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For some, the question is, why is personal finance not taught in school? It is not clear whether people are not educated, or simply they don’t want to learn anything. Before I look into the crux of the issue, let me review a twitter feed that I engage in about finance. A good number of people believe that they were never taught personal finance. Those that were taught think that it was a waste of time; in fact, some are enrolling for private finance consultations instead of reviewing their school-learned lessons.
Before 1998, only 21 states had implemented personal finance in their educational curricula. Eighteen years later just 24 more states have done so to bring the total to 25. Today, only 22 states, out of 54, require students to pass a personal finance course before graduating. Considering that 73% of the US population is above 21 years, it not hard to see why they feel that they never received this critical information.
So, from reliable extrapolation, we can argue that majority don’t have the power over their finances. Once you get your money, ‘finance’ becomes an academic word. If the person is not taught in school, then, personal finance is just that, personal! If you cannot take the initiative, then the cruel hand of your creation will initiate you.
Research shows that majority of people rely on information from parents, mostly negative, about finance. If your parents are struggling with finances, you are likely to learn from experience. If they don’t, then, that lesson may never hit you until when it does. With finance, there is more than affording a mortgage, paying for college, medical insurance or even a holiday. It is about having a balanced lifestyle from youth to old age.
It is more about how you can transition from one stage of life to the next and managing it well. For example, the transition from youth to parenthood is not always backed with increases in income, yet the expenditure tends to increase significantly. So, personal finance is engaging in a thought-provoking decision plan. For example, individual finance should inform you on when to start a family and how to do that.
On average, to retire peacefully, you need $1.5 million. Assuming you have worked for 40 years to retire at 65, you need to save $37, 500. Unfortunately, the real median personal income for the country is $31,099. That sad reality can explain why the average American debt grows over 20 times faster than the US GDP, which is another worrying statistic. Firms such as Tweed Financial Services must worry about the trend.
A quick review of some of the personal finance courses available in schools shows that the classes are laden with financial jargon and little applicable knowledge. Tweed Financial Services is concerned that one does not need to know how to fill IFRS compliant forms to be perceptive about his finances. All the person needs is information enough to plan and execute a budget that includes what to earn, what to spend, what to save, how to save, and how to grow the savings.
My opinion is that personal finance knowledge should be a comprehensive learning process that should start in school and continue into adulthood. At the high school level, children should learn bookkeeping, budgeting, and a saving culture. As they progress in life, they must learn how to manage debt and earn. Once they have savings, they should learn ways and means to increase or multiply those savings. Later in life, they should focus on maintaining affordable lifestyles without breaking their lifelong commitment to a successful personal finance.