Lack of Education to Blame for Financial Mess


I won't mince my words; our current financial plight is entirely our fault. We are a nation of financially-ignorant inhabitants prone to impulse purchases such as buying a $450,000 home on a $40,000 a year salary, while willingly subjecting ourselves to the rigors of paying back a 120% refinancing loan.

How in the world did we deem this acceptable and what are we doing to ensure this won't happen again? Everyone is sick and tired of reading about bad news and the sorry state of the economy and would rather bury our heads in the sand and hope the Justice League of Obama is here to save the day. Well he's not and I'm here to tell you, it's up to each and every single one of us to get ourselves out of this mess. If we don't change the way we teach personal finance to the youth of this country, we would have learned nothing from this economic disaster with future generations destined to repeat our mistakes.


Having taught college business students for many years, I am horrified by the lack of personal finance training the youth of today receive. Are they to be left with acquiring these traits on their own? There are a lot of books on personal finance out there. Don't take my word for it; stake out your local bookstores or libraries (yes they still exist) and watch the caliber of people who frequent the finance section. You'll notice one thing - a dearth of youth flocking to get their hands on the available books. It is usually the 30 and older crowd that have now found themselves in financial straits and in search of guidance out of their plight. The younger generation doesn't realize that they need this knowledge yet. Their parents probably never taught them because they probably have a limited understanding of personal finance themselves. How can we expect parents to teach children something they never learned in the first place?

Shouldn't personal finance skills be something we acquire in high school and college in order to prepare us for our financial futures? Arizona State University's W.P. Carey School of Business has a good reputation. I use this as an example because I have intimate knowledge of its workings having earned my BS in Business there. Business Week lists ASU in its 2007 rankings as 66th out of the top 100 business schools. I am not trying to pick on ASU because it is a wonderful school. However, as of the last semester of 2008, they offered only one course that addressed personal finance and retirement planning. Only three sections of this course were even offered. For one of the largest business schools in the US, there was very little emphasis on educating youth on the benefits of being financially savvy. ASU also only requires that business minors take this course.

I recently ordered a textbook ASU uses to cover this course to get a gauge of the quality of the literature being used and I have to say, despite my interest in the subject matter, I was literally bored to tears! Words like "net present value of money" have me retreating in horror. I just don't think that it teaches the types of things young people need to know in a way that would spark their interest. The textbook is littered with charts, pictures, numbers and balance sheets. An individual with only a passing interest in math might be immediately put off by this. To be fair, this course is offered to business majors, who are probably decent in math. However, what about the rest of the students who are not? Why are we only teaching personal finance to business majors? Granted, it's a class that is open to everyone, but this is not a requirement. Personally, the text book would be a "next level" type of teaching tool for those with rudimentary knowledge. Unfortunately if ASU is representative of what other schools offer, they are missing the boat of what it takes to reach the average student.

Paula Zobisch, Ph.D., a renowned professor and online educator at ten online universities, agrees that appealing to the youth is important. When quizzed on her feelings towards the lack of tutoring available to young students, she said,

Financial management begins long before college. Sure, let us lean on the high educational institutions to teach financial management, but let us not also forget high school. And even more importantly, let us remember parents who could teach financial management by giving younger children an allowance and then guiding the management of that allowance.”

Fox News (2009) reported only 48% of high school seniors correctly answered finance and economics related questions.

This is not to say that more colleges and universities aren't realizing the importance of teaching personal finance. In fact, universities such as Lynn University, University of Cincinnati, Kent State, Fairfield University, Scripps College and Texas State are all among the schools offering courses in personal finance and money-management. However, some universities have had some convenient relationships with credit card companies which would appear at odds with teaching fiscal responsibility.

New York Times recently featured a story about how colleges profit from marketing credit cards to their students. Michigan State University came under fire as it was noted that they allowed Bank of America to offer advertising items to their students to sign up for banking and credit services. In fact, according to the New York Times (2008) “Bank of America's relationship with the university extends well beyond marketing at sports events. The bank has a seven-year contract worth $8.4 million with Michigan State, thus gaining access to the students' names, personal details as well as use of the university's logo. The more students who take the banks' credit cards, the more money the university gets. Under certain circumstances, Michigan State even stands to receive more money if students carry a balance on these cards.”

If we step back to look at our children’s personal finance education before the start college, it is interesting to check out the National Standards (2007) in K-12 personal finance education. The standards define financial literacy as “the ability to use knowledge and skills to manage one's financial resources effectively for life time financial security”. The standards include areas such as financial responsibility, planning and money management, credit card and debt, as well as saving and investing. Some of the 12th grade goals include having the ability to “analyze how economic, social-cultural, and political conditions can affect income and career potential” as well as “explain the effect on take-home pay of changing the allowances claimed on an employee’s withholding allowance certificate (IRS form W-4). What they don’t really cover is how much time they are devoting to these topics.

The National Standards are created by the JumpStart Coalition for Personal Financial Literacy in Washington, DC.

