My introduction to Financial Education came during university with a recommendation to read Robert Kiyosaki’s Rich Dad, Poor Dad by a fellow student. Despite the criticism that the brand may have faced over the years, this book really opened my eyes to the different approaches to money by the rich, poor and middle classes. If you haven’t read it, I definitely recommend. For my fellow UK folk although some of the items discussed may be specific to the US the principle of using your money as investment capital to generate income is universal.
So what’s currently the norm when it comes to how we use our money?
We exchange our time for money, in other words we go to a 9-5 (other shift patterns also available J) in exchange for a salary/wage. This earned money is then spent on things (rent/mortgage, bills, leisure); some of us will then save what’s left (if there is anything left). As we progress in our working lives we may get a raise/a promotion (or several if we’ve had a really good run). What do we do with our new surplus money? Do we invest it in building income streams that will make money for us whether we go to the office/factory/store/hospital (*select work location as appropriate) or not? No! The reality for most people is that these additional earnings are absorbed by the new house/car/designer clothes/holiday they couldn’t afford previously. In short, most people end up returning to having just enough. The lifestyle is upgraded to match the pay packet, often with extra dose of debt to match.
If everyone’s doing the above, why shouldn’t we?
Resisting the urge here to quote the often used phrase … “if everybody else walked into the fire”…. I will stop right there but I think you get the point. Living this way keeps us in a state of dependency on our jobs – a state of Just Over Broke (J.O.B) to borrow from Robert Kiyosaki or even worse in a cycle of debt (if our spending habits are particularly bad).
So why do we need Financial Education?
To equip us with financial skills/knowledge. This will allow us to make better financial decisions that line up with our circumstances and are not simply the product of conformity.
To help us plan for the future. The money game has changed compared to prior generations – pensions being a prime example. Company pensions don’t come with the same guaranteed retirement salary that our grandparents were used to. We will need to be more creative in order to achieve our desired retirement sum.
To provide clarity around what debt is…a burden! With personal debt at an all-time high and job security not what it once was, we need to start looking at debt as a burden rather than just something everyone has. Instead of turning to the credit card to purchase something we “deserve” we should be thinking about how we could afford it without debt (e.g. through monthly savings, dedicated side hustle, etc). If you lost your job but did the latter you won’t be left thinking “how am I going to make these repayments”.
To provide clarity around assets versus liabilities. Consider a car bought with finance or your primary residency purchased with a mortgage – are they assets or liabilities? Think of how most people describe them, then consider whether they are adding to or taking away from your pocket.
Because the majority of adults have received limited education in this area. Most of us learn through error (often costly error). Prevention would be better than cure surely.
Thankfully financial education is now being taught in UK Schools. There is still a way to go given that this has started fairly recently. Nonetheless for those of us past school age, all is not lost, we have an abundance of information available to us via personal finance blogs and the internet.
What are your thoughts on Financial Education? Did you receive much growing up? Who do you think is responsible for providing Financial Education? Is there anything you would do differently with regards to your finances if you knew what you know now? Please comment and let me know, would be great to hear from you.
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