Many Americans experience financial jeopardy at some point in their lives, and experts share an opinion about a strong cause: there’s no formalized way to learn how to use money properly, so most people must learn by experience, making mistakes as they learn what is necessary for building a solid financial foundation. It would save a lot of headaches if we could somehow warn people in advance that they’ll need to consider financial consequences when making decisions in their life. This consideration would help families and individuals build wealth over time. This early warning would have more meaning if we could somehow extol the virtues of the often unstated goal, financial independence.
Financial literacy advocacy programs try to address this problem. Encouraging good behavior with money at an early age could help increase the probability of achieving financial success in the future. With efforts conforming to this principle, some high schools offer money management classes  while some companies like ING Direct offer tools to help younger students learn about money management. These approaches have not been proven to have a positive effect on long-term financial fitness.
I’ve previously discussed the limitations with money management classes in high schools. First of all, if a child doesn’t receive the first lesson with money until he or she is a teenager, the student has already formed an attitude about money that will define the relationship during the important formative years when he or she later begins earning money for living for the first time. At the age when children are forming their money personalities, they are most influenced by parents. If the parents aren’t making an effort to set a good environment and example for handling money, it will negate any effect by a money management class as a teenager.
Most teachers are not trained in personal finance, so they cannot provide the best instruction. And without mandatory money management classes, only a small percentage of students will choose this class as an elective. Those who choose this class make this choice at the expense of other possible electives, many of which enrich the mind rather than purport to enrich the wallet.
At the same time, society can’t rely solely on parents to transmit good financial habits to their children, even if the right tools are provided by outside sources to help those parents.
The problem of poor money management skills manifests itself in lower-income communities more than middle-class areas. Change, in the form of professing the opportunities that one can enjoy through financial independence, must come from within the community. It’s important for successful individuals to be involved with the community, serving as a role model, particularly when parents don’t have the skills or resources to serve in that role. Poor financial management and a lack of economic mobility can become a cycle. As a child grows up without a great financial role model, he or she will continue to be poor role models to his or her children.
The only way out is to break the cycle, and the only way to break the cycle is for successful individuals to assume the job of parents as financial role models.
Photo: Pink Sherbet Photography