Another huge problem with relying on education as a solution to any widespread problem is that there is always going to be a sizable portion of the population that are slow learners and are not going to be able to capture the concepts taught to them in a financial literacy class. Do these people not deserve to have healthy, stable, and secure lives?
The role of government should be to provide a robust safety nets for everyone regardless of how smart they are. Not forcing people to take a class on solving financial problems that the government either created or should be responsible for addressing.
Couldn’t agree with this more. If knowledge was the issue, we wouldn’t have 60% of Americans living paycheck to paycheck. We don’t need another YouTuber explaining to us how compound interest works. The psychology behind why we keep doing things over and over again expecting a different result is much more important
This scratched an itch that I've been struggling to articulate well. I grew up in an affluent suburb where designer brands and shopping called to me, and then moved to a Dutch area, where people are famously frugal, and many of my friends seem to have an aversion to spending any money. Everyone is quick to mention the deal they got on an item, comparable to pointing out the pockets on a dress after getting a compliment.
The priorities are different: marrying young, educating children, avoiding debt, viewing overconsumption as improper, maintaining a strong community, helping your neighbor, etc., etc.
I would always joke that I become a different person when I travel home, but I'm probably just easily influenced. Evidently, I too have a fragile ego. Moral of this comment is that I have seen this play out in my own (highly financially educated, likely goes without saying given I am leaving a comment on a finance article) life. I would have a lot less saved if I stayed where I was raised.
Reading this was like a throwback to “Classic Katie”. I loved it all, and agreed with most of it. I would like to see how you would tweak the current finlit education system to account for the weaknesses you’ve highlighted.
I appreciate the way your brain works. I would love to see suggested solutions follow on from your generally astute observations.
Really appreciate this commentary. I grew up mostly financially illiterate I would say, knowing that I “should” know, but too stressed about money to figure it out. Conceptually I walked around knowing I should budget, for example, but somehow let overwhelm stop it from being put into practice. I think that’s the scary part, the “practice” and the emotion that comes with it. Now that I’m in a different tax bracket, it feels there is even *more* to learn and that emotional overwhelm comes back in. Maybe the fact that there is actually so much information available is part of the problem. That the next best internet expert will magically have some other way to manage that’s better, easier, and yields more return. In summary I guess what I’m saying here is I also envy your brother in law 👏 who seems to have the basics of putting things into actual practice covered.
but then you'd also have to be on the receiving end of nonstop torture about how your texts are green and that's a battle i wouldn't wish on anyone !!! lol
How dare you recommend that Cut article about surrogacy?! I had work to do this morning. Every paragraph more wild than the next. I couldn't stop reading.
I hate all those 'why did we learn the recorder in school when they could've taught us how to do our taxes?' posts. 1. I think it's actually really beautiful that most (all? seems like one of the more common experiences but I'm sure not every school did recorder lessons) children in this country got to learn at least one musical instrument as a part of their education. 2. It's depressing that imaginations are so limited that the solution people think of is using precious education time to teach children the convoluted tax system, and not overhauling the tax system so we just get the bill/refund outright or at least killing the private tax filing software industrial complex.
This post is also stirring some deeper frustrations about what school is really for as we get articles about universities killing "useless" departments to invest more in subjects that will "prepare people for the workforce," but that's a rant for another day.
wow re: "It's depressing that imaginations are so limited that the solution people think of is using precious education time to teach children the convoluted tax system, and not overhauling the tax system so we just get the bill/refund outright or at least killing the private tax filing software industrial complex." what a perfect example of our limited imaginations in a single sentence
I've done a lot of research if financial literacy. It is generally a way to keep the poor in their place in the US (don't you dare take risks or try to use debt to build wealth, you will just mess it up), but in the Global South it is a way to suck value out of communities. Instead of sharing resources, they encourage individualization and debt.
I totally agree that disposition matters more than literacy when it comes to saving, avoiding debt, etc. But there’s one big trait many people who built wealth the old fashioned way share: anxiety.
This can come out as control, workaholism, scarcity mindset, obsession, achievement, etc. But FIRE adherents and over savers often share, and are trying to outrun, some version of money anxiety.
I am a rare example of a non-frugal, money nerd who loves spending and has always been obsessed with building wealth. Luckily the anxiety of not doing the “right” things with money, career, etc always slightly outweighed my love of designer goods and luxury hotels.
I had a brief period in my life where I was one of these frugal people. It was the two years I spent living in the Middle East where all advertising was in a language that I didn’t understand and other women’s fashion were largely hidden from me. It was 1999-2001, so no social media or targeted advertising. I saved 10k easily, and spent it all within a few months of returning to the states.
