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Am I Wasting My Time?

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I got the September issue of Money magazine yesterday and, as always, there are a few eye-opening articles. Every time I feel like I know everything about personal finance, I find that there's so much I have left to learn. One particular article, on page 24 is titled, "Why You Can't Teach Money."

The article is a Money magazine interview with a law associate professor from Loyola... not economics or finance that you'd ordinarily expect. She "specializes in financial product regulation" according to the article. With that background let's get to the interview... I'm going to paraphrase it, for (a tiny bit of) humor and to avoid having to quote the magazine article in full. I suggest anyone interested buy the magazine and read the article in it's exact form - rather than my interpretation of it.

Q: Why is financial education so bad?
A: It's terrible in so many ways. The people who sell financial products pour in major Benjamins to get consumers to buy their horrible products. This marketing negates any education that others might give. Financial products change all the time and educators can't keep up. "As far as I know, people get pregnant the same way the did when I was in high school."

Lazy Man's Take: I like to think that a good number of people get knowledge that supersedes marketing. I have read a lot of personal finance blogs and financial magazines that give me very sensible evidence on why low-expense, index investing works. It has prevented me from buying more expensive financial products. I'm just confused at the pregnancy parallel - I really don't see the relevance.

Q: Isn't Budgeting (and other basics) fundamental?
A: It's a waste of time. Studies show that high school personal finance classes or adult retirement classes don't help - it may hurt. Those classes give people false hopes that they can manage their own finances and "they end up making worse decisions."

Lazy Man's Take: I think this lawyer is biased towards looking at financial product regulation, her specialty, and not personal finance. There are a number of people who learn to make very solid financial decisions (which I realize is hard to define), by educating themselves - and getting education from other people. If you are reading this right now, there's a good chance you fall into that group.

Q: How now, brown cow? (My mom's way of saying, "Where do we go from here?")
A: Give up on teaching people to plan their finances. Try to show people that there are charlatans out there trying to sell you financial products. Politicians need to regulate financial products and change them into things that help consumers rather than educate them.

Lazy Man's Take: It seems like the best way to get people to realize that there are charlatans out there is to teach people to personal finances. I hate to depend on politicians to do anything for me - especially when I can do them myself.

Q: So How Should Politicians Regulate?
A: People who sell financial products should be required to offer you a safe default product. If you apply for a 50 year, interest only mortgage, you would have to be offered a 30-year fixed option

Lazy Man's Take: I'm not sure how that would help. It would be very easy for a mortgage lender to show how lower payments for the exotic mortgages are "better" than the higher payments for a 30-year fixed. If people were educated to know the difference... oh wait, you can't teach people money.

Q: So I should stop teaching my child about money?
A: No, that would be crazy, especially with their daily spending. Children should be taught to resist buying things that are not good for them - happiness is not bought. Families can teach that better than the government can.

Lazy Man's Take: Whoa... so it's suddenly okay to teach budgeting again? Just three questions ago it was a waste of time to teach children. I believe that children can learn some things better than adults (language as one example), but I'm not convinced that money is one of them. If you can teach children to resist buying things that are not good for them (i.e. happiness can not be bought), then shouldn't you be able to teach adults these things?

Is personal finance education a waste of time? I can't believe that. I can't believe that education is ever universally a waste of time.

Last updated on August 27, 2008.

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15 Responses to “Am I Wasting My Time?”

  1. Miranda says:

    Um, wow. I can’t believe that! I think that we need MORE education with regard to managing personal finances. If we understand more of what we are doing, we are much more likely to make better decisions about our money. Most of the stuff this “expert” is saying is crazy. Having more knowledge is always preferable to ignorance.

  2. bamalucky says:

    As with Prosper lending,you can’t educate anyone who has no wish to be educated.

  3. Lazy Man says:

    Don’t you mean as with anything in life?

  4. I am tired of reading “expert opinions”. Maybe that’s why the whole Web 2.0 concept of peer to peer counceling has exploded over the past few years.

