The Stark Reality Of The Financially Uninformed

Why don’t they teach this stuff in school? Is there some sort of conspiracy to keep us working our entire adult lives until our bodies give out and we’re forced into a retirement that almost perfectly coincides with the social security benefit age? Oh wait, maybe that’s the way it IS intended to be. You go to school, you work, you retire for a few years, and then you check out. If you ask me, that sounds like a completely uninteresting and grim prognosis. Why am I babbling on and on about this? Because it’s no secret that most people, and especially young(er) people, have no idea what the heck they’re doing with their finances. This very thing was thrust into my face this evening when I was enjoying a nice dinner with a friend who is in her late 20s. Somehow we got on the topic of money…this must’ve happened because I was there 🙂 The conversation rolled on from there. And I experienced, first-hand, the uninformed state of our union.

“What’s An IRA?”

cats and beer 2

Zombie gingerbreads for your visual enjoyment

As we sat there enjoying our dinner and conversing about college, debt, and a combination thereof we drifted into unchartered territory for my friend. We were listing the pros and the cons of different career paths she was considering and when I threw out the idea of starting a ROTH IRA account to save for her future and safeguard against emergencies at the same time, she threw back this question, “What’s an IRA?” As I explained what the acronym stood for and how it could be used, more questions came my way. “What’s a brokerage firm? What’s Vanguard? How does the stock market work?”

 

Now I love talking about this stuff and passing along the knowledge I have taking up space in my noggin, but as I went on and on trying to explain the connection of one to the other, and how the biggest asset anyone can have is time, I realized that the my friend is only one speck in a sea of drowning ocean of misinformed people. How’s that for a visual? Unfortunately, it’s true. I also must add that this friend of mine is one of the smart ones. She is a smart cookie who can debate anyone under the table. Yet, somehow our public education system had failed her in this area.

“How Do I Start?”

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Here’s lookin’ at you, Mad Money Cat

After about 30 minutes of me excitedly laying out the basics of saving and investing (did I mention I love this stuff?), the next question was asked with enthusiasm, “How do I start?” I kept going. I gave her options and things to think about that she had never considered before. I was able to give her a basic idea of what’s going on in the financial world and what should be going on in her financial world.

 

The State Of Our Union

Before she left for the evening, I suggested she read (some of my favorite) financial blogs and listen to (some of my favorite) financial podcasts to jumpstart her financial education. She seemed happy to have had a tiny boost in the right direction. But how many other people never get that boost? Considering the amount of money people have saved for retirement in each age group (see below), I’m guessing not too many.

retirement-savings-chart

Being a young Gen-Xer myself, I see it all around me nearly every single day. I see co-workers who say they’ll never be able to retire and scoff at my lofty goals of having enough in savings to walk away from The Man in a few years. I see friends buying cars they can’t afford and I see those same friends wondering how they’re going to pay their rent. This is the unfortunate state of our union without financial education.

What do you think? Where did you get your financial literacy? Did you learn it in the classroom, at home, or in books and on the web? How are you teaching your children (if you have them) about money? We’d love to hear from you in the comments!

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Mad Money Pup Loving His photo Op

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Lisa is the creator and resident writer at Mad Money Monster. She's a mother, scientist, and financial guru on a mission to save Generation X from working until they die!

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19 comments… add one
  • Craig Mar 23, 2017, 4:47 am

    I’ve been banging on about this problem for years to anyone who’ll listen to me over here in the UK. Seems to be a generational thing rather than geographic. In Britain kids seem to be obsessed with credit cards, and we’ve got a real problem with personal debt. As far as I’m concerned financial education has to come from two places; school so that kids grow up to be financially savvy adults, and then as parents so they reinforce the knowledge onto their own kids. Will financial literacy ever be taught to kids in school though? Not likely unless there’s a massive culture change in the education system.

  • @Guyon_FIRE Mar 16, 2017, 8:07 am

    Great article! It’s wonderful that your friend was open to learning. Most of my friends considers me ‘good with money’ but few ever actually listen to the advice I share. Like your friends, I have friends with the expensive car they cannot afford. These same friends also wonder how they will pay their rent or if they will make a student loan payment this month.

    I do not have kids but am trying to spread financial literacy to people of all ages. Keep your the good fight. Look forward to following your story

  • DS Mar 14, 2017, 12:48 pm

    I’m jealous of Mad Money Pup- looks really comfortable!

    I got my financial knowledge jump start from my brother, who taught me about tax-advantaged retirement accounts shortly after I finished undergrad. I then learned more via the Motley Fool and some high-pressure meetings with financial advisers, where I learned I better learn more so I can see the falsehoods in the arguments presented by sharks.

    I now like listening to multiple podcasts: Afford Anything, Mad Fientist, Bigger Pockets. Favorite book: Millionaire Next Door. I learned a ton of finance and real estate stuff through an MBA, too.

  • Piggy Mar 11, 2017, 12:34 pm

    This terrifies me. I was so financially ignorant until about 5 years ago, and I am honestly baffled as to why and how that happened. Was I just not paying attention when my parents talked to me about this stuff, or did they just not bother? Did my school try to teach it in such a boring way that I forgot, or was it simply not taught? Something definitely needs to change, because young’uns can’t rely on the chance that a friend like you will kindly walk them through it all before it’s too late!

    • Mad Money Monster Mar 12, 2017, 7:44 pm

      If you went to a public school like I did, I can almost guarantee they didn’t teach it to you. Also, my parents didn’t have any knowledge about wealth building that they could pass along to me, so they didn’t. It sounds like you might’ve been in the same boat? It’s not bad. It just is what it is. Thankfully we have the wonderful World Wide Web to help us educate ourselves and help us make good $ decisions moving forward – and we get to meet cool virtual friends in the process 🙂

  • FirstHabit Mar 6, 2017, 3:59 pm

    Your Money or Your Life was a real eyeopener for me. That’s what got me thinking. Perhaps a bit dated, but I will have all my kids read it.

  • billbanholzer Feb 9, 2017, 8:13 pm

    It is crazy that so many people have no idea about how money works, and that by the chart, I have more money saved at 36 than the average 63 year old. But I get it. I was lost just a few years ago. I decided I’d drop this link here that tells the story about how I started to learn. This is me writing all the things I wish I would have known when I knew nothing. It’s a great place to start. Thanks for the article and discussion. http://www.wealthwelldone.com/money-and-investing/

    • Mad Money Monster Feb 9, 2017, 8:28 pm

      Very nice! It is amazing how little savings the average person has stashed away. Thanks for sharing!

  • thejollyledger Jan 14, 2017, 11:02 am

    Many times I have thought that I will need to be the one to start some sort of financial education program in our schools. Maybe this can be my retirement gig, when I finally have the credentials and the time. Maybe if kids see someone so young retired that will get their noggin’s flowing and grand ideas blooming!
    As for me, no one ever talked to be about finances. I was left to scour books (before the internet) and then the webs whenever a news story crossed by path. My financial plan came together like a quilt, but in the end it all clicked when I found the FI blogs. Happy to finally be here!

    • Mad Money Monster Jan 14, 2017, 1:41 pm

      You should totally do that! I feel like I was just reading my own bio. My education was a bit like a quilt, too. Everything finally came together for me when I found this community 🙂

  • Ning Jan 12, 2017, 4:54 pm

    It’s really amazing to me just how much people DON’T know about finance. Granted, I was like that as well a few years ago, until 3 months ago when I discovered the concept of financial independence. But I have been saving because I come from a very frugal family that didn’t earn much, so when I first got my job, my dad was like, put at least 10% of your wages into retirement. So, like the little good girl I was, I did that (it helped that I also lived at home that time). If I’d known back then what I know now, I’d definitely have maxed my 401k back then.

    But I know what you mean. My husband doesn’t know anything about finances, but at least he lets me take care of everything and he’s not a big spender (just have to convince him that we have to eat out less and buy less books). His parents are super smart and successful people, but they don’t ever talk about investing their money smart, just doing whatever their financial planner tells them to do.

    I really wish that financial literacy was a required part of our education system.

    • Mad Money Monster Jan 12, 2017, 5:29 pm

      I’d like to think that financial education will be part of the public curriculum at some point in the future. I guess we’ll wait and see. My husband and I had similar upbringings…lower/middle class. Both of our parents were good at not spending much money but had not clue how to invest it and build wealth. That’s where we have been focusing our efforts, after making a bunch of money mistakes in our past, of course. Glad to hear you got on the right track and that your husband lets you do all the money stuff. That’s certainly better than trying to convert a spender to be a saver. 🙂

  • Smart Provisions Jan 12, 2017, 1:25 pm

    I definitely agree with you! There are plenty of people who are financially uninformed. Heck, it can even apply to many other areas of life.

    In this age of being connected to everyone, the answers to almost every question is everywhere because of Google. Maybe it’s just that people don’t put it very high up on their priority list.

    • Mad Money Monster Jan 12, 2017, 3:13 pm

      I agree. It’s not a matter of not having access to the information; it’s a matter of not thinking the information is important enough to make it a priority. Or, maybe it’s more a matter of not realizing how important this stuff actually is.

  • Kate Jan 12, 2017, 11:31 am

    This sounds a lot like conversations I’ve had with my friends as well. I try to only push them if they ask questions but it’s so hard to keep my mouth shut with their financial futures at stake!

    One friend has been asking a lot of great questions so I finally gave her a copy of Jim Collin’s book The Simple Path to Wealth. And she’s actually reading it!

    My parents started buying shares of stock for me when I turned 18, as birthday and Christmas gifts. But they stopped short of actually teaching me what they know for some unknown reason (maybe they don’t feel confident about this knowledge?). For the most part, everything I’ve learned has come from checking out books the library or reading personal finance blogs.

    • Mad Money Monster Jan 12, 2017, 11:52 am

      That’s awesome that you’re helping your friends as much as possible. Giving out The Simple Path to Wealth was a great idea! My friend does love to read, maybe I’ll give her one of my books. My parents didn’t have any knowledge to pass on. I just knew I didn’t want to be “poor” the rest of my life so I started reading about finance as soon as I started my first job. Of course that didn’t stop me from still making major mistakes in the way of money and relationships along the way. I’m finally on FIRE and don’t intend on stopping until I hit it!

  • Ernie Jan 12, 2017, 7:53 am

    I’m sorry…but the only thing I can think about right now is how amazing that pizza looks! I know it’s only 6:53 in the morning, but I could still pound a few slices of that!!!

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