How To Become Financially Literate Since Schools Have Failed You

Good financial practices need to start early, but sadly, most American high schools don’t really teach finances. I had to take algebra to graduate, but I walked across that stage with a 3.7 GPA and no idea how to balance a checkbook or open a checking account.

This was the self who signed the dotted line for all those undergrad loans I’m paying for today. Somehow the system in place seems to think there is nothing wrong with taking 17- and 18-year-olds who may not even know how to open a savings account, and trusting them to make what is arguably the most important financial decision of their lives. Then later on down the road when we’re trying to build lives, they chastise us for complaining about the debt and circumstances in which we have found ourselves. In the end, I picked up the basic things from parents, friends, and the internet throughout my college years, as well as just applying my own logic to the situation. I muddled through a car loan and doing my taxes this way.

Working for a financial institution after college made me realize the financial world goes a lot deeper than savings accounts and rent payments. I’m talking stocks, bonds, 401Ks, IRAs and so many other acronyms that I felt like I needed a special dictionary to properly do my editing job. I asked a lot of questions and scribbled some things on sticky notes, and it ended up being worth it. It also made me realize that many (read, most) people seem to be intimidated by finances. Again, if we were taught these things universally at a young age, then maybe it wouldn’t seem so scary! But instead we’re left to glean what we can from personal research and the example set for us by our parents—which means that many of the children of parents with poor fiscal knowledge and responsibility will likely inherit that same illiteracy and irresponsibility.

One of the top articles in The Atlantic this week is The Secret Shame of Middle Class Americans by Neal Gabler, which addresses the economic crisis many Americans continue to go through, despite the rise out of the recession. The article begins by explaining that in a recent national survey, “The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all.” But that’s not what I found striking. We live in a world of stagnant wages and student loan debt, after all. No, what I really found perplexing was the following: “the study by Lusardi, Tufano, and Schneider found that nearly one-quarter of households making $100,000 to $150,000 a year claim not to be able to raise $2,000 in a month.”

Wait, what? How could this be happening? People making two, three times the median income shouldn’t be living from paycheck to paycheck. I grew up in a household making less than $30K, and yet we managed to have a house, albeit a small one, two (old, yet functional) cars, and enough food to put on the table. It was difficult, for sure, but it makes me wonder. If a family of three can manage to survive on a $30K salary, then how is the median family of four falling into ruin on incomes twice that much? Yes, life is hard, and that can explain away some of it—there are unexpected medical costs, student loans, and the like. But what Gabler admits is a large culprit of his own troubles is plain old financial illiteracy and poor decision making on his part.

Think about it. We’ve all heard the story that lottery winners are more likely to blow all their cash rather than save it, leaving themselves in the position they were beforehand, just with shiner stuff. Well, it turns out that’s what a lot of people do with their paychecks. Their rate of consumption exceeds or equals their rate of income. Gabler ends up placing much of the blame on credit card debt, but in reality, it goes deeper than that. Credit card debt is just a symptom.

The good news is that it’s never too late—there are ways to improve your financial literacy. Here are a few resources to get you started:  

• 30 Second Economics
• The National Financial Capability Study—Not too many questions, and aims for the personal basics.
• CUNY Financial Literacy Quiz—13 more in-depth questions.
• Council for Economic Education—This one is the longest (20 questions) and is more economics than personal finances. It also prompts you to add demographic information so you can compare your score with the national average, and see the breakdown by education level, age, and gender. Not to brag or anything, but I got an 83%. (Thanks 30 Second Economics! I haven’t even finished you!)
• NerdWallet was my best friend when I was looking into getting a credit card: They have a bunch of comparisons and tips.
• In addition, the r/frugal Reddit forum is bookmarked and tucked in my “adulting” folder. They cover a lot of things like budgets, major purchases/product reviews, and have a lot of finance how-tos.

We as a generation are already facing an economic setback in the form of student loans, so we may as well know what we’re up against and become informed of the best ways to go forward in our money lives.