Why Little Johnny and Mary Struggle Financially As Adults
Posted on August 29, 2008
Another school year has begun and millions of young people will sit through classes that focus on how to get a job, but fail to teach them how to handle the money they will earn. As a result the vast majority will go through life struggling to make payments on debts they probably wouldn’t have if they were taught how to manage their money and avoid the devastating effects of consumer debt. I don’t fault the teachers, I blame the system.With all the money spent on education, why is it so rare to find high school graduates who know anything about consumer mathematics? We turn out students who can plot the course of a rocket to the moon, but can’t balance a checking account, reconcile a credit card account or know that loan payments consist of principal and interest. Why is so much emphasis placed on preparing young people for college and so little effort made to teach them how to prepare a budget, pay bills and run a household?
I’ve had numerous discussions with teachers on this topic and consistently I hear the same thing; they teach to prepare students for the tests that determine their school’s overall performance and whether or not they get bonuses. Can you blame them? I don’t! I blame the politicians who have created a system that fails to teach our children what they are going to need to function in the real world.
What concerns me the most is the long-term affect this failure is having on our country. Over the last three decades the gap between the rich and poor has widened, the middle class has been shrinking and the poor have been hit the hardest. According to the US Census Bureau, the top quintile, the wealthiest 20 percent of Americans, those who own homes, stocks, bonds and other investments control a larger percentage of the nation’s wealth today than they did a decade ago. Those in all other quintiles own less than they did a decade ago. Although it’s difficult to trace this trend to its root causes, I believe much of it can be blamed on a failure to teach the financial skills needed to create wealth.
Students are prepared to enter adulthood, get a job and earn money. They aren’t prepared to get the money they earn to work for them. Fresh out of high school, young people are bombarded with credit card offers, yet they receive no training nor are they cautioned about the devastating effect consumer debt can have on their lives. This lack of knowledge is what allows the wealthy to take advantage of the poor. Without understanding the consequences, less affluent people often borrow in an attempt to have some of what they see the rich enjoying. Unfortunately, that’s not how it works.
When rich people deposit money into banks and the banks loan that money to credit card holders, the interest the card holders pays becomes a transfer of wealth from the borrower to the investor. A portion of the interest paid by the card holder is paid as interest to the investors who get wealthier. It buys the borrowers nothing and reduces their wealth. Like it or not, that’s how economics work. Why aren’t we teaching this concept to our children when they are in middle and high school? Why are we letting them graduate thinking they can borrow their way to prosperity only to become entangled in a web of debt from which many never recover?
As a nation, we have become addicted to debt, both public and private. I wonder if politicians are afraid to teach young people about the negative consequences of debt for fear they will be tossed out of office for the reckless government spending they approve. I also wonder if powerful lobbying by lending institutions has led to economics 101 being dropped from school curriculums. Has consumer lending become so lucrative that exposing its dark side is no longer acceptable? Whatever the reasons, until a major focus is placed on teaching young people how to manage their finances, I think we will continue seeing the gap between the rich and poor widen.
Little Johnny or Mary should never be allowed to graduate high school until they can demonstrate their ability to write a check, balance a checking account, reconcile a credit card account, and understand the difference in cost between saving for big purchases and financing them. They should also be able to prepare a meaningful household budget that takes into consideration expenses that are paid annually or semi-annually. They should be able to calculate the future value of regular savings at various rates of return. They should understand how the combination of price and terms is what determines the value of long-term investments like real estate. These are just a few of the skills every high school graduate needs in order to function in the real world.
Here’s a tip! We’re never going to see these changes made if we continue to accept the status quo in education. Until we demand that consumer economics become a critical part of basic education, we’re going to continue to flood the workplace with financially illiterate young people. There should be a major focus on teaching youngsters skills they are going to need whether they become ditch diggers or doctors.
The current school year has started and there’s not much that can be done for this year, but if enough people call or write their legislators about this major flaw in our educational system, it might make a difference for coming years. Send them the message that not only should basic consumer economics be on the tests, it should carry extra weight. These skills are something every student will need in adulthood.
» Filed Under Success Tips Articles
Comments
One Response to “Why Little Johnny and Mary Struggle Financially As Adults”
Leave a Reply
OUTSTANDING…. I feel the exact same way. I’ve often thought how rewarding it would be to offer a course to Middle school and High school age kids on these very topics…
I’m not a teacher, I’m a business person. Are you aware of any programs that have put this valuable information together to offer to groups? I would be very interested in finding such a program.
Great article, Linda