Have you ever stopped to think about the extent of your financial knowledge? Depending on your age, you probably have some sort of knowledge (good or bad) about things like credit cards, rent, checking accounts, mortgages and car payments. These are just a few of many crucial financial items that nearly all adults must deal with on a day-to-day basis.
However, what worries me is that in the American School system, the vast majority of people are never explicitly taught anything about personal finance. I remember grade school and high school forced us to take classes on music, physical education and home education, but never financial education. I went to pre-school, kindergarten, grades 1-12 and I graduated college in 4 years with degrees in Finance and Real Estate. That is 18 years of schooling, and miraculously at no point was I required to take a course on Personal Financial Responsibility.
As I have now had over 10 years since graduating college to reflect on this, I realize how many financial mistakes I have made and how easily most could have been avoided if I had any basic financial knowledge at the time. What worries me is that I see a lot of my peers continuing to make these mistakes, and nearly everyone under 30 has zero understanding of personal financial responsibility.
This needs to change now! We are at a crossroads in history. The recent recession as well as the current financial debt crisis should open all of our eyes to the fact that something needs changed: all individuals need to start taking responsibility for their own personal finances. Young people need to be forced to take classes, starting at the earliest possible age, on personal financial responsibility. Everyone needs to 1) save cash and 2) avoid debt.
Living in a country that continually deficit-spends makes it hard for the average person to understand that they cannot run their household budgets like the politicians who control America run its budget; America can keep borrowing money where the average person cannot.
With a little education and incentive, people can strive to live on a budget surplus, spending less than they earn and saving what they do not spend. Financial stress can crush relationships & ruin lives, yet for the average person, having $50,000 in savings can go a long way to helping sleep at night!
Unfortunately most people are doomed from the beginning, starting their adult lives by forming habits of deficit-spending on credit cards, allowing them to spend more than they make, while saving zero. If this trait continues long enough, it becomes nearly impossible to reverse it without a drastic increase in income. People eventually just accept that they are going to be always counting on the next paycheck and they can’t even imagine any other way to live.
This cycle leads to a mass of people who are poor and desperate and much more likely to rely on the government. We are currently witnessing it and the devastating effects a society of financially illiterate people can have.
The good news is that there is still time to change things for the better! Educate yourself – read as much as you can and ask proven financial advisors for advice. If you have children, force them to learn about personal financial responsibility as soon as they are old enough to understand speech! Eventually, we can hope that the American Educational System adopts Personal Financial Responsibility as a required course from K-12, but even then the ultimate responsibility lies on our own shoulders.
Remember, save cash, avoid debt, live a simple, frugal life until you’ve earned the right to live otherwise. Once you achieve a stable financial position, or even financial independence, you might be surprised at the lack of desire to live anything but a humble life!