As the CEO of the National Financial Educators Council, Vince Shorb works tirelessly to teach America more about money: how to save it, how to invest it and how to waste less of it. He was kind enough to speak with us about financial literacy and how we can improve.
What is financial literacy?
The National Financial Educators Council defines financial literacy as: "Possessing the skills and knowledge on financial matters to confidently take effective action that best fulfills an individual's personal, family and global community goals."
What could schools be doing to help their students be smarter about money?
Schools should be encouraged to teach the subject with the same intensity as they do other core subjects. Unfortunately, financial education is not required by most schools, and the ones that do give the topic significantly less attention than other subjects. Students cannot learn a foreign language, geometry or other subjects with a few random classes - the same is true for personal finance subject matter.
Second, its important schools understand that financial education is a unique subject that requires specialized expertise to teach effectively. The quality of financial education instructors directly influences both short-term student outcomes and long-term impact on their financial well-being.
General educators report lacking the confidence to teach financial literacy. When attempting to teach financial literacy as a stand-alone subject, traditional educators report lacking the subject knowledge and skill sets they need to deliver the coursework effectively. Many teachers deliver personal finance topics using the same methods they use to teach core subjects and neglect the subject's unique traits. For example, they often focus on financial literacy rather than on improving participants' financial capabilities. On the positive side, as professional educators, they do understand how to present and teach in general.
Are we overestimating our own ability to deal with money, and if so, why?
This varies depending on the person. Some people lack confidence in making financial decisions, while others are overconfident. Both point out the fact that the money elicits emotions that often impact a person's financial decisions.
If you could do away with one misconception about finance, what would it be?
Just because someone is financially literate does not mean they will never experience money problems. The economy, personal events and the risk someone takes can impact their financial security. The difference is that a financially capable person has a plan to recover from the situations and often exercise better control of their emotions during financial uncertainty when compared to those that lack financial acumen.
What can parents do to help their kids become more financially literate?
The first thing parents can do is understand they are responsible for teaching their children about money. Most children will never receive the financial education needed to make effective money management decisions. You wouldn't teach your kids to drive by handing them the keys and pointing them to the nearest freeway. Yet that's how most kids learn about money - they move out and learn through trial-and-error. This can have devastating consequences that can impact them well into their future.
A good way to start is to set family financial goals. The more family members working toward a common goal, the faster you'll get there. What's more, when an entire family unit works together toward a financial goal, each family member appreciates the unique bonding experience.
1) To start the process, sit down and share with your child some of your current personal goals. Then talk about how they compare to the goals you set when you were your child's age.
2) Ask your child to share some of his or her goals. What does he want to be? You will learn a lot about your children, and it makes for fun conversation.
3) Write down their goal and help them develop a game plan to accomplish each. Start with a short-term goal.