Dude. This piece is so good you make me want to stay in bed all day and give up any hope of ever producing content worthy of the world’s eyes. You’re so good. Ugh! Gross.
I wonder what a study of the politics of these consumer-culture-immunized individuals would tell us. Do they lean one way or the other; or, do they ignore the circus, and, perhaps, the voting booth all together?
Holy heck, I’m new to this Substack and I already feel my brain chemistry shifting.
I will be thinking about this “disposition” idea for a while, it provides a helpful starting place for “financial literacy frustrations” I have with myself and those around me. I am considering my grandparents, who grew up very poor and were frugal their whole lives, who raised 11 children, who are now an interesting mix of people who continued on the legacy of frugality and financial awareness, and people who spend without much discretion, seemingly as a way to gain some control in their lives. Maybe unsurprisingly, this split seems mostly related to gender, further exacerbated by becoming stay at home mothers, and in my opinion not having the regular exposure to a yearly salary or hourly wage, which provides a way of thinking related to what you are personally earning (“it feels like we are doing well financially so I think we should by a new car” vs “a new car payment would be X% of my monthly earnings”).
In contrast, my dad, and my partner’s parents, also grew up frugal, and continue to be closer on the disposition spectrum to your brother in law. They are mostly content and don’t feel the draw of advertisements quite as much. For my partners mom, I wonder how much of this has to do with maintaining an engineering career even after having children. In fact, now that I think about it, I would be curious about how jobs that involve a lot of project/time management, budget, resource management, affect “disposition”, or if it is the other way around.
I know for myself that I have been very financially anxious as long as I can remember, but I am very susceptible to advertisements/consumerism, and in the past have had a pattern of buying something for that sense of control or thinking it will improve my quality of life, and then feeling crushing guilt for those purchases later. Things have drastically improved for me now that I am more financially stable, and I have a wonderfully supportive partner who sees no issue with continuing to wear clothes from high school.
I do feel there is room for “disposition” to change, because I have seen this in myself, mostly through having people in my life who are more content and not as consumeristic, and also through being exposed to the ~horrors of capitalism~. A huge part of this has working through body image issues, realizing how profitable it is for women (and everyone) to hate their bodies and be willing to spend a lot to change them or present differently. To your point, very little if any of this has had to do with financial literacy, which I am still terrified of, but more so with stability, community, and self acceptance.
This is a great takedown of the literacy industrial complex, but I wonder if blaming "disposition" lets us off the hook a little too easily. If the people who are good with money just have a genetic mutation that makes them immune to wanting nice things, the rest of us are basically just screwed by our own brain chemistry.
I'd add more to your critique. 1) Financial literacy is an attempt to blame individuals for what is really a systemic problem. 2) My understanding is that most research on behavior change shows that education may be necessary, but it is insufficient by itself to change most behaviors. 3) While I love 401(k)s and similar products, we have created a system that creates anxiety. If I f-up my retirement savings, I'm screwed. Pensions and Social Security are population-based models that reduce anxiety (assuming the pensions are solvent...). 4) We talk about financial literacy as if it is all cognitive/rational decision-making. Three Nobel Prize-winning economists (Kahneman, Thaler, and Shiller) have included how emotions and cognitive biases are major factors, too - probably more impactful. 5) If you are poor or of moderate income, there are no or few discretionary funds to leverage into investments. --- Finally, I'm not sure what the answer is. Oh, and I'm a CFP(!).
As always, a thoughtful essay that really centers our lived experiences. I agree with much of what you wrote, but let me offer an additional perspective.
I wholeheartedly agree, and have said so myself, that we cannot rely on financial education to carry the water of policy failures. You cannot literacy your way out of a system that does not support the economic well-being of much of the populace. But to me, that is not an argument against financial literacy efforts.
Financial literacy AND, not just financial literacy.
What I would like to see in school-based financial education is a curriculum that helps students understand the role of public policy as the foundation of financial wellness. Additionally, whether we like it or not, the financial landscape is becoming more complex at an exponential rate. As a Boomer child, I probably did not need financial education in my school day. But kids today are facing a vastly more complicated – and dangerous – financial landscape than even just a few years ago. One that their parents are often unable to navigate.
I agree that the academic findings to date have been mixed. But mixed does not mean ineffective. For one thing, while 30-ish states have these requirements, in many if not most, the efforts are nascent. Organizations such as NEFE are leading efforts to research what actually works in bringing financial education to schools, advocating for and disseminating best practices founded on evidence. If impact results to date have been dispiriting, that is not a reason to abandon the effort; it is a call to improve.
