Most people who learn about proper money management as an adult learn the hard way. A common thread in stories about personal financial recovery is a journey to “rock-bottom.” Often, a financial crisis is necessary to motivate people to change behavior and learn to be responsible for their financial condition and their path towards improvement. This type of trigger seems to be built into human psychology.

Many recovering drug addicts, for example, didn’t admit they had a problem until their life was so unlivable that they had no choice. The stakes when dealing with financial problems are usually not as high, but the concept is similar, and is repeated all the time.

Learning from one’s own mistakes is the most effective method of education, but the problem is that is requires someone to unnecessarily experience the worst of what life has to offer. Often, these rock-bottom situations could have been avoided, sometimes easily. The cost of losing a house is a high price to pay for learning to evaluate what you can afford before buying, being skeptical of mortgage salespeople, and preparing for economic emergencies.

A healthy relationship with money during formative years can help increase the chances of making sound financial decisions as an adult, avoiding the most damaging situations. I’ll freely admit that like many others, I entered the adult world — after college, job in hand — without knowing much about managing not only money but other responsibilities like maintaining a car. I worked for a distant non-profit organization, spent hours a day commuting, and almost all the money I earned after taxes was required just for my living expenses. My debt increased, and when I was asked to resign, I was living in a bad situation and had no money. I learned some lessons pretty quickly after that.

I seriously doubt having a course in high school dedicated to financial literacy, even if it had been required, would have changed my situation. I was, for the most part, enrolled in advanced courses in high school, geared towards going to college and earning college credits while in high school, with the intent of studying music education.

A macroeconomics course would have been more suited for my curriculum than basic personal finance, but I consider myself anecdotal proof that one can have advanced mathematics skills at the same time one doesn’t stop the tide of debt until its terrors manifest in the physical world. That is despite the concept of debt’s root in basic arithmetic: if you spend more than you have, your financial condition will worsen and you’ll never achieve any level of freedom.

The role of the parents

Parents are the first line of defense against children not entering the middle class as adults. Before children enter school, their personalities have already begun to form, and parents have the biggest role to play in forming that personality. It might be a little young to teach children about money specifically, but guiding children in the right direction in terms of instant gratification is one thing parents can do.

As children grow and attend school, the lessons that stick with children the most are those that are reinforced at home. The parents have a much bigger role than teachers in shaping kids’ approaches to money. Money shouldn’t be treated as a thing of evil, nor should it be worshiped. Money is a tool, only, and we live in a society that expects citizens to work in order to build a future for one’s self, and money is the intermediary method of exchange between work and freedom. At the same time, families shouldn’t emphasize the important of work, because until the reach adulthood, the job of a child is to do well in school and thrive in college if possible.

Economic differences affect these priorities. In some families, teenagers need to work because it’s the only way the family can earn enough to live. In other families, teenagers may want to work if they want to afford some of the luxuries they see their friends experiencing, but parents also have an opportunity to limit the effects of peer pressure.

The best thing parents can do is be great role models with money, even when money is not a frequently discussed topic. What happens when parents aren’t good role models?

The role of the schools

Whether media report that debt is increasing while incomes are decreasing or that on average, college graduates can’t pass a simple quiz about money management, public blame seems to focus on the schools. Most schools lack a comprehensive money management curriculum, and those that offer financial management courses do so to meet state competency guidelines. Some studies show that these classes do more harm than good, so there’s already a question about whether this is the right solution.

Nevertheless, many non-profit groups exist to promote financial literacy education as part of the American school curriculum. Corporations are entering the schools, too, offering their branded approach to financial literacy: Teach kids how to balance a checkbook or bank online, as long as they are exposed to Chase Bank logo (for example) day after day. With teachers not necessarily trained to provide lessons in personal finances, these outside forces are brought in to the classroom as supplements.

Unfortunately, many parents are not in a good position to impart financial lessons to their children, and that’s why blame often falls to the schools. Society expects teachers to pick up where parents fail. And in some way, that’s the only way devastating financial patterns in families can be broken. A few decades ago, college education became much more accessible to the middle class, the working class, and the poor.

Families, particularly those in more recent waves of immigration to the United States, celebrated the first to go to college. This was more than just about a college education; the benefit of a college education was access to better paying jobs and careers opposed to a trade, lifting those children’s later families out of poverty or moving them further in the direction of financial freedom. With this new success in the family, the cycle is broken, and there is positive economic mobility.

The role of the community

While the poverty rate remained essentially flat this past year, middle class jobs are shrinking, being replaced by working class jobs. It’s in no country’s best interest to have a growing section of society unable to break through to the middle class. It’s even more critical at the state and local levels.

