When I started working in wealth management, the project that excited me most was my firm's "Kids and Money" initiative. Initially the program was only for our clients' children. We wanted to provide a safe space for families to discuss the basics of money as well as the unique challenges that come with being born with substantial means. Eventually we spun out our program to local schools. Most of the time we focused on the basics of savings and credit, and building a basic investing vocabulary. I loved the work and felt like I was making a difference - if only on a small scale.
With my love of working in the financial literacy space, it may come as a surprise that I find myself in agreement with Helaine Olen's recent Slate post, "Stop Trying to Make Financial Literacy Happen."
Olen argues that many of the financial institutions that promote financial literacy are doing so for their own protection. If financial literacy can be taught, she argues, then hoodwinked clients may have a harder time proving they were deceived by creditors.
Olen takes this point further in her book, "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry" where she points out that the financial literacy industry is just that - an industry. It is an industry that churns billions of dollars annually and the so-called financial experts' fortunes are sustained and augmented not by their financial savvy but by their ability to profit off those they proclaim to help.
If I agree with Olen, why do I keep pushing for financial literacy? Because even though something may be bad, it doesn't mean it can't be made better.
It is true that the industry is flooded with self-proclaimed money experts with dubious qualifications who see the legacy of the Great Recession as a great opportunity to build and profit from their own celebrity. With all this noise, a financial literacy curriculum that teaches discernment may not prevent all financial ills, but even incremental progress is progress.
Financial literacy is not just about money, it is also about decision making. Let's be honest, there isn't much to personal finance outside of basic arithmetic. However, many of us - myself included - have made money mistakes. Unfortunately financial advice is often presented with hard and fast rules by the moneyed financially illiterate: never tap a retirement account, prioritize paying debt over saving. Of course, in the real world, if the choice is between eviction and paying taxes and a 10% penalty on an early 401(k) withdrawal, it might be best to take the tax hit - and then seriously review one's cash flow situation.
If the snake oil salesmen are removed, financial literacy can be about empowering people to ask questions when they face financial uncertainty and deciding what is right for them.