A few years ago I was working with a young lady in her 20’s who was talking about her spending habits and the fact that she had maxed out her credit card. I mentioned that that would mean she would have to change her spending so she could start paying it off and she remarked that it didn’t matter as she would just apply for another credit card from another bank. “It’s easy!” she said, “You just ask and they give it to you.”
Although I’m not sure how widespread this attitude is, it does show a weird disregard for a how a particular system works.
This question has been asked a lot over the last few years. Why don’t we teach money management at school?
The short answer is that we do. In recent years there has been more and more classes about things like saving, credit, interest and loans and what they actually mean. Although, it doesn’t necessarily follow that just because we’ve received education on something, then we will automatically make good choices about it.
There are a few issues with teaching money management at school.
One is that when my parents and grandparents were young they were taught find a good job and then knuckle down and work hard and build a nest egg over many years and then invest that into a house which would then grow in value while they paid it off and raised a family. Then that asset would help fund their retirement along with their super from that one long term job or career. They were told to not worry too much about following your dreams or passions but to find something that paid well and stick with it and then eventually it would pay off.
As a result money management tended to be taught more in the home, through children seeing how their parents handled money and what their parents valued. Money skills like saving, working hard, going without, putting off self-gratification until later, and managing debt were taught through example as the kids experienced it first-hand.
Therefore at school we were taught about the value of compound interest and savings and how putting a small amount away today can pay dividends much much later down the road.
Unfortunately, while those values were good and tended to also do a lot to instill a particular character into children growing up, they are not especially useful today. The economic climate has changed and the strategies that worked before no longer do. The situation has changed and the skills that worked in the past don’t any more.
Part of it is the result of the stock market crash and the sudden loss of people’s life savings. Things like houses, cars and retirement portfolios went into a sudden and difficult crash and people came to realise that funds weren’t always secure. The old ways of storing up your life savings into an asset like your house suddenly didn’t work anymore and people were left struggling in a world where everything they had believed in and worked for suddenly no longer worked.
The kids growing up weren’t stupid, they saw those things and they learned from them.
As a result, over the years the mantra has changed from “Work harder” to “Work smarter”. People are being told that you shouldn’t ‘work for money’, you should ‘get money to work for you’, even though many people don’t really know what that actually means in a practical way.
However, along with this there has been a focus on following your passion and looking for self-actualisation now. If life is for living and for following what I want to do then why shouldn’t I pursue what I want and not settle for something until I’ve found the right job? As a result, instead of waiting around in a good, secure, but ultimately unfulfilling career, I should be finding myself and pursuing the “right” career, and the best career for me. Isn’t life for living after all? Shouldn’t I be trying to make money and a career out of something that makes me happy and therefore I would put more effort into it and do a better job? It makes sense. I don’t want to spend my life just living for the sake of survival like my parents and grandparents. I want to make something with my life!
The other issue with how money is taught at school is that older generations give kids advice because it is based on what things worked for them, but the situation has changed and the advice doesn’t work anymore. It’s no longer viable that young people starting out in the work force can afford to put deposits down on houses and start paying off their mortgage. They can’t survive on single incomes anymore. It’s no longer viable that the lessons taught at school will work today and the kids need to learn new lessons if they want to survive.
When I first got married, my wife and I received a lot of marital advice. Most of the advice was from older couples who had been married for 30-40 years and they told us how they had made their marriage work and what they did. It was good advice, but it was good advice for them. The problem is that they could really only tell us good advice about their own marriage and what had worked for them. The same things didn’t work for us. When we tried them it lead to arguments and recriminations because we weren’t the same people. In fact we had to unlearn those things and learn totally new things that were more applicable. So, while the advice was well meaning and sincere, it was ultimately wrong.
In this way it’s no wonder most kids leave school today and enter into the workforce feeling totally unprepared.
In order to cope with the sheer amount of change that is going on schools need to understand that people need to adopt learning itself as a lifelong skill. Young people growing up can’t just learn what’s taught, they need to understand how to think critically about what they know (and assume to be true), and to apply creative thinking and problem solving abilities to the real world issues that they will face when they leave school.
One of the learning skills that is necessary is to understand that solely focusing on knowledge (and memorisation) is not going to lead to good results when the whole landscape is changing around us. I want to talk about some of those skills in my next post.
As Einstein said, “We cannot solve our problems with the same thinking we used when we created them.”
That’s something I wish I was taught at school.