Putting Financial Education To Work
A philosopher, a motivational speaker, a political leader, an author, and a data scientist have all made the same observation about the power of knowledge — and it can be applied directly to finance. To paraphrase their quotes: action without knowledge is foolish, but knowledge without action is useless.
It’s never been easier to access financial tools that allow people to make purchases instantly, buy and sell stocks on a whim, or collect volatile crypto assets. Because it’s so easy to access platforms that "democratize" finance, people tend to be overly confident about their financial know-how. But the companies providing these products have no obligation to educate or protect their users. Action without knowledge is foolish, and can even be dangerous.
The reverse is also true. The amount of financial information available today seems limitless, but it’s hard to put it to much use. In 2021, 46% of employers were offering financial literacy courses. By 2022 about half of all high schools did as well. Financial institutions spend more than a half a billion dollars on creating free educational resources each year, and hundreds of companies and nonprofits exist to serve this purpose also.
But talk is cheap. Numerous studies have shown that financial literacy courses — on their own — are basically useless. They’re responsible for less than 0.1% of all improvements in financial standing. This is because the materials are rarely deployed in ways that position their learners for success.
First, our brains aren’t wired to listen to large amounts of information and retain it over the long term unless the information serves an immediate need. It can be a better strategy to seek out financial information when you’re facing a particular situation if you want the knowledge to stick.
Second, much financial information is complex and even counterintuitive. To help with these complex concepts, we must reduce anxiety around numbers. Taking additional math classes has been found to have a higher impact on economic well being than financial literacy courses.
Third, knowledge alone has a low chance of changing the behaviors you need to be financially successful. This is because they don’t address the feelings we have around money.
Most of the decisions we make happen quickly and are driven by our attitudes and emotions. It's only after we know what we want to do in our gut that we rationalize our decision with facts. So getting to the root of your emotions and relationship with money is crucial for managing it well.
Financial education is much more effective if it’s used to open up conversations about money. Talking about finances with your friends and family can help you become more aware — and take charge of — the beliefs that drive your decisions.
If you’re looking for more knowledge, here are a few of the free resources we suggest:
· Dr. Per Cap – The First Nations project developed this resource specifically for Native Americans. It organizes subjects by category so that you can find information that’s relevant to you today. If you have a question that’s not covered in the resources, you can email askdrpercap@firstnations.org for guidance.
· Global Financial Literacy Excellence Center – Offers a Financial Resilience Hub that provides links to resources that can help folks manage the changes in the financial landscape that are a result of the Covid-19 pandemic.
· Money Smart – The FDIC (the group that insures bank deposits) offers a quiz to test your level of financial literacy along with many other games and resources.
· Practical Money Skills – This free website from Visa includes several interactive games (like Peter Pig’s Money Counter for children and The Payoff for high school age students) as well as financial calculators and articles on topics from credit to mobile banking.
