In a recent Business Times article, Professor Emeritus Lewis Mandell shuns standard financial literacy education. He says:
I'm very pessimistic. I have been doing research continuously, tracking levels of financial literacy which have not gotten any better, and also attempting to measure the impact of educational programmes. The research gives no reason for optimism. It basically shows that students in high school who have had a course in financial education are no more financially literate than those who never had such a course. That's an indication that we have not figured out how to teach financial literacy.
Mandell goes on to talk about using more real world, trial by fire methods, of educating children on the use and purpose of money. We opened up this topic on Twitter a couple of weeks ago and received a wide variety of responses:
Personally, this is a very interesting article. He appears to be saying that classroom teaching doesn’t work, but practical hands on stuff does. I would agree with this.
I’ve never been completely sold on the idea that financial literacy is the answer. In Australia, there is no financial literacy training in any school system at any stage. However, Australians are much better at managing their money than Americans. I think Americans historically were better at managing their money when wages were increasing in line with cost of living increases. They left school, got a job and their income steadily increased throughout their life time. Over the last 15 years, the middle class has had to learn to live with reductions in pay and benefits at the same time as costs were increasing. They haven’t coped well and so we see the problems we are now experiencing. The minimum wage didn’t increase for 10 years. This impacted on the low wage and young people in particular.
On the other hand, Australians have never had to systematically cope with reductions in pay and benefits. Income has kept pace with inflation. Add to this that the average Australian doesn’t have any outstanding student loans, lives at home when going to college, can live without a car until they can afford to buy one. Public transport systems allow you to do this. Credit scoring is a guide, not the bible.
Bottom line for me is, we need to come up with creative ways to teach kids money management (like reality fairs and student run branches). The country needs to get serious about making sure people can earn a living wage.
I hope more credit unions get involved in initiatives like reality fairs and lemonade stand loans rather classroom presentations.We'd love to your hear your thoughts either in the comments below or shared with us on Twitter.