feel qualified to lead a Financial Understanding class. That is even doubtful they would teach it correctly. The ability for one to teach about assets vs liabilities and how money flows in or out, for the most part, is not practiced by most teachers.

This cash flow is more important today than it has ever been in the past. The teachers themselves are lost in this jigsaw puzzle. How can we expect them to train the students when they do not do it themselves.

“Tell me and I forget, teach me and I may remember, involve me and I learn.”

-Benjamin Franklin

Robert Kiyosaki’s Rich Dad Poor Dad book is a great starting place if you wish to educate yourself about Financial Understanding. You can get it all over the world and in just about every language. I highly recommend reading it.

Here Mr. Kiyosaki talks about how his "Poor Dad" was highly educated had a great position at a University but they lived paycheck to paycheck. Then he talks about how his "Rich Dad", who was his best friend's dad was an entrepreneur and had a number of businesses that provided their family with multiple forms of cash flow. Thus he did not need to get a job and they did not live paycheck to paycheck.

In his book, he goes on to explain the 4 quadrants of where people are at when it comes to earning money.

On the left side you have an Employee and the Self Employed. On the Right side, you have the Business owner and Investor.

On the left, the cash comes in from a job and flows right out to pay down debt, house, car, which are just liabilities no real assets, etc. On the right cash comes in from different sources and flows back out to create more revenue streams while paying on the majority of good debt and creating more assets and fewer liabilities.

You can click on this link below to get a copy of this must-read book. Full disclosure I am an affiliate of Amazon and will earn a small compensation if you click on the link and buy it. This link will work worldwide so, for the most part, it will direct you to the Amazon site in your country if available.

Let's continue to discuss why our education system does not teach this.

Schools are set up to teach us how to become employees not business owners. After the Great Depression, people made a dynamic switch in their fundamental way of thinking. Since many small and medium-sized businesses went out of business and only a few larger corporations, people started to look to larger corporations for security.

A few years before this you have to also remember was the end of World War I. For a brief history lesson here is a snippet from:
https://history.stackexchange.com/questions/1024/what-was-the-economic-impact-of-ww1-on-usas-economy

"The effect of WWI on the US economy was considerable. There are two effects that the war had on the US economy: short-term, and long-term.

For the short term effect, the US economy grew in the buildup to the war and during its prosecution. From 1915 the US made tons of loans to the UK to help them in their war effort. It is not a stretch to say that WWI was the major factor in contributing to the "Roaring 20s" when the US economy boomed. After the peace, the economy dropped temporarily and this is most likely attributable to the stopping of war material production. However, at that point in the timeline, the US was the only country that had not been completely devastated by the effects of the war. US companies were able to expand their reach around the world, and domestic consumption in the US increased, hence the name "The Roaring 20s." So the short term effect (I am defining short-term effect as within one decade) was that the US economy grew a large amount due to their involvement in WWI.

The long-term effect was that US involvement in the war lead directly to the Great Depression and WWII. The Treaty of Versailles led to a system where the US was cashing in its wartime loans to the UK, which in turn was using the wartime reparations it received from Germany to pay off the US. This system collapsed when the Germany economy succumbed to hyperinflation and died. That paired with Black Tuesday, which was driven by rampant stock speculation from tons of US citizens flush with cash led to the Great Depression. Since the world was still reeling from the effects of WWI when Germany fell, everything else fell apart. This event was directly attributable to WWI.

So, in short, there was a huge effect on the US economy in the short term which lead to the Roaring 20s, but the growth was short lived as it was built upon the same conditions that brought about the Great Depression."

If you lived through this time you wanted your children to grow up go to school and get a good secure job so they would be able to provide for their family and not suffer the hardships their parents did.

Think of these generations and you might get a better understanding why schools have been shifting more and more toward teaching students to be employees. I will have to do an article on these generations to really look at how one affected the next.

GI Generation.
Born 1901-1926.
Mature/Silents.
Born 1927- 1945.
Baby Boomers
Born 1946 - 1964.
Generation X.
Born between 1965 and 1980
Generation Y/Millennium.
Born between 1981 - 2000*
Generation Z/Boomlets.
Born after 2001

Here is another factor that goes to the fundamental core of basic education elementary through high school.

The industrial age needed semi-educated workers. They needed to know the basics of math and reading while learning routines.

The basic school system was born. Over the years other courses have been added and deleted. The core has remained the same. To produce a workforce that is capable to handle normal employee tasks. The big problem is that this core has not kept up with our changing society and technologies.

Our society is no longer a labor based society. For students to succeed they need to become more critical and creative thinkers. Our education system is not teaching that. In order for people to adapt to all the changes in the economy and technology, they must learn these new ways of doing things. Unfortunately, schools are not designed nor have evolved to teach this.

If you want to prepare your self and or your family you must look to examples of those who are excelling and adapting. Then learn from them. This is where if you think like the the rich you will become rich. Of course one must take action. Read, take courses about online businesses, how to use the good debt, limit bad debt, invest, create multiple sources of income. In short STOP TRADING TIME FOR MONEY!

I am on that journey now. It took me a long time to find this path and it will not be easy. I need money to provide for my family now and for the future. So it really makes sense for me to develop multiple income streams. I am 51 soon to be 52 almost at the unemployable age. Yes, that makes me a Gen Xer. We started it all and are the quietest about it. My experience and my age make me not cost effective for a regular business to hire me.

Now ad my entrepreneur mentality and I am really unemployable.

Lastly, we are now a culture of instant gratification. The concept of “put in the work now, spend later” does not sound very appealing to people who live in the present with little worry of the future. Paycheck to paycheck

What then are the solutions to this mammoth problem? Firstly, a subject like Financial Understanding ought to be taught from the earliest years of education in the home like the rich have done for centuries. Students always learn through examples so the teachers must be shown how they themselves can do it. Thus be able to show real-world examples and be well equipped to conduct such lectures.

Owing to the instant gratification of the contemporary world, education is mainly oriented towards scoring more marks rather than learning skills like; critical or creative thinking required in life.

Thus, Financial Understanding must also form a crucial part of our every day lives. This can be easily achieved through independent learning.

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