Another huge problem with relying on education as a solution to any widespread problem is that there is always going to be a sizable portion of the population that are slow learners and are not going to be able to capture the concepts taught to them in a financial literacy class. Do these people not deserve to have healthy, stable, and secure lives?
The role of government should be to provide a robust safety nets for everyone regardless of how smart they are. Not forcing people to take a class on solving financial problems that the government either created or should be responsible for addressing.
very well put. it's extremely darwinian
Couldn’t agree with this more. If knowledge was the issue, we wouldn’t have 60% of Americans living paycheck to paycheck. We don’t need another YouTuber explaining to us how compound interest works. The psychology behind why we keep doing things over and over again expecting a different result is much more important
This scratched an itch that I've been struggling to articulate well. I grew up in an affluent suburb where designer brands and shopping called to me, and then moved to a Dutch area, where people are famously frugal, and many of my friends seem to have an aversion to spending any money. Everyone is quick to mention the deal they got on an item, comparable to pointing out the pockets on a dress after getting a compliment.
The priorities are different: marrying young, educating children, avoiding debt, viewing overconsumption as improper, maintaining a strong community, helping your neighbor, etc., etc.
I would always joke that I become a different person when I travel home, but I'm probably just easily influenced. Evidently, I too have a fragile ego. Moral of this comment is that I have seen this play out in my own (highly financially educated, likely goes without saying given I am leaving a comment on a finance article) life. I would have a lot less saved if I stayed where I was raised.
Reading this was like a throwback to “Classic Katie”. I loved it all, and agreed with most of it. I would like to see how you would tweak the current finlit education system to account for the weaknesses you’ve highlighted.
I appreciate the way your brain works. I would love to see suggested solutions follow on from your generally astute observations.
Really appreciate this commentary. I grew up mostly financially illiterate I would say, knowing that I “should” know, but too stressed about money to figure it out. Conceptually I walked around knowing I should budget, for example, but somehow let overwhelm stop it from being put into practice. I think that’s the scary part, the “practice” and the emotion that comes with it. Now that I’m in a different tax bracket, it feels there is even *more* to learn and that emotional overwhelm comes back in. Maybe the fact that there is actually so much information available is part of the problem. That the next best internet expert will magically have some other way to manage that’s better, easier, and yields more return. In summary I guess what I’m saying here is I also envy your brother in law 👏 who seems to have the basics of putting things into actual practice covered.
but then you'd also have to be on the receiving end of nonstop torture about how your texts are green and that's a battle i wouldn't wish on anyone !!! lol
How dare you recommend that Cut article about surrogacy?! I had work to do this morning. Every paragraph more wild than the next. I couldn't stop reading.
Same. Omg. So well written
I hate all those 'why did we learn the recorder in school when they could've taught us how to do our taxes?' posts. 1. I think it's actually really beautiful that most (all? seems like one of the more common experiences but I'm sure not every school did recorder lessons) children in this country got to learn at least one musical instrument as a part of their education. 2. It's depressing that imaginations are so limited that the solution people think of is using precious education time to teach children the convoluted tax system, and not overhauling the tax system so we just get the bill/refund outright or at least killing the private tax filing software industrial complex.
This post is also stirring some deeper frustrations about what school is really for as we get articles about universities killing "useless" departments to invest more in subjects that will "prepare people for the workforce," but that's a rant for another day.
wow re: "It's depressing that imaginations are so limited that the solution people think of is using precious education time to teach children the convoluted tax system, and not overhauling the tax system so we just get the bill/refund outright or at least killing the private tax filing software industrial complex." what a perfect example of our limited imaginations in a single sentence
I've done a lot of research if financial literacy. It is generally a way to keep the poor in their place in the US (don't you dare take risks or try to use debt to build wealth, you will just mess it up), but in the Global South it is a way to suck value out of communities. Instead of sharing resources, they encourage individualization and debt.
any recommended reading/resources on this subject?
I totally agree that disposition matters more than literacy when it comes to saving, avoiding debt, etc. But there’s one big trait many people who built wealth the old fashioned way share: anxiety.
This can come out as control, workaholism, scarcity mindset, obsession, achievement, etc. But FIRE adherents and over savers often share, and are trying to outrun, some version of money anxiety.
I am a rare example of a non-frugal, money nerd who loves spending and has always been obsessed with building wealth. Luckily the anxiety of not doing the “right” things with money, career, etc always slightly outweighed my love of designer goods and luxury hotels.
Thanks eldest daughter syndrome!
I had a brief period in my life where I was one of these frugal people. It was the two years I spent living in the Middle East where all advertising was in a language that I didn’t understand and other women’s fashion were largely hidden from me. It was 1999-2001, so no social media or targeted advertising. I saved 10k easily, and spent it all within a few months of returning to the states.
