In school, you likely learned about logarithmic functions. You likely learned about the American Revolutionary War. You might have even learned about electrochemical bonds. But did you learn anything about the importance of fiscal responsibility or how to manage your basic finances?

The unfortunate reality is that personal finance is not a required curriculum in the public education system, and few schools in this country offer financial courses as electives. As a result, we have entire generations of people who don’t know the first thing about personal finance or economics -- and it shows.

We’re severely underestimating and underutilizing the power of personal finance education in this country, and it’s time to change things for the better.

The Basics of Financial Literacy

What do I mean by “financial education?” That could refer to a broad range of different topics. When I use the term, I’m referring to a common collection of principles associated with financial literacy. These include things like:

•  Budgeting. You make $3,000 per month. Can you afford to move to an apartment that costs $2,500 in rent? This should be a simple question, but there are many adults in this country who won’t be able to give you a straight answer. Budgeting is a fundamental skill that allows people to live within their means -- and plan for a better future.
•  The power of compound interest. Compound interest can be dramatically beneficial or dramatically harmful, depending on the context. In just a few years, even a small amount of credit card debt can spiral out of your control – or a smart investment could make you wealthy -- all thanks to the power of compound interest.
•  Long-term financial thinking. Too many people think about finances only in the short term: how much money do I have today and what can I spend it on? Better personal finance education should include illustrations of long-term effective decision-making. For example, if I save $5 a day, every day, how much extra money will I have at the end of the year? At the end of the decade?
•  Investing. Investing should be for everyone, whether you favor stocks, bonds, real estate, or alternative investments like cryptocurrency. It’s the pathway to financial independence and, eventually, retirement, but it’s neglected by a startling percentage of the population.

The Consequences of No Financial Education

The consequences of leaving these topics untouched in school and in a person’s childhood can be devastating.

For the individual, it means:

•  Higher financial stress. Financial stress can be harmful to a person’s mental and physical well-being -- especially if not properly managed. Struggling to make ends meet and not knowing how to climb your way out of debt can lead to a much lower quality of life.
•  The burden of debt. Taking on debt early in your life can hinder your potential growth. With college debt or credit card debt, you may find it nearly impossible to establish a strong financial foundation for yourself -- and that debt may only grow worse over time.
•  Retirement impossibility. Millions of people forge a path to their own retirement through hard work, strict budgeting, and investment; even on a modest salary, an individual can push to retire early. But with no personal finance skills, that’s a practical impossibility.

For our society at large, it means:

• Wasted potential. The first and most obvious consequence for society is wasted potential. When people are struggling to get out of debt, when they’re incapable of budgeting, and when they have no financial ambition, they don’t contribute as much to our communities as they otherwise could. Our economic growth is stagnated as a result.
• Bad economic policies. Millions of people in bad financial positions and with no personal finance education to guide them will push for legislation and economic policies that are harmful to this country. Certain types of debt relief, rent moratoriums, and welfare programs, while well-intentioned, often have long-term repercussions like higher housing costs and inflation -- which ultimately hurt the very people they were intended to protect.
• Wealth inequality. However you feel about the root causes of wealth inequality, it has a negative impact on society. It builds resentment, increases polarization, and can lead to dramatic (and sometimes violent conflicts).

The Road to Better Personal Finance

We can’t change the system immediately or dramatically, so the best place to start is at home and in your local communities. We can push for better long-term changes to our education system to favor more personal finance education, but in the meantime, it’s our responsibility to teach our kids, our friends, and our neighbors what we know about personal finance. If you feel competent in this area, you can lead the charge -- and make a positive change for both your community as a whole and the individuals who comprise it.

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