How America Got Financial Education All Wrong

Schools Do Poor Job of Financial Education American schools do a terrible job of educating students about money.

Students learn to identify coins and currency in the second grade.  They are adding and subtracting sums in the second and third grades; they are multiplying and dividing sums in the fourth and fifth grades and doing simple percentage problems in the fifth and sixth grades.  For most, that is the end of their financial education……until a kid is 17 and some college admissions officer is asking them to sign up for student loans for an education that may (or may not) lead to their future prosperity.

Six months later and they are in college, trade school, or the military managing a household budget for the first time in their lives, and learning (often by trial and error) how to use credit cards and how to balance a checkbook.

Four years later, they have a job (hopefully), a car payment, more credit cards, a girl or boy friend they are talking about marriage with, and real estate agents trying to talk them into a low down payment 30 year mortgage.  Financial decisions made and financial habits learned between age 17 and 27 will set the course for good or for bad for the next several decades…..and most enter this period with little or no actual serious financial knowledge.

Schools teach to tests. Whether those tests are the state required annual testing to determine if the students in elementary school learned anything or not, the High School Graduation Exam, or the SAT and ACT students need to do well on to get accepted by a college.  Balancing a check book, establishing an emergency fund, what stocks are, the difference between an ETF and a mutual fund, how bonds work, the definitions of REITs, how annuities work, that student loans are not bancruptable debt, how PMI makes mortgages more expensive over time, what a 401(k) is, etc none of this is covered on any of the tests you need to be considered an “educated person”, thus no schools teach much (if any) of this.   It is very easy to do one to two years of kindergarten, eight years of elementary/middle school, four years of high school, four years of expensive university education, and get a masters degree and really no nothing about money or the micro-economics of a planned life.

Parents have to provide a financial education to their children, because the state schools are not going to do it.  The younger you start the more likely they are to absorb the information.  If you don’t have the knowledge yourself, you are going to have to make the effort to learn these things yourself so that you can pass the knowledge on to your children (and you can help yourself along the way).  There are numerous magazines and books that can help you in this.  You might also want to consider taking some classes or hiring a money coach yourself or providing those resources to your teen or college age children or grand children.

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