 There are educators and organizations set up that are trying to do something about educating our youth. The DuPont Fund is another one of these organizations. In 2008, the organization created a presentation to increase awareness on the lack of financial literacy. In that program, the author addressed the areas that required attention. “There are three parts to a successful financial literacy education program.

  • Qualified and Trained Financial Educators
  • Quality Financial Education Products
  • Evaluation Program in Place to Measure Results” (Lindfield, 2009).
  • If we do not have quality financial education products, then we are limiting the educators’ ability to reach this group of students.


    Having two grown daughters as well as having taught online for 5 different universities, I can say I have struggled to find many students who meet many of the required standards. If we have set guidelines for what seems to be admirable goals in educating our youth, why haven’t the graduating high school and college seniors learned these important lessons? This could be down to several reasons.

    • These schools may only be devoting a small amount of time to very important topics.
    • It is also quite possible that personal finance is the last thing on their minds while attending school. They can’t even relate to it yet.
    • Lastly, when and if they actually do receive personal finance training, it is usually in a format that is hard for them to digest.

    Many financial websites like Charles Schwab’s have some interesting statistics on how our youth view the importance of personal finance training. “Among the ideas tested, young people believe providing incentives for states to mandate financial education in schools is the most important step the Obama Administration can take to improve financial literacy.” (Schwab, 2009). In fact, studies are showing that facing future demands without a financial education is a source of serious concern for young adults. “Seven in 10 (71%) are “very concerned” about the country’s economic future. More than half (53%) are “very concerned” about their personal financial future” (Schwab, 2009).

    Schwab (2009) data shows the concern our youth has about money management.

    Part of the problem with educating our youth about personal finance is that books on the subject are written in an intimidating or boring manner. Even the books that are aimed at a young audience can be in question and answer format or simply read like text books. When something is so far-removed from what they deal with on a daily basis as personal finance is in those early years, it must be taught in a way that allows young people to picture themselves in situations that they could relate to. It’s imperative that we sell them on the importance of understanding personal finance.

    Having been in sales for over 25 years, I have learned many tricks on how to “sell my point” so that customers would want my solution. When I was in pharmaceutical sales, part of my training involved, painting a picture in the doctor’s mind. If our youth is taught personal finance through picture painting or storytelling, perhaps they will learn more. Techniques like placing images in their heads are important for the person to get the point you are trying to get across. If I told the doctor to prescribe my drugs because they were good, I got nowhere (this is what the traditional personal finance book does). If I told them that their patient would be calling them at midnight complaining about migraines or inability to breathe if he didn’t prescribe my drugs, then he had a picture and more reason to do it because he wouldn’t want to be disturbed in the middle of the night. We need to portray a clear image of why personal finance is important in students’ minds.

    By targeting our high school and college students with education that delivers the message in a picture-painted storytelling format to explain the importance of personal finance, perhaps the next generation will avoid the tragedies that we are all dealing with now. To do this, we need to focus on creating educational materials that are delivering the message in a way that allows us to meet the standards that we have set for our youth.


    Every day there is another article or news story about families facing foreclosures or bankruptcy. According to Realty Trac there were more than 3.1 million foreclosures filed in 2008. Even if people were able to keep their homes, they can suddenly find themselves owing more than their homes are worth. We have over 3.5 million homeless people in the US. If we are fortunate enough to still have a job . . . that may be all we have. Those of us with our retirement savings in a 401k are now contemplating life once our working days are behind us. As we watch our life savings dwindle away with the falling stock market, shouldn’t we be thinking about how we got here and how we could have avoided this in the first place?

    RealtyTrac (2009) data shows a steep include in foreclosure activity.

    There are foundations and coalitions that focus their attention on such issues. The New America Foundation addresses challenges facing future generations. Their site has had articles addressing the importance of utilizing what we have learned throughout this crisis to teach our youth. “Such moments of financial trouble are teachable opportunities for children and youth to learn about personal finance, and to improve their own money management skills. However, comprehensive strategies for educating children and youth about personal finance so that they can successfully navigate a complex financial market place have not yet emerged.” (Lopez-Fernandini & Murrell, 2008).

    The problem is that changing the education system is no easy task. Proposals must be made and money must be spent. I recently sent a letter to Arne Duncan with the U. S. Department of Education, highlighting my concerns about the current lack of personal finance education as well as my willingness to outline a solution. What did I get back? I received a form letter commending my interest in education but politely stating that I should check out the Excellence in Economic Education (EEC, 2009) program already in place. At the site, you can download current information about national programs currently in place. According to the EEC, there was $1,447,267 worth of appropriations available for 2008 allotted to personal finance education. Making grants available is a good start. But what about addressing the problems in the school’s curriculum?

    Obviously the current programs are not working. If we are not open to looking at alternative solutions to our current lack of education our children are receiving, aren’t we doomed to repeat our past mistakes? I realize the government has its hands full with the current crisis. However, one of the classes I teach is “Learning Organizations”. Isn’t the definition of insanity doing the same thing over and over and expecting a different result? Taking a line from the acclaimed TV series, Millennium; by not addressing the problems within our educational system, we are unwittingly ‘hurtling towards an apocalypse of our own creation.’


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