When I was a high school student, I learned all about the human body’s circulatory system: the four chambers of the heart, cardiac output, arteries, veins, capillaries, blood pressure, vasoconstriction, dilation, the diffusion of gases across vessel walls . . . I didn’t really care about the information, just acing the test.
So I did. And then I forgot it all. Poof.
Fast forward five years and I’m in medical school. I re-learned it all, and more. Not because I was told I had to, not because there was a test to pass, but because I wanted to. I knew I would need, not just the knowledge, but the understanding, if I was going to be a good doctor. I cared because I was preparing to put that knowledge to action.
And that makes all the difference.
Financial literacy is the same way. We hear the scary statistics all the time: out of control spending, record levels of debt, dangerously low savings rates . . . And the oh-so-obvious solutions: Budget! Don’t drink lattes! Pay off your credit cards! Clearly, there is a lack of financial literacy out there. Why don’t our schools just step up and teach our kids about money? It would be SO EASY to solve the problem of financial illiteracy.
Except it wouldn’t be.
Why? Because there is gap between knowledge and action, and that gap has to be filled before our neurons find something more interesting to do.
KUBA: how we change
A very wise friend of mine, who is a master educator, talks about “KUBA”. KUBA is a mnemonic that describes the fact that knowledge is not enough: there are additional steps we must take to effect behavioral change. KUBA stands for KNOWLEDGE – UNDERSTANDING – BELIEF – ACTION. And it has everything to do with teaching kids about money.
Say you have a teenager who spends money as fast as he makes it. And he’s not happy about it either because what he really wants is a new mountain bike. He knows he should save, his parents encourage it, but he just doesn’t.
He has the knowledge, but he doesn’t understand how to budget his spending or how a savings plan will allow him to accomplish his goal. He’s stuck until he understands.
But even if he did understand the process, that still wouldn’t be enough. He has to buy into the plan, he has to care about the outcomes, and he has to believe it will work.
Once you have accurate knowledge, appropriate understanding, and the motivation of belief, then and only then is effective, sustained action going to happen.
And that’s the problem with school. It offers knowledge, maybe understanding – if you’re lucky – but you can’t get kids to care or change financial habits in a classroom setting. If you want to teach kids about money, the content has to matter to them, not just the grade.
It’s easy to blame financial ignorance on a lack of formal education. I used to point the finger there too. Then I had kids. And I learned how school works (and doesn’t). In my next post I’ll describe how our family tries to instill good financial habits in our four kids. In the meantime, with the greatest respect to the wonderful people who work in education, please don’t teach my kids about money. Here are five big reasons why:
Five reasons schools shouldn’t teach kids about money
1. Financial literacy programs just don’t work.
Maybe I’m putting the punchline first, but the evidence is clear: financial literacy programs just don’t work. The largest meta-analysis on the topic found that financial literacy programs, and they studied 200 of them, only resulted in a 0.1% change in behaviour. Yeah, one tenth of one percent. Thrilling.
A more recent meta-analysis reported a statistically significant increase in financial knowledge (0.25 standard deviations), but this did not carry over to a change in financial behaviours (in which there was only a 0.05 SD change), which is all that really matters.
2. Who would design the curriculum?
Would you trust the school board to design a financial curriculum? Who are they going to go to for content? You guessed it – the financial services industry. The lobbyists would be salivating. “What is the most popular investment product, kids?” . . .”Mutual funds!” Ugh. I want my kids’ knowledge to be evidence-based, not the status quo BS that pervades the industry.
Perhaps this is why formalized financial education programs rarely align with real-world skills.
3. Kids don’t learn about money until they have money to learn with.
Unless you can see financial concepts in action in ways that affect you, the concepts aren’t going to sink in. Information is not enough when teaching kids about money: they have to understand it, believe it, and act on it. That doesn’t happen sitting at a desk.
Studies show that the effect of financial education decays over time, just like my knowledge of the circulatory system did. You can’t make that information stick with a test. You have to appreciate it’s power and use it in real life.
4. Who is going to teach it?
Teachers are stretched thin as it is. It’s not reasonable to expect them to become proficient at personal finance on top of all their other responsibilities.
Besides, if you add financial education, what are you going to cut? Lunch?
5. False confidence.
Do you teach your kids about history? Geometry? Physics? Me either. School takes care of that. If we ask our schools to teach kids about money, it might be easy for some parents to assume their children have acquired the relevant knowledge and skills, not putting the time and effort into it themselves.
But unlike history, geometry and physics, our kids are going need financial skills in real life all the time. When the average person makes 6-8 financial decisions per day, this is too important to screw up.
To be clear, I’m not saying that all financial education is useless – I am a financial blogger, after all. I just think that there are much better ways to develop financial skills in young people and the next generation will be far better off if we put our time and energy there. Knowledge converts to action only when its relevance is understood and we believe it has the power to improve our lives.
With this in mind, stay tuned for the next post where I’ll tell you all about how we teach our kids about money. It might spur some ideas and, hopefully, some good discussion in the comments.
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