Dude. This piece is so good you make me want to stay in bed all day and give up any hope of ever producing content worthy of the world’s eyes. You’re so good. Ugh! Gross.
omg devin???? are you serious i'm blushing
I wonder what a study of the politics of these consumer-culture-immunized individuals would tell us. Do they lean one way or the other; or, do they ignore the circus, and, perhaps, the voting booth all together?
Holy heck, I’m new to this Substack and I already feel my brain chemistry shifting.
I will be thinking about this “disposition” idea for a while, it provides a helpful starting place for “financial literacy frustrations” I have with myself and those around me. I am considering my grandparents, who grew up very poor and were frugal their whole lives, who raised 11 children, who are now an interesting mix of people who continued on the legacy of frugality and financial awareness, and people who spend without much discretion, seemingly as a way to gain some control in their lives. Maybe unsurprisingly, this split seems mostly related to gender, further exacerbated by becoming stay at home mothers, and in my opinion not having the regular exposure to a yearly salary or hourly wage, which provides a way of thinking related to what you are personally earning (“it feels like we are doing well financially so I think we should by a new car” vs “a new car payment would be X% of my monthly earnings”).
In contrast, my dad, and my partner’s parents, also grew up frugal, and continue to be closer on the disposition spectrum to your brother in law. They are mostly content and don’t feel the draw of advertisements quite as much. For my partners mom, I wonder how much of this has to do with maintaining an engineering career even after having children. In fact, now that I think about it, I would be curious about how jobs that involve a lot of project/time management, budget, resource management, affect “disposition”, or if it is the other way around.
I know for myself that I have been very financially anxious as long as I can remember, but I am very susceptible to advertisements/consumerism, and in the past have had a pattern of buying something for that sense of control or thinking it will improve my quality of life, and then feeling crushing guilt for those purchases later. Things have drastically improved for me now that I am more financially stable, and I have a wonderfully supportive partner who sees no issue with continuing to wear clothes from high school.
I do feel there is room for “disposition” to change, because I have seen this in myself, mostly through having people in my life who are more content and not as consumeristic, and also through being exposed to the ~horrors of capitalism~. A huge part of this has working through body image issues, realizing how profitable it is for women (and everyone) to hate their bodies and be willing to spend a lot to change them or present differently. To your point, very little if any of this has had to do with financial literacy, which I am still terrified of, but more so with stability, community, and self acceptance.
This is a great takedown of the literacy industrial complex, but I wonder if blaming "disposition" lets us off the hook a little too easily. If the people who are good with money just have a genetic mutation that makes them immune to wanting nice things, the rest of us are basically just screwed by our own brain chemistry.
I'd add more to your critique. 1) Financial literacy is an attempt to blame individuals for what is really a systemic problem. 2) My understanding is that most research on behavior change shows that education may be necessary, but it is insufficient by itself to change most behaviors. 3) While I love 401(k)s and similar products, we have created a system that creates anxiety. If I f-up my retirement savings, I'm screwed. Pensions and Social Security are population-based models that reduce anxiety (assuming the pensions are solvent...). 4) We talk about financial literacy as if it is all cognitive/rational decision-making. Three Nobel Prize-winning economists (Kahneman, Thaler, and Shiller) have included how emotions and cognitive biases are major factors, too - probably more impactful. 5) If you are poor or of moderate income, there are no or few discretionary funds to leverage into investments. --- Finally, I'm not sure what the answer is. Oh, and I'm a CFP(!).
As always, a thoughtful essay that really centers our lived experiences. I agree with much of what you wrote, but let me offer an additional perspective.
I wholeheartedly agree, and have said so myself, that we cannot rely on financial education to carry the water of policy failures. You cannot literacy your way out of a system that does not support the economic well-being of much of the populace. But to me, that is not an argument against financial literacy efforts.
Financial literacy AND, not just financial literacy.
What I would like to see in school-based financial education is a curriculum that helps students understand the role of public policy as the foundation of financial wellness. Additionally, whether we like it or not, the financial landscape is becoming more complex at an exponential rate. As a Boomer child, I probably did not need financial education in my school day. But kids today are facing a vastly more complicated – and dangerous – financial landscape than even just a few years ago. One that their parents are often unable to navigate.
I agree that the academic findings to date have been mixed. But mixed does not mean ineffective. For one thing, while 30-ish states have these requirements, in many if not most, the efforts are nascent. Organizations such as NEFE are leading efforts to research what actually works in bringing financial education to schools, advocating for and disseminating best practices founded on evidence. If impact results to date have been dispiriting, that is not a reason to abandon the effort; it is a call to improve.