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Financial Education. Who, What, Where, When, Why and How?

Chad Jones, one of my partners here at Allen & Company, writes a blog about KIDS & MONEY. The blog offers great insight into issues

valuable to parents and their kids. As I read the blog FINANCIAL LIFE LESSON FOR KIDS: HOW DEBT IS LIKE SWIMMING, I thought how valuable it will be for young people to fully understand how debt can have such an enormous long-term impact. (Also thought it might help for members of Congress to read the blog.)

For the most part, readers of our blogs have a good grasp of basic finance or at least are working toward having a better understanding of the subject.

When it comes to financial literacy, it appears that there is a need for increased education on the subject. I have applied the 5 W’s (Who, what, where, when, and why?) to talk about the issue. Then, I added an ‘H’ (how) to the conversation.

WHO should learn about at least basic financial concepts.

This is an easy one. Everyone should.

WHAT should we know about the subject?

The basics are a good starting point. Understanding what a budget is and how spending beyond that budget can have an impact for years to come. Having an effective system of tracking income and outgo is simple yet critical to financial well-being. Understanding debt and its impact on finances is crucial. Learning that deficit is NOT the same as debt. The misunderstanding on this is understandable. We often hear from people who know (or should know) that the two are interchangeable terms.

A quick lesson on the power of compounding can motivate saving at an early age.

WHERE this education takes place sometimes is subject of debate.

Some say our schools should teach this. Others argue it should be taught at home according to a study from Financial literacy hovered around 50% for eight consecutive years with a 2% drop in the past two years. Assuming this data is correct, half of U.S. students will receive little, if any, financial education, at least not until they study it in college. Even at the secondary level, however, it may not be required.

WHEN should financial literacy be taught?

Based on my response to the WHERE question, I would argue that the sooner the better. Like many things in life, the earlier we are taught something, the more likely we are to retain it. I was fortunate to have two parents who understood some basic financial issues. Neither had been formally educated in the field of finance. Mom was a nurse, and Dad was a cop. As children of the great depression, both parents had learned some lasting lessons along the way.

I got my earliest training around the age of 5 or 6. Dad built a wooden “budget box.” The box was divided into sections. The income was placed in one section (yes, cash). The other compartments represented all the bills to be paid. On good months, there was money left after the “gotta have” compartments were full to add to the savings and “wanna have” compartments. Mom did most of the budgeting, and she would have me sit and watch the process. The tracking system was a hand-drawn spreadsheet attached to the lid of the box. As banking advances occurred, the system was updated, and the box went away. (I wish I had that box today). Technology allows this basic process to be used today. Unfortunately, there is a lack of emphasis on the topic.

WHY should we teach financial literacy?

There are many reasons. Most importantly, it is to enhance the financial security of those least likely to receive adequate and timely training. I say timely, because what we have seen is young people make poor financial decisions on spending and debt without basic understanding of finances.

The other WHY.

Why not teach financial literacy at an early age? Some would argue lack of time, lack of funding, and lack of other resources. I would counter by saying we need only look at the cost of debt owed by young people to see that an early education may have prevented many from being influenced by people who do not act in that borrower’s best interest. The likely cost to most of us, including those who did borrow the money, will likely be far greater than the cost of early education. (An ounce of prevention…)


Getting basic programs into the K-12 might start with discussions with local school boards is possible. However, our industry, including the individual advisors, may need to be willing to step up financially to initiate these programs.

Have a question about kids learning about financial matters? Give us a call.

July 2024

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