America is full of sober, responsible people who tried very hard to do the right thing financially. They got their education, got a job, bought a house, stayed out of debt and saved for retirement. They followed all the rules only to wake up one fine morning and find themselves in serious financial trouble. What did they learn? They did not necessarily do the right things after all. They, meaning we, found that very often our financial teachers gave us advice that benefits them rather than us. Yet even now, our financial teachers, wherever they may be found, are advising us to do what we have so long been taught to do: go to school, work hard, stay out of debt, save for retirement, and hope things will be okay. Once the crisis is over and things are back to normal, doing all those old right things will work---except when they don't.
Every financial adviser strangely urges relying on the same failed strategies to work in the future, the strategies that enrich them instead of us. And why not? Most so-called financial advisers are really financial sales people. We should expect what they say to benefit mostly themselves. It seems each financial adviser has a pet financial instrument. For some, no matter what the financial problem is, the solution is life insurance. For others, the solution is an annuity. Still others, it's the stock market. For yet others...whatever it is they are licensed to sell. Once they have been paid, it little matters how their advice impacts their clients for good or ill.
Given the importance of finance in every single person's life, it is astonishing that finance is not generally taught in schools, nor is there much public demand to make finance part of the school curriculum. Teachers may read and groan, Oh, please, do not add even one more burden to the teaching load or one more excellent subject to be neglected in favor of NCLB testing. Even so, finance should be part of the curriculum, perhaps within the math curriculum. To be sure, many math textbooks touch on financial topics, especially when looking for real world applications of the math students are supposed to be learning. But these incidental financial topics are taught by the same elementary math teachers whose lack of a profound understanding of fundamental mathematics has already been well-documented.
Robert Kiyosaki, taking some cues from John Taylor Gatto, believes that keeping our children in ignorance about money and how it works is evil. We are in the information age when knowledge about all kinds of things, including money, is crucial. Yet as any history of education shows, our education system still operates in the industrial age. During the most recent presidential campaign we heard that education and the economy are intertwined and interdependent. However, there are no broad-based initiatives to include finance in the curriculum.
A program to teach financial literacy is probably more important than the technology literacy schools were more than happy to integrate into their curriculum, especially since technology in schools was often generously funded by the foundation arm of corporations in a position to profit. Thus Apple put free computers in many schools. Nearly every foundation's Request for Proposals (RFP) for grant funding requires a computer/technology component. Financial literacy is even better, because almost by definition, financial literacy would enhance that darling of all educators, CRITICAL THINKING. Financial literacy is all about evaluation, the very top level of cognitive knowledge.
What would a curriculum of financial literacy include? Robert Kiyosaki, writing about this very topic, would probably say a curriculum* of financial literacy would include:
1.The language of money.
2.The difference between capital gains and cash flow.
3.The fairytale aspect of most financial advice.
4.The influence of attitude on reality.
5.Selling yourself.
In other words, students need a new mind set, a different frame of reference, a modified set of pegs for organizing the basics of financial knowledge, such as rate of inflation, compound interest and tax strategies, just to name a few. Those basics need to be taught within a different frame of reference, because clearly the old frame of reference further enriches the already rich at our expense. Schools need to prepare students for the information age where knowledge is king. So far, schools seem uninterested in the task, perhaps because teachers with the new, different, modified mindset are so rare, and because the usual, but flawed advice, is not only everywhere, but everywhere accepted as correct. I am not necessarily recommending Mr. Kiyosaki's work. He has his own agenda. However, finance is such an integral part of the adult life for which we are supposed to be preparing students, we need to get serious about including it in the curriculum.
*Robert Kiyosaki spelled out his curriculum in chapter 12 of his new online book. The chapter did not exist when I first wrote the post, and the link is now broken.
“History of money...
Understanding a financial statement...
Difference between asset and liability...
Difference between capital gains and cash flow...
Difference between fundamental and technical investing...
Measuring an asset's strength...
Know how to choose good people...
Know which assets are best for you...
Know when to focus and when to diversify...
Minimize risk...
Know how to minimize taxes...
The difference between debt and credibility...
Know how to use derivatives...
Know how your wealth is stolen...
Know how to make mistakes...”
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