  5. Start-Up says:

    I have learned all I know about finances from my parents and from self-educating myself via blogs and books from the library. I feel as though I started pretty early compared to the average, but I think personal finance classes in high school should be mandatory. They are more important than most electives that high schools offer. I would propose to make a personal finance class required in all high schools and reduce the number of elective classes necessary by one.

    I did rather enjoy the use of the word charlatan. It should be used more often in everyday life.

  6. irina says:

    I think that there is a lack of education not only about money management, but also about life in general. The whole concept of life and happiness and meaning of life needs to be thought from first grade or earlier. :-)

    We have way too many depressed people, too many suicides because people don’t have a clue where they are and where they are going… Personal finance is a part of personal life and these two subjects have to be taught in conjunction, me thinks.

    They studied poorest of the poor and found that percent of happy people is very high among them. And if you ask me, I take poor and happy any day, as oppose to being rich and miserable. :-) Young readers here might don’t feel it yet, but life just don’t last forever. So, take every opportunity to enjoy it.

    And if you enjoy saving money, it’s all the better. Otherwise, enjoy anything you can. :-)

  7. Mike Sweeney says:

    Funny post. Yeah, that’s just what you want, politicians who aren’t financial experts stepping in to pass laws on personal finance.

  8. Matt says:

    Like politicians have done anything but cloud the issues and slow progress down to a crawl.

    This is one the reasons why I hate reading some of the traditional money magazines lately… in an effort to stand out from their peers, they made a once educational read into a whole lot of nothing useful.

  9. bamalucky says:

    The thing is our politicians punish us savers every day.Our money is eroded by national debt,low interest rates & social programs.I’m beginning to think it would have been better for me to have about 8 kids out of wedlock & shack up in govt housing with my girlfriend & draw welfare & food stamps.We have got to cut the social programs & get a handle on spending in this country.As someone else said,my parents taught me everything too.My dad is 68 & never had a checking account.I’m 35 & have never had a credit card.We were taught to save for it & then you could decide if it was worth buying,& you would be surprised that many times we decided not to blow our money we had worked so hard for.

  10. Jared says:

    I agree with Online dividends, Web 2.0 is about real people giving personal advice. The second someone claims to be an expert they normally are wrong. You can’t be an expert in a field that changes dramatically every year.(Personal Finance) All you can do is make the best decisions you can every day and keep learning as much as possible. Example, Jim cramer is one of the BEST out there and even he tanked in bear stearns.

  11. This is very reminiscent of how Kiyosaki/Ann Coulter became so popular/big. They say something very loudly that is very different from what everyone else is saying and they go over the top to get coverage of it. It’s annoying and I have no time for people that alter their message like that.

  12. Ken says:

    Without having read the entire interview, I’d bet this “expert” also believes that privatizing SSI would be a bad idea. After all, people can’t be trusted to make to make their own financial decisions, so the government should do it for them.

    Cheers,
    Ken

  13. CommRE says:

    You said “I’m just confused at the pregnancy parallel – I really see the relevance.”

    If you see the relevance, what is there to be confused about? Or is this just another example of a Lazy Man typo that requires me to reread sentences?

  14. Lazy Man says:

    Can I claim that it was sarcasm? ;-)

  15. Peter says:

    Talk about arguing out of both sides of your mouth. Obviously she’s looking to be on the committee writing the rules for these proposed government regulations.

    Funny that I was purging some old files the other day and found some notes from a community college class I took back in 1989. Amazingly the bulk of the advice regarding personal finance has not changed in the last twenty years. (e.g. save 10-20% of your income for retirement, avoid/minimize unsecured debt, know where your money goes, don’t invest in things you don’t understand, etc.) It was all 90% of what you see regurgitated in many of the articles today. Stunning that this lawyer can’t seem to recognize that the general principles are sound and that these basics should be reviewed and taught. I can see a few updates for new tax rules and things like Roth IRAs, but with little modification this course could be taught today. After all, most of the “new” financial products are typically the same old products given a new spin.

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