You can’t teach money?

I definitely think you can teach money. Like you said, for myself personally, I have learned a lot in the past couple years, particularly from your website. But I agree that it is like anything. You have to put the effort in to get something out of it. And especially with finances, you have to be dedicated to it wholeheartedly.

Bob, your take is so true! As part of the financial services industry, I get very frustrated when colleagues pretend that what we do can only be done by use. For some reason, they convince themselves that people can’t do things themselves. I know that’s not true and most of the time all people need is some education (or re-education) about finances.

I’m planning on starting an hourly, fee-only firm just for this purpose - to teach people how to do it themselves. It lowers their costs and gives them a much greater chance of reaching their goals. And it makes them less dependent on professionals - especially commissioned “professionals”.

I meant to say “hourly, fee-only financial planning firm”.

@Paul
I love that you are taking it fee only - that so greatly cuts out the inherent conflict of interest with commissioned brokers. After working for a big brokerage firm for 5 years I was so frustrated about all churning of products going on - so I love seeing Financial pros break out of that to the fee-only charging…

What a silly (I want to use harsher words here) article. As a professor who teaches an entire course centered around money (Financial Mathematics), the article is absurd. My students all complete a personal financial plan as part of the course, which allows them to think through their future. Certainly some will forget it before they graduate, but even if they return to it at a future time they will be better off. Some will certainly grab hold of the ideas immediately and make a big difference in their lives forever.

The article is in full at http://money.cnn.com/2008/08/25/pf/teaching_money.moneymag/index.htm. I’m pretty sure they printed it in order to mock it… The interview doesn’t provide enough information to make sense of her ideas.

I think she’s got a small valid point, though. She’s saying that government mandates on how a loan company teaches consumers are a waste of time; the loan companies will always find ways to twist the instruction (or to take a positive view, new products will arise for which the teaching is irrelevant). She says that OTHER actions would be more cost-effective.

She also says that teaching about money in the family IS effective, apparently because it teaches relative values rather than how to think about things (while still leaving the values set the way they were).

I can kinda defend what she’s saying… But the truth of which she’s saying depends utterly on the validity of the claim she makes that “Studies show that sending people to either high school personal-finance classes or adult retirement seminars does not result in better financial behavior.” If that’s true, then not only are required courses a waste of time, they’re counterproductive. OTOH, the studies that showed that may have been inapplicable…

I’d really need to see a lot more information. I’ve tossed her papers onto my “to read” stack. The first one is at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1105384, and there’s another one linked to from the same page.

@Wm
thanks for sharing that link - I should have had a link to the original article - my bad!

I agree, the article left me feeling confused - did they leave comments out to make her look bad? I am not sure…

If you can’t teach personal finance, all of us PF bloggers are wasting our time, money, and efforts on our blogs… Given all the comments and feedback I see on those blogs, of people saying ‘thank you, this really helped me out’, I think that people can be taught to improve their handling of their finances.

This was the quote under the picture on the page with the full article: “Financial literacy classes give people the illusion that they can successfully manage their finances. So rather than seek help, they end up making worse decisions.”

How is not managing your finances at all better than trying to manage them and messing up? When people do mess up, can’t they learn from those mistakes? I’ve learned a lot about PF. I’ve made a budget, made some changes and yep, I’ve messed up. I don’t think I’ve made “worse decisions” than I did before I started learning, but I have certainly made mistakes. Then I learn from those mistakes, figure out why I made them and how to prevent and hopefully don’t make them again.

“If you can’t teach personal finance, all of us PF bloggers are wasting our time, money, and efforts on our blogs…”

That’s not certainly connected. You might be teaching the already-teachable; she may be talking about mandatory classes. It’s hard to tell from the article, and I have yet to read her peer-reviewed papers on the subject.

I’m not 100% optimistic; note that her conclusions may well be wrong even if her data is correct.

Back about 400 to 500 years ago, the Church said that ordinary people couldn’t understand the Bible and purposely kept it written in the language of Latin. I think you’d agree that getting the message out to the people in language they could understand has been a good thing.

I think the same holds true for the language and nuances of money. We’ve been told for years that you had to be a stockbroker to understand how to buy and sell stocks, an insurance agent to understand how insurance works, and a licensed mortgage broker to understand the mortgage markets. All those walls are coming down and more and more people are able to have access to the knowledge of how money works.

What they do with that knowledge is up to the individual, much like it is with the Scriptures.

@Frugal Vet and Ron
You both bring up great points… I think I am finally understanding why Money Magazine put the article in there - to get lots of people talking about the crazy article in their magazine!! Free publicity!!