Why is it so difficult to teach people to manage money?

[sydboy007]

http://www.vox.com/personal-finance...-cant-we-teach-people-to-be-better-with-money

I found it quiet depressing that financial literacy classes within schools seem to provide little to no benefit to students in the long run. The Oklahoma financial syllabus looks comprehensive and very grounded in real life, yet students don't seem to be able to apply what they learn later in life.

Just 17 states require personal finance courses for students, and only six test students on what they've learned. But those classes don't seem to make much difference anyway: students who took a semester-long class in personal finance fared below average on the Jump$tart survey.

There is no evidence that the classes actually made students worse at managing money, the group wrote in its report. But it certainly didn't make them any better.

Academic research backs up that conclusion. A 2008 study from two Harvard Business School professors studied the relationship between education and saving and investing behavior. They found state-required financial literacy education had no effect on graduates' saving behavior later in life.

The money spent on financial literacy education, they concluded, produced little in return.

Possibly some research like what Derek Muller did

[video=youtube_share;AcX3IW00nuk]http://youtu.be/AcX3IW00nuk[/video]

 

[Value Collector]

http://www.vox.com/personal-finance...-cant-we-teach-people-to-be-better-with-money

I found it quiet depressing that financial literacy classes within schools seem to provide little to no benefit to students in the long run. The Oklahoma financial syllabus looks comprehensive and very grounded in real life, yet students don't seem to be able to apply what they learn later in life.

Just 17 states require personal finance courses for students, and only six test students on what they've learned. But those classes don't seem to make much difference anyway: students who took a semester-long class in personal finance fared below average on the Jump$tart survey.

There is no evidence that the classes actually made students worse at managing money, the group wrote in its report. But it certainly didn't make them any better.

Academic research backs up that conclusion. A 2008 study from two Harvard Business School professors studied the relationship between education and saving and investing behavior. They found state-required financial literacy education had no effect on graduates' saving behavior later in life.

The money spent on financial literacy education, they concluded, produced little in return.

Possibly some research like what Derek Muller did

[video=youtube_share;AcX3IW00nuk]http://youtu.be/AcX3IW00nuk[/video]

perhaps it because money is tied to some very powerful human desires that can't be over come by a high school course.

I think there is probably a few things working against people.

1, the human brain in most cases doesn't seem to deal with delayed gratification well, we want what we want now, even if it means having less later. this can lead to debt and a failure to save.

2, Humans tend to have a need for status in their social group, having things eg, expensive clothes, car, house, holidays etc is a way people try and establish status, this can lead to doing silly things with money,

3, The human brain tends to think in linear way, Meaning it doesn't really understand compounded growth intuitively. Hence the benefits of doing smart things don't seem as great as they really are, and the financial punishment of doing the wrong things doesn't seem as harsh.

As procrastination is a big part of the human behaviour, we all know we should exercise today, but we can always do it tomorrow or the next day, or we will start on monday we procrastinate with doing the right money things too.

 

[pavilion103]

Very true

 

[DocK]

Excellent video sydboy007, I found it very interesting despite the fact that I'm one of the dummies who would have given the wrong answer on the initial question - but then again, I didn't study physics.

I agree with Value Collector's comments.
I think some other reasons it's difficult to teach people to manage money are:

People tend to follow the example set by parents/family - and that's not always the best.

Fear of making a mistake - sometimes the easiest and safest thing to do is just leave your money in the bank.

Entrenched belief, mainly by older Australians, that you can trust experts in their field. A lot of us were brought up to believe that if our car wasn't running properly we should take it to a mechanic. If we needed help with our tax see your accountant. We were led to believe that doctors were the next thing to God and could be trusted to take care of our health. Likewise, the bank manager was an important and trusted person about town. We are constantly told to "see your financial adviser" when looking at insurance products, superannuation funds, managed funds etc - and the majority of us believed that they could indeed be trusted to have our welfare at heart. The number of dodgy schemes uncovered recently, not to mention the current investigation into Commonwealth Bank Financial Planning and Macquarie Prime will go some way to dispelling the notion that anyone can be trusted with your money but yourself.

The sheer amount of information, products, choices, tax ramifications etc can be overwhelming, especially to those of medium to lower intellect. Information overload or indecision between investment choices leads straight back to - yep, seeing your adviser - and for some they'd be better off just leaving it in the bank and taking their chances with inflation.

Lack of time is a real issue for some. Unless you give managing your finances a high priority there often seems to be more urgent matters clamoring for attention, especially for the young. As Value Collector said, it's much easier to put off the hard/boring stuff for another day. I've been nagging my 18yo for two weeks to look at his first Super Fund default investments and insurance options and make some changes - even though I've pointed out to him that he doesn't need the death & tpd cover and the weekly premium on the default income protection cover is almost equal to the amount being contributed, his response to my nagging is always "yeah, I'll get around to it", yet somehow there are always computer games to play, girls to impress, mates to hang out with & a wee bit of study to be done etc etc.

Emotion is also a factor. Some people cheer themselves up with a shopping spree - even though this may be the very cause of distress when the credit card statements come in. Advertising is designed to appeal to our emotions. Love for children can lead to parents paying for clothes, gadgets, education, sporting fees etc that perhaps they can't afford.

Good thread

 

[tech/a]

Unless you need to use it you wont.

90% of businesses fail so your own micro business when your a kid ---- is no different.

Failure is often the same as that of business.
Under capitalization and poor/no management.

Its only when you actually accept that you need to run your own finances that you do.

The availability of easy finance has a lot to answer for!