Financial literacy — that’s the new watchword. How can we expect people to save — for retirement, for a rainy day — if they don’t understand, fundamentally, how finances work. How does interest work? What’s inflation all about? How would one even begin to start investing? With respect to the first two of these items, I’ve generally had the sense that people might know how these terms are defined but don’t have a feel for what they really mean in the real world — but I came across a claim the other day that young adults don’t necessarily even know that.
At my column at Forbes, I wrote a while back that, in the same way as community organizations sponsor “wellness fairs” they would do well to sponsor “financial wellness fairs.” Now there are reports in the news about expanding financial literacy courses for high school students, so that they learn the basics of banking, investment, and budgeting.
But (while I have a larger article on the topic sitting as a draft in my Forbes WordPress editor) I wanted to collect some reader thoughts on a couple issues here:
First, it seems to me that bank accounts for children have always had a certain “training wheels” element to them, as kids learn to deposit their money in a bank, watch it earn interest, and then withdraw it, so that they might save up for a long-desired item. But a child with a bank account cannot learn about interest from that bank account — not in the year 2018, when, to pull the example of the bank statement in front of me, my son earns 0.02% interest. That’s not 0.02 as a fraction. That’s 0.02 percent, or 0.0002 as a fraction. For that matter, the idea of a “savings account” in general, as a means of earning a moderate degree of interest while still keeping money accessible, really doesn’t exist any longer, yet there’s a great deal of hand-wringing over how few people have savings accounts.
And, second — well, this is more of an open-ended question: think back to your young adult years. How did you learn to budget? How did you learn about mutual funds and credit cards and mortgages and the like? I’m still putting together my thoughts on this and would appreciate a mix of perspectives.
Image: https://commons.wikimedia.org/wiki/File%3AMoney_Cash.jpg; By Jericho [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons
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