Every spring, high school principals across the nation hand diplomas to young adults who are financially ILLITERATE. I encounter this fact on occasion, and I think we can all agree, it’s a problem. But why is it such a problem? And what’s being done?
Firstly, financial illiteracy is a problem because whether we like it or not, we are all born into a system where money is a measure of winning and losing. Money brings freedom, independence, security. With enough money, we win* A lack of money brings insecurity, fear and dependence. Without money, we lose*. Sure, the playing field is uneven, and it’s rigged against many born into neglect, poverty, or even unloving well-off homes. But how can any of us have a hope of winning this game if we’re never told the rules of the game nor the objective? Financial literacy is nothing more than that: an understanding of the financial game rules. And the objective, I would argue, is financial independence. Read more about this in my last post. Now I want to move on to what’s being done about it.
I poked around the instanet to find out what’s being done to remedy this woeful situation. It turns out our federal government is attempting – working quite hard in fact – to encourage financial literacy among young people.
In 2003, the US Department of the Treasury created the Financial Literacy and Education Commission (aka ‘FLEC’). FLEC last met publicly in February 2015. Click the link and spend 2.5 hours watching people in suits talk, while their colleagues try to not look bored. I made it about an hour through. Read my bullet-point notes from the meeting here, or don’t. Here’s a quick summary: goals of the commission include starting kids early, building interest and accessibility of financial products, teaching how to live within means and working with banks and credit unions to make appropriate savings products available.
The amount of attention and the number of people working on this initiative is impressive. FLEC’s even put together a web-site called ‘My Money Five’ that explains five pillars of financial proficiency: Spend, Earn, Save&Invest, Protect, Borrow. Great, right?
Er, well, uh …
Go to MyMoneyFive, click on ‘Save & Invest‘ and read the first paragraph. Don’t want to click? Okay, here it is:
“Saving is a key principle. People who make a habit of saving regularly, even saving small amounts, are well on their way to success. It’s important to open a bank or credit union account so it will be simple and easy for you to save regularly. Then, use your savings to plan for life events and to be ready for unplanned or emergency needs.”
Are you asleep? Wake up!
ARE YOU FRICKING KIDDING ME? ‘SAVING IS A KEY PRINCIPLE’?
DO THESE PEOPLE NOT REMEMBER BEING TEENAGERS? HELL, DO THEY NOT KNOW THEMSELVES NOW? No kid is going to be inspired by these words! OMG, there’s so much wrong here, I mean, what’s ‘success’ and why should anyone give two shits that ‘saving is a key principle’? If these pages are representative of FLEC’s work product on the whole, then the committee may as well disband immediately. All this work is for nothing. You read that right. It’s for nothing. Because until they explain why a young person should care – until they get the ‘why’ message across – only a handful of teacher’s pets are going to pay any attention. And who gives two shits about the teacher’s pets, beyond beating them up mercilessly behind the track shed. No wait, I’m sorry, did I just write that? Tangent. Let’s get back on track here, shall we?
Sigh. Gah. Guh.
Oh I get it. As a parent, I jump to the ‘what’ way too often. I’m as guilty as the fine, caring, well-intentioned people of FLEC. But their work isn’t a one-off parenting “because I told you so” directive. This is a big deal! This program could alter the arcs of peoples lives! It could be really effective. And they’re tantalizingly close: They just need to explain the goal.
Thinking back to the February FLEC meeting, it dawns on me that members of this hard-working committee assume that everyone understands the goal of financial literacy. I believe that’s a flawed assumption.
FLEC and MyMoneyFive are missing the !#@&* ‘WHY’!
You might say, ‘oh, you’re talking about saving for retirement’. NO! I’m not. Financial independence is not the same as retirement. In fact, if you say, “here’s how you save for retirement” to a person under forty, you may as well say, “here’s how you prepare for DEATH.” People starting out want to know how to LIVE. They’ll listen to advice on preparing for LIFE. They’ll tune out if you ever use the word retirement. So just… don’t.
So, ‘financial independence’ is the goal, but still – YAWN – ‘financial independence’? That’s only marginally more exciting than ‘saving is a key principle.’ It’s still an abstract concept. It’s not personal. It’s lacking that effervescent punch in the face. So what’s a better message? How about these ideas as a starting point:
- FI is being able to say ‘FU’. Here’s Lucy Liu’s take on FU money, …and John Goodman’s thoughts on FU money (from The Gambler).
- FI is FREEDOM. FI is self-directed inde-freaking-pendence! When you’re FI, you can pursue whatever passion, interest, talent, activities you wish. Or, keep on working! If you’re lucky, you achieved FI in a career that is aligned with your skills and interests! Keep on truckin’.
