By Steve Kautz, former Maine mathematics teacher and personal finance expert.
I Like Numbers
First, thank you for reading, for your comments, encouragement and suggestions. I am enjoying the conversation, and you have motivated me to keep learning and teaching and blogging.
Picking up on last time, it’s important to mention that I constantly think about how I went from a kid who was sensible, good with numbers and money, to the opposite guy in my 20s and beyond. It wasn’t my parents’ fault. In fact, I know I have them to thank for those early successes. They had no idea that when I got to college I was going to be basically handed a credit card.
Schools weren’t doing anything with this problem either. In my experience there was almost zero practical financial literacy taught in schools in the ‘70s and ‘8os, and economics courses back then were mostly (other than mind numbing for teenagers) journeys through the exciting world of aggregate demand graphs and production possibilities curves. Ooooh, ahhhh.
The credit industry exploded in the ‘8os and ‘90s and the forces of consumption have been ahead of the forces of education ever since. Two quick stats:
1) 56% of undergraduates have at least one credit card, however, only 63% pay the balance in full each month. (Sallie Mae, “Majoring in Money: How American College Students Manage Their Finances.”)
2) Approximately 40% of low- and middle-income families rely on credit cards to cover basic living expenses (from a Center for Responsible Lending study).
As a result, American credit card debt totaled $854 billion in 2012.
Back to my parents and our schools … there is no way that the influential adults in my life when I was 18 years old could have known that we were headed in that direction.
You will not find me blaming the credit card industry for any personal finance crisis in this country. “While it’s true that there are always examples of unfairness and greed, the fact is that most of us that have struggled with our finances have done so because of our own decisions, our own behavior. Some part of me knew better when I ran up those charges on my Eddie Bauer card. Did I really need the “Classic T” in seven colors? $15,000 for a new car ─ “Why??? I could have gotten the new car smell in a can for $6.95.”
It Was 2008 and We Were Rippin’ Mad!
I write this at a time when I am afraid that momentum is waning. After the financial crisis of 2008 it seemed that financial literacy was the next big thing. Everyone from government to school districts to parents and even banks began promoting it. But as the economy improves (at least superficially, because an argument can be made that our economy is structurally weak, but that is a topic for another day) it becomes easy to fall back on bad habits, break out the credit card, and forget that the financial literacy level of the average American has probably not improved enough to make a difference. If a lack of financial literacy played a role in the recent economic crisis, the failure to increase our capabilities will contribute even more to the next crisis. I could fill 1,000 blogs of 1,000 words each talking about the details. Let’s start with a few words in one blog.
- According to CNN Money, 76% of Americans live “paycheck to paycheck”
- Only 60% of U.S. workers feel confident or very confident about having enough money for a comfortable retirement (only 18% report that they feel very confident) according to an Employee Benefit Research Institute study.
- While median household incomes have grown in the last two years (topping $59,000 in 2016 according to a CNN Money article), the average price in 2016-2017 for full-time tuition at a four-year private American college or university was $33,480. That’s over half of the median income for American families.
- As of 2016, only 17 states require high school students to take a course in personal finance to graduate (from the Council for Economic Education’s Survey of the States).
- Only two in five (40%) U.S. adults say they maintain a spending budget and keep close track of their spending, as found in a National Federation for Credit Counseling report.
I love the term “Financial Literacy.” The world of finance, money, and economics has its own language and the only real chance one has of navigating our system is to speak that language. Immersion is the best way to learn a language and we should be immersing our kids in the language of personal finance at a young age and increasing that immersion as they get older. By the time an 18-year-old is staring down at college commitment that will result in $50,000 in loans, they should be able to understand what it means to have a $500 payment in their monthly budget. First of all, they should understand what a budget is. They should understand compound interest. They should understand the dangers of analyzing purchases based on monthly payments. They should know that rent-to-own is a bad idea (sorry, Hulk Hogan). I could go on and on … (a fact that my students know all too well).
I say that being financially literate for an American is just as important as knowing how to speak English. Personally, I wish we could all communicate better. I wish I could write better. I wish students crafted better emails. However, I don’t know of anyone who is deeply in debt because they didn’t really know what not to end a sentence with. But I know or have known plenty of folks (yes, myself included) who have been burned by their lack of financial literacy by those who were financially literate. No, we shouldn’t replace English with finance. But we should make a serious, sustained, widespread effort at getting our society literate in an all-important second language.
There is some good news here and there.
- LD-184: An Act to Promote the Financial Literacy of High School Students encouraged secondary schools in Maine to develop a personal finance course by the 2012-2013 academic year (LD-184).
- Average credit card debt in the U.S. has gone down since 2008 (is that an indicator of real, I sense that there are more people working for this cause than ever before. Right here there are organizations like Jump$tart Maine putting on teacher’s conferences and supporting an array of education initiatives. Are we making a dent?
There is a lot to be done and it can seem like an overwhelming task. So let’s do something today, something small. Parents, talk your kids about it. History teachers, spend a few minutes connecting history and economics. English teachers, there are endless works fact and fiction on the subject. Math teachers, take the chance to answer the number one question asked by young math students: “When am I going to use this?” And for each one of us, grab an article or a book about the subject, watch a video, get some credit counseling, write a blog..
The views, information, or opinions expressed in this blog are solely those of the author and do not necessarily represent or reflect those of the Maine Jumpstart Coalition for Personal Financial Literacy.