When parents are for whatever reason ineffective role models for their children, and schools are focused on what is now considered the core curriculum of science, math, history, and English, more responsibility lands in the laps of the community. Great organizations can pick of some of the slack by offering meaningful role models. Big Brothers Big Sisters is one of the biggest organizations that come to mind. This organization isn’t focused on financial habits, but having a good role model is about more than just the financial lessons kids can learn. And when a kid has very few people in his or her life to rely upon, the impact from an organization such as this can be significant.

As mentioned above, other financial-focused non-profits and corporate programs exist in society to fill in some of the gaps left when parents and teachers are not equipped for breaking a cycle and developing financially capable young adults.

While the best teacher is experience, as many adults have determined for themselves, society would like to believe we’d be better off if fewer people had to learn about money the hard way. The better we can point the next generation in a positive direction when dealing with financial issues, there will be fewer tough lessons such as losing a house, being hounded by debt collectors, or being virtually enslaved to lenders and employers. While a lesson learned from one’s own mistakes is often the most powerful, it’s often better to learn from someone else’s mistakes when possible.

I’ll write more about teaching kids about money in the future. What would you like me to cover? What are your tips for teaching children about money? For those with children, what has worked for you and what hasn’t worked?

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Despite the Main Street vs. Wall Street conflicts post-recession, there is still a great desire among young people — particularly among privileged families — to be part of the finance industry. In three private schools, one for just girls, a non-profit organization is bringing Wall Street education to young women. Invest in Girls takes a new approach to a financial education for high school sophomores.

To its credit, the program sounds like it has found a great way to create a curriculum that engages young minds. The lessons will likely stick with many of the students, who will later choose to pursue a career in finance. A combination of having an instructor who is deeply involved with the industry, field trips to experience the finance industry in a hands-on environment, and metaphors designed to help the students relate to complex financial concepts make this an effective method of teaching and inspiring. If women are underrepresented in finance, courses like these can help to change the balance.

But the balance isn’t shifting much. The finance industry, particularly at the biggest firms, is overwhelmingly represented by young people with privileged backgrounds. A private high school, Ivy League college education, and wealthy parents with connections in the financial industry already lead to young graduates entering that industry. Invest in Girls admits as much when asked about targeting only private schools for this program. The founder of Invest in Girls replied to a New York Times reporter, “This is really about girls who are emerging as leaders and how to help those girls have the finance and investing knowledge they will need.” Implicit in her remarks is that girls attending private schools are more likely to be leaders than those who attend public schools. I’m not sure I agree with that statement.

I have to wonder whether Invest in Girls is not yet comfortable with the idea that their program is designed only for private school students. While the Invest in Girls website explains features of the curriculum, I could not find any mention of the fact that the organization reaches only a subset of the population already likely to be involved with the financial industry after college. If not for the New York Times article, I would have assumed from the Invest in Girls website that any young woman could receive the benefits of the well-considered curriculum. Perhaps the organization is attempting to avoid the questions about introducing a privileged career to a set of students who probably don’t need as much as help breaking into the industry as the general public.

I like that Invest in Girls is not just another boring financial literacy curriculum, but they certainly know their audience. While the curriculum starts with the basic knowledge that underpins a life with which money is a necessity — saving, budgeting and personal money management — the crux of the set of courses is exposure to the professional money management industry on Wall Street. Financial literacy programs are generally geared towards families who do not have the same financial advantages as these students, but every young person, regardless of economic status, needs this foundation. But most high school money management classes don’t help. Invest in Girls sets itself apart from the other types of education, so perhaps there is a chance of the program inspiring young students not just to love Wall Street, but to learn to manage their own money intelligently.

Boys in these private schools who want to take these classes cannot. I mentioned the course uses metaphors to help reach students, relating complex financial concepts to things with which girls may (stereortypically) might already be familiar: organizing wardrobes, for example.

Not every private school student comes from a privileged background. As the author of the article notes, some girls in the class required financial aid to attend the school, some attended the school from foreign countries (the point of mentioning this, I believe, would be to indicate there were exchange students who often do not pay full tuition), and some families paid the full tuition. Regardless of the mix, on average, the students attending these three private schools, are less culturally diverse and come from a wealthier background than typical public schools. Does society really need help pointing young adults from wealthy families in the direction of careers in which they’re already over-represented?

Update: After publishing this articles, Invest In Girls contacted me via Twitter to inform me that they plan to expand to public schools in 2013.

New York Times

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