The other half of the personal finance battle

A high school friend posted a link to this Mother Jones commentary on an Economist article dealing with education in personal finance.

The main point brought out is that “courses in personal finance do not appear to have an impact on adult behaviour.”  The article specifically mentions that financial education had no impact on degree of saving.

Knowing is half the battle …

I either never learned about, or completely forgot about, the safety lessons included in G.I. Joe cartoons.  (But, with the magic that is YouTube, I can educate myself.)

How things went down:  Someone would get themselves into an unsafe situation, like having their arm set on fire, or getting near a downed power line, or becoming stuck on the center of a frozen pond.  A G.I. Joe guy would just happen to be in the vicinity to get them out of the mess, and would explain for all of our benefit what the safety hazard was, and how to get out of it.

The grateful civilians would then say, “Now we know! … ”

And the red-laser-shooting G.I. Joe guy would say:  “… And knowing is half the battle.”

… but it’s only half the battle!

Getting back to the personal finance education topic, I suppose that I wasn’t surprised to hear that classes in personal finance didn’t really have much of an effect on later behavior, for a few reasons:

  • People learn far more from their adult relatives’ actions than in the classroom.  I didn’t learn about spending less than I earned from a textbook.  I learned it from my parents, and my grandparents.  That was how they dealt with their finances, each day, every day.  Their actions spoke, and taught, far more than any classroom would have.
  • Basic financial literacy is … really pretty straightforward.  I wouldn’t expect that the basics of personal finance would really round out a full year-long class.  Possibly a semester-long class.  But stretching the material out, it would seem, would get pretty dull pretty quickly.  This would give people reason to tune out when they otherwise wouldn’t.
  • Knowing is only half the battle.  Learning how to balance a checkbook, or how to budget, or how to save for big expenses, is one part of the equation.  Let’s be generous and agree with the G.I. Joe guys: it’s half the equation.  The other half, then, is following through.  It’s the lack of follow-through that gets people, even if they know the right thing to do.  Getting 50% right is still failing under most circumstances.
  • The other half, frankly, isn’t fun and carefree.  Restraint from impulse buying, saving for a rainy day, and packing lunches just doesn’t get the juices flowing for most people.  As much as evangelists may try to make this a fun activity — I suppose I’m one of them — in a way it feels like living life with the throttle on.  It takes discipline and constant work to maintain a frugal, financially-responsible lifestyle.  I’ve even come to the conclusion that it isn’t supposed to be fun.  But, I also suspect that if it were actually fun, everyone would be doing it, and that’s not the case.
  • The not-fun part usually wins over the I-should-know-better part.  That’s the crux.  People who know better don’t do better because they’ve gotten used to a certain level of “fun” that is more than they can afford.  They don’t want the pain associated with the absence of that fun — even if they know that down the road it will cost them lots more.

So, even if people do know about good personal finance, knowing is only half of the battle.  The other half is doing it.

Where did you learn about personal finance?  Did it have a lasting effect on how you handle your finances now?

John Wedding

Husband. Father. Web publisher. Musician. John has blogged at Mighty Bargain Hunter since 2005, helping people to recognize life's good deals.

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