Last month, President Obama signed the massive financial regulation bill, which in a kind of legislative footnote, created a federal Office of Financial Literacy. While I applaud the intent to take financial education seriously, I am skeptical about the impact of the new office (to say nothing of the regulation). It may help older consumers learn about saving, credit, debt, and wealth building, but it doesn’t address a real need: educating the next generation of consumers, entrepreneurs, and investors.
America needs financial education. Students don’t know what “compound interest” means and parents are generally not prepared to teach them. The impulse to do something about this emerges every few years. In 1995, Jump$tart, a non-profit that was to lead in financial education was formed. In 2003, the Financial Literacy and Education Improvement Act created the Financial Literacy and Education Commission. In 2008, President George W. Bush established the President’s Advisory Council on Financial Literacy.
But these efforts did nothing to ward off the propensity of Americans to buy homes they could not afford. The lack of thoughtful dialogue related to the new financial regulation bill was itself scary evidence that many legislators’ own financial fluency is so inadequate that they had NO IDEA what the bill they voted on really does. A quick Google search of “financial education programs” produces a staggering 34.3 million results—there is no lack of programming. Anyone can get financial education, some of it very good, free of cost.
America faces two problems in regard to financial education that the new office is unlikely to impact. The first is a deep ambivalence about the very concept of financial education. “Buyer beware” is integral to the American psyche, reflecting a roguish attitude that each of us is fair game, literally. Capitalism thrives on the foolishness of others and REALLY creating a citizenry of responsible savers who live sustainably and buy judiciously goes against something deep in our national identity.
Indeed, the current worry that Americans aren’t “buying enough,” even as we fret about rising unemployment and houses under water, demonstrates the schizophrenia that no one, certainly not a government office of financial literacy, is prepared to tackle.
The second problem works in league with the first: the acquisition of basic financial fluency is not a “remember these three tips” kind of process. More akin to learning new languages or gaining skill as an athlete than learning how to frost a cake, the process involves the mastery of a new vocabulary in the context of a family’s specific values. This is a tough sell in an “instant” culture.
Ultimately, protecting assets—financial or human—is all about paying attention. “Buyer beware” is actually a great piece of wisdom, but thought leader families are getting proactive: Buyer BE AWARE is the new attitude. Thought leader families are now paying attention to the financial education of family members. They are not being prodded by a government office, but by their own informed self-interest. Financial education is economic self-defense and it is this consciousness that will help us rebuild an “in-the black” nation, not another Office.
With my best,