The REAL Real Lesson Of Financial Literacy Month

The CU Water Cooler called attention to a GlobeAdvisor article titled The Real Lessons of Financial Literacy Month. The article lists “12 points that  no one has raised since Financial Literacy Month began Nov. 1,” and includes some very worthy items like “banks are part of the problem” and “relying on schools to teach financial literacy is passing the buck.”

My take: While the list is good, the article still misses the REAL lesson that no one has raised since FLM began:

Financial literacy is not a worthwhile goal or objective.

The problem that many people have regarding the management of their financial lives is rooted in behavior, not knowledge. Knowing how to effectively manage your financial life doesn’t mean that you will effectively manage your financial life. It’s like driving a car — knowing how a car operates doesn’t make someone a good driver.

You might think that I’m mincing words here, and believe that while behavior might be the important goal, that literacy or knowledge is the path to achieving that objective.

Hogwash. I’ve never taken a financial literacy course in my life. I’ve never accessed a single web site page on any financial institution’s web site that dealt with financial literacy.

In other words, I would have a hard time proving that I’m financially literate. But I have no debt, my family spends within its means, and my financial life exhibits none of the problems or issues that are characteristic of those who are supposedly financially illiterate.

Literacy is simply not the problem we — as a society — need to address. It’s personal accountability and responsibility for one’s own financial live.

The “as a society” part of that sentence is important. Blaming banks, credit card issuers, or mortgage lenders for the problems that people have with their financial lives is wrong. (It seems to be a popular sport these days to consider banks that foreclose on defaulted mortgage holders to be the “cause” of homelessness). 

Should makers of Cracker Jacks prohibit the sale of their product to people who are overweight? No. It’s the responsibility of the individual to eat right, and pass on eating junk, or eating it in moderation. Cracker Jacks could educate consumers about how sugar is bad for you, or how taking in more calories than you expend causes weight gain, etc. — but if people aren’t disciplined about what and how they eat, the problem won’t go away. 

So, if you work at a financial institution that is promoting Financial Literacy Month, good for you. But you’re probably having absolutely no effect on the real problem. Stop trying to educate people about financial literacy. Give them tools to change their behavior. Or get tough, and tell them what to do.

And for the holier-than-thou, righteous types out there: Stop blaming financial institutions for the bad decisions that individuals make. 

p.s. No boxes of Cracker Jacks were harmed, or consumed, in the writing of this blog post.


9 thoughts on “The REAL Real Lesson Of Financial Literacy Month

  1. Ron – you hit the nail on the head! It is ALL about PERSONAL RESPONSIBILITY which includes suffering the consequences of judgement errors. We – as a society – are getting much too comfortable with the notion that when we screw up we should not be blamed. In fact, all to often we are told that when we screw up it is really the fault of the others, banks, governments, doctors, and/or the society at large. BS! Take responsibility for your actions!

  2. Great post as usual and I agree with most of your points here. I know I don’t usually comment but I spend a lot of time at work talking about financial education.

    I don’t think that being financially literate and responsible are mutually exclusive, are they? I think a big part of financial education is teaching people to be accountable. (ie: If you buy this, this will happen, or don’t pay, this will happen…).

    “Stop trying to educate people about financial literacy. Give them tools to change their behavior. Or get tough, and tell them what to do.” – Again, I think part of financial education is not educating folks, but saying, “Hey we have these tools at the credit union to help you do this” and actually contains a lot of telling them what to do.

    • A good example of this are reality fairs, which are interactive financial education tools for high school students (more info:

      “The Reality Fair concept is a unique opportunity for students to experience some of the financial challenges they will face when they start life on their own. It’s a hands-on experience in which students identify their career choice and starting salaries then complete a budget sheet requiring them to live within their monthly salary while paying for basics such as housing, utilities, transportation, clothing, and food. Additional expenditures such as entertainment and travel are factored in as well. Throughout the fair, there are many temptations for additional spending, and students must learn to balance their wants and needs to live on their own. After the students have visited the various booths covering components of independent living, students balance their budget, and then sit down with a financial counselor for review. ”

      It’s great because it teaches both accountability and financial literacy. They see their actions and spending have consequences.

    • CM: I think that what I’m arguing is that, yes, there can be a huge difference between being “literate” and being “responsible”. I know — because I’ knowledgeable about dieting and health issues — that I shouldn’t eat that third piece of cheese cake after dinner, but I still do. I know — because I’ve read a lot about the dangers of smoking — that I shouldn’t smoke, but I still do.

      So how is financial literacy the same as good financial behavior?

      The reason this is an important distinction is that how you define your goals and objectives will dictate what you do. If you set out to address literacy, you’ll focus on education. If you focus on changing behaviors, you’ll do something different — and what you’ll find is that changing someone’s behavior is 100 times harder than educating someone.

      • Makes sense. I think what I was hung up on was youth financial education. There is an important distinction between financial education for youth and adults. For youth you are really trying to shape future behaviors whereas with adults you are trying to change bad habits or behavior (which I think you are referring to). And agreeably it is 100 times harder with adults and changing behaviors, but at least with youth…you’ve got a shot.

  3. Nice post. “The problem that many people have regarding the management of their financial lives is rooted in behavior, not knowledge.”

    Like many of the previous posters alluded to, education plays a role in bahaviors. Beliefs produce Behaviors which produce Results, which reinforce Beliefs, and so on. Beliefs are influenced by education.

    But, in the case of fiscal responsibility, I find the real challenge is engagement and getting people to actually care!

  4. What kind of tools can change behavior? Are you referring to PFM? People are already punished financially by bad banking behaviors: overdraft fees, high interest rates on debt, etc. They are incentivized for good banking behavior when they earn interest on savings or receive loans with low interest rates. People respond to incentives, but short-term thinking and the need to have cash in hand trumps all other incentives. How can this behavior be changed?

    I can see how a good old verbal thrashing from a trusted source at a financial institution could change someone’s attitude and behavior. Can that ever be replicated on a macro scale?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s