- FI is POWER. Use it for good, or use it for evil. It’s up to you.
- FI is CONFIDENCE, or conversely, freedom from FEAR. If you’re still working when you’re FI, any fears associated with losing your job are lessened. You’ll find the courage to speak up when people aren’t being treated right, to question decisions that seem ill-conceived, and to not go along with silly bureaucratic procedures. This new found confidence may even get your ass promoted!
- FI is INDEPENDENCE. Why would anyone want to be dependent on an employer when they’re living in a system that affords them the possibility of becoming INDEPENDENT????
Why does FLEC need to explain all of this? Because, unless a kid has parents who ‘get it’, they’ve never told been told the rules of the financial game of life! They’re never been told the objective. They’ve been left to absorb messaging from marketers and sales reps, and then expected to resist impulse purchasing and save, what, because the local credit union offers a .075% savings account for sixteen year olds? Come on.
In my last post, the ‘why FI’ message was my leading left-hook. Here’s what I wrote:
The object of the game is Financial Independence, ‘FI’ for short. No, you don’t get to choose a different goal. FI is your friggin’ goal. Accept it. Your objective is to accumulate a nest egg large enough to fund your life. That’s FI.
If you prefer, you can call it ‘FU’ Money. Here’s Lucy Liu’s take on FU money, …and John Goodman’s thoughts on FU money (from The Big Lebowski). How do you know when you’ve won? Simple: when cFIREsim reports that you have a greater than 95% chance of successfully living off your assets for the rest of your life. Simple right? That’s when you’re FI. That’s when you’ve won.
In the FLEC video-cast meeting, I heard people touch on the ‘why’. For example, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB) said,
“We … strongly encourage parents and guardians to get more involved in discussing the topics at home to help young people make progress toward greater financial capability. … the Consumer Financial Protection Bureau recently put out a report on the topic of financial well- being*….”
Yeah! ‘financial capability’ and ‘financial well-being’ are heading us in the right direction! At the very least, they sound like goals. And the CFPB wrote a report* on what they mean? Awesome! Wait, but no, not really. If you read the short report, you’ll find the definition of financial well-being was crafted based on interviewing consumers, and finding out what they thought it meant. The report describes a state of being. The goal is still elusive! It’s still not clear. And it HAS to be crystal clear or everyone should just go home and give up.
In the February meeting, FLEC members discussed their attempts to get out the message, such as ‘Savings Awareness weeks.’ That’s bullshit. There are so many awareness weeks these days they’re meaningless. ‘Pet Wig Awareness Day’ and ‘Toe-jam-cleaning week’, frankly, pique my interest way more than ‘Savings Awareness Week’ – and I’m super-passionate about money and savings!
To be fair, I’ve not read all of the publications FLEC has put out. So, maybe somewhere they’ve defined the goal of our financial lives. But that’s just the thing. The goal of financial competence should be EVERYWHERE. It should be sung from the hilltops or perhaps MEME’d from the social media. I shouldn’t have to go digging for it.
Until financial literacy is mandatory in US curriculums, the work of the FLEC is all we’ve got so far as I can tell. They’re doing so much great work – working with the CFPB, Credit Unions, banks, high schools, etc. It’s a shame that this work is for nothing.
So, here’s my CTA, my Call-To-Action. If you agree, that the ‘why’ needs to be communicated, join me in contacting FLEC to nudge them along. Share with them any spitball ideas you have! My ideas here are just a start. There are far more creative people in the world who can craft non-gimmicky messages that might resonate with young people.
So, here are some options for you:
1. If you’re lazy, send ’em an email based on the note I’m sending in: OFE@treasury.gov
2. Email OFE@treasury.gov with your own heartfelt originally crafted nudge. Just make sure to tell them to work on their messaging – be clear about the WHY / The Goal.
* Consumer Financial Protection Bureau’s
– condensed report on defining financial well-being.
– FULL report on defining financial well-being.
bullet points from February FLEC Meeting:
|*Feb FLEC Meeting Goals:
||Topics FLEC wants to teach kids:
- ‘get youth actively involved in their own financial lives’
- ‘starting early’ became a clear goal in 2012.
- get teenagers to open bank accounts (1/2 teenagers have them)
- ‘build students interest in savings’.
- ‘encourage youths to start saving.’
- bridge need & products – provide young people access to safe financial products.
- provide / encourage hands on learning.
- get parents and guardians get more involved.
- ‘raise awareness at things like ‘AmericaSaves week and Military Saves week. DoD, Labor, Veterans Affairs.
- financial well-being – control, capacity to cope, financial freedom, being on track.
- behavior that supports “ask, plan, act”.
- live within means.
- awareness & how to gain access to financial products.