Don’t Teach Personal Finance in Schools

Why don’t they teach this stuff in schools? Why don’t they teach this stuff in schools? WHY DON’T THEY TEACH THIS STUFF IN SCHOOLS?

Whenever someone picks up even a little bit of personal finance or investing knowledge, or gets an answer to a PF&I question they have, a common response is a complaint in the form of the above question.

This, apparently, is the reason why everyone seems to be so bad at personal finance and fixing this error would have us all living in some type of financial utopia.

Because You Won’t Learn It

What’s 7×8? What’s the capital of Albania? What’s in a plant leaf cell? What’s the German word for pig? How did The Old Harry Rocks form? What happened in the build-up to the Bay of Pigs Invasion? How do you use a semicolon?

I don’t know what you were taught in school, but I remember being taught the answers to all of the above, and a lot more. And yet I can only recall the answers to less than half of these questions.

How much do you remember from school? The answer is probably not a lot. Because school makes stuff boring. As soon as you’re forced to learn something at the pace of the slowest member of the classroom, in a stale classroom environment, for a standardised test, you start to drift off and mess around and not pay attention. And not learn.

Learning becomes a chore.

Things that are self-taught, things that interest you, things that are directly applicable to your own life, seem to stick much more effectively in our brains. 

I didn’t learn basically anything from my university degree; all the learning I did was via books and the internet. I was introduced to some interesting topics, sure, some of which (linear algebra, partial differential equations, code, etc.) I pursued further. But the actual content of the lectures has been almost entirely forgotten.

This is a problem for the why-don’t-they-teach-this-stuff-in-school people because 99.9999999999% of teenagers and kids won’t find PF&I interesting. Because it’s not that interesting, relative to how the universe was created or Shakespeare, anyway.

Try it for yourself: talk to a 13-year-old about pensions. Try and explain to your teenage cousin what ISAs are and why they are important. Young’uns simply can’t relate to these concepts; they don’t resonate, because they don’t have money. They have no SITG.

Here’s something that I hope you will retain:

0 SITG + dull subject = 0 learning

Because How Do You Teach It?

Now let’s imagine a crazy parallel universe in which the Secretary for Education hasn’t read this post and doesn’t agree with this reasoning. Let’s pretend they intend to append PF&I to next year’s curriculum.

How?

What do you teach?

The basic and the complex

The basics, the principles, what is known, can be taught in about 37 minutes. And there are no real answers to the uncertain questions. Attempting to teach the latter would be too heavily influenced by the opinions of the teacher.

One could argue that this happens with some subjects already. There is no consensus belief about macroeconomics, but this is still taught. Teachers try to present both sides of the argument in an unbiased way, which could be attempted for PF&I.

But it would be difficult because there are no facts, per se, just opinions. This is unlike other subjects: we know what 6 + 8 = and what the rules of grammar are. The explanations we learn in science classes are usually the result of experimentation in controlled environments in which one can isolate variables to derive meaningful conclusions.

This isn’t the case with PF&I.

This is hard to explain to students. It’s difficult to explain the latest academic research. It’s tricky to communicate statistical rigour and where and how it is absent. Example: index funds. Seemingly easy to teach, right? But what happens when teens start asking so then Miss if they should invest in them…or not? Because this is a contentious issue.

I certainly wouldn’t want to be on the receiving end of those types of questions. Particularly as incorrect information can be near-life-ending. Thinking that it was Patroclus who was the recipient of an arrow through the ankle rather than Achilles isn’t that consequential. But leveraging leverage to “purchase” multiple properties with 95% LTVs after being taught how mortgages and lending works at school and then being on the hook for those mortgage repayments when the fixed-rate periods on those mortgages expire just as inflation is rocketing and so the BoE raises interest rates and those VRs kick-in does matter. A lot. Incorrect information or info distributed without heavy caveats and warnings can be devastating.

The boring and the fun

Which is also why I don’t like the idea of making the lessons quote-unquote “fun”:

  • Let’s play a trading game! Sure ok let’s teach kids that trading is fun and games and easy and something they should be investing time and money into.
  • Let’s do some macro forecasting! Again something that is easy and definitely possible. Forecasts of interest rates, GDP, inflation, etc. are very very useful and accurate.
  • Let’s learn about derivatives! Yes because learning how to price options is mathematically accessible and relevant for teenagers and knowledge of complex financial instruments is going to come in handy later in life.

Teachers would be in a catch-22: teaching the safest and most-applicable stuff is boring but the fun bits won’t be useful and have the potential to be harmful.

Another option is a detail-orientated approach. A sort of introduction to financial advisership/accounting if you will. This is possible, but I think most teenagers would rather have their parents explain the intimate details of how they were precisely conceived rather than pay attention for 30 seconds in those lessons.

What do you think?

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