By Mourine Warui
Why Financial Literacy Must Be a Core Part of The Curriculum
I wish they taught this in school.” A common phrase used by the new adults. That is the millennial and Gen-Z generations. You will hear it in every talk show, podcast, and any conversation involving these groups of people. It is alarming that so many adults feel that the education system has failed them.
Most of them feel they spent many years in school studying and learning how to integrate well into society, only to come out and realise they are indeed missing key survival tools.
Aside from essential life skills like communication, personal development, and interpersonal relationships, they also failed to teach financial literacy. You will be struggling, living paycheck to paycheck, blowing off your salary on trivial things and knee deep in debt before you realise you need help.
Then, one day, you wake up, and it dawns on you that you don’t have an emergency fund, any savings, or a pension scheme. If you are lucky, this hits you in your mid-twenties, as you head into your thirties. That’s when you realise you could use some personal finance classes. If not, you end up working even after retirement to remain afloat.
According to research by the Financial Times, only one in four adults’ reports receiving any financial education at school. While a recent FICO survey shows that 98% of adults think learning about money is crucial to achieving financial stability, and two-thirds believe their current financial situation would be better if they had received personal finance education in school.
What Is Financial Literacy?
As defined by Investopedia, financial literacy is a skill set needed to handle money wisely. It is an essential foundation for a bright and healthy relationship with money. It is knowing the basics of money management, saving, budgeting, tracking and investing which enables a more successful and stress-free life.
The Cost of Ignorance
Often, people blame the economy, inflation, and greed when households buckle under financial stress. But if they are honest enough, the truth is: few were taught how money actually works. As a result, they suffer.
Household Debts
In many nations across the globe, households are drowning in unsecured debt. This is due to the rise in credit cards, payday loans, and buy-now-pay-later schemes. Economists used to argue that debt cycles were consequences of economic downturns, but now it is safe to say that debt cycles are a symptom of financial illiteracy.
Borrowing money to live a particular lifestyle is unwise. So is frequent use of credit cards. If only you understood compounding interest at a tender age, you wouldn’t treat a 30% APR credit card as normal. You wouldn’t even take up such an offer. Similarly, if people knew the consequences of minimum payments, the buy-no-pay-later industry wouldn’t have exploded in the manner that it did.
Retirement Crisis
Pension schemes are straining because people are entering adulthood with a culture of zero savings and habits. Hence, these schemes become underfunded. Consequently, households without retirement savings become public burdens.
Obviously, financial education is not a magic pill that will solve systemic failures in pension designs. But it will significantly improve the saving and investing culture long before young people become adults and enter the workforce.
Small Business Failure
Entrepreneurship gets romanticised a lot. It is often seen as an escape from formal employment. It is also viewed as the gateway to innovation and job creation. That is true, but most small enterprises fail within the first five years. Mainly because most founders fail to understand basic cash flow management and risk assessment, mistaking passion for planning.
Financial education will reduce that failure rate. If aspiring entrepreneurs learned budgeting, forecasting, and risk mitigation at 14 or 15, rather than at 34 and 40, startups would be healthier.
Impact On the National Economy
When households don’t know how to manage money, it affects national prosperity. Thus, the effects of financial illiteracy ripple outward from households into the heart of national economic health.
Consumer Behaviour Drives Macro Instability
When most consumers lack budgeting and saving skills, the national savings rates fall. Low savings mean less capital for domestic investment. This then forces economies to borrow externally or tolerate inflated asset bubbles because cheap credit fills the ideological gap that should be occupied by productive investment.
It is unhealthy to assume macro conditions are just abstract. They are not. Savings rate, capital formation, investment cycles, and recessions are consequences of personal financial behaviours. Luckily, they can all be fixed with financial education.
Wealth Inequality Isn’t Just Tax Policy
In matters of inequality, before you point at the tax brackets, look at education first. Households with financial literacy build equity. They invest intelligently and leverage credit to create wealth. However, those without get stuck paying debt service and renting, never accumulating assets.
You can redistribute tax burdens to infinity, but that only changes who pays what. But with financial literacy, it changes to who gets ahead at all.
Financial Literacy as a Core Part of the Curriculum
Gone are the days when teaching Mathematics equated to teaching money matters. Financial education involves more than just addition, subtraction, multiplication, and division. But just like Mathematics, reading and writing, financial literacy should also be taught at a tender age.
Unfortunately, the schooling system left personal finance for parents and guardians to teach. Yet in many households, money was never a topic of discussion. It was a foreign concept, and frankly, most parents did not feel confident enough to teach it. And in households that did talk about money, you would hear a narrative of getting a job, saving and buying land.
However, as an adult, you realise there is more to financial success than just saving and buying land. And when you do get the courage to seek help with your finances and learn something, those offering this knowledge charge an arm and a leg for it. And with good reason, they saw a market gap and decided to capitalise on it.
Therefore, it is paramount to integrate financial education into the curriculum. And not just as an elective subject like French, Agriculture or Business, it should be a compulsory subject. This will allow the future generations to know about money at an early age, which is better for them and the economy at large.
What Should Be Taught
Budgeting
Budgeting is all about resource allocation. Students need to learn how to do that; perhaps it will reduce the number of future leaders who embezzle public funds. They need to distinguish between needs and wants when mapping irregular income to monthly obligations. Besides, students are also required to understand the psychological triggers that fuel spending. It is more than just learning how to balance a chequebook.
Tracking
Instead of teaching students to memorise dates, they ought to teach them to track their money flows throughout their lives. Most adults struggle because they never mastered tracking. If you can’t measure where money goes, you can’t improve the outcomes. In fact, students should keep mock accounts for months and keep track of their spending habits and the consequences of those habits.
Saving With a Purpose
Students should be taught about compound interest at age 10. We have all heard about compounding interest, but rarely do we hear an explanation of how to keep saving when income is low, and your expenses are glaring at you.
This curriculum needs lessons on emergency fund psychology, goal-based savings, and the tools of saving, such as money market funds and other safe vehicles.
Investing
Many people treat investing like gambling. That is because they were never taught or shown how the capital markets work. Financial education would demystify such notions. Students would understand risk vs return, diversification, index funds vs individual stock, behavioural biases in investment and fees and returns over decades.
Tax and Government Interaction
Basic tax rules are not enough. Students must understand how different taxes affect decisions. They should know how the government benefits and interacts with personal finance. They don’t need to be economists or accountants, but they should be financially literate citizens.
Credit and Debt
Most people fail to achieve financial success because they treat credit like free money. It feels like free money until it’s time to pay up! Therefore, students need to understand how interest really accumulates, as well as when debt is productive and when it is not.
The Way Forward
People cannot just sit and wait for the government to fix things. Doing so, they also become part of the problem. The government indeed has its role to play, but so do the people. First, there is no need to keep crying over spilt milk. The education system failed you, yes, but now it’s up to you to educate yourself. Invest in financial education or use online resources to manage your money better. Furthermore, you need to apply that knowledge to your everyday life.
Now that you are the new adults, teach your children what was not taught to you. As a parent, take it upon yourself to teach your children about money. Let them grow up understanding and respecting it, rather than fearing it, as you did.
Likewise, as a collective, you should continue lobbying for new education policies that incorporate financial education into the curriculum. Everyone and the entire nation benefit if its citizens are financially literate.
The Take Away
Financial education should be integrated into the school curriculum. There are already too many adults living in bitter regret. That should not be the case for future generations. It is possible to have a generation that enters adulthood fluent in finance and not fearful of it. Financial literacy will lead to better governance. It will enable and enhance accountability of public funds, thus eliminating corruption. Besides, you can’t fool people who are affluent in money matters. And maybe that’s what the country needs.
The author is a writer, broadcast journalist and TV producer at the Kenya Broadcasting Corporation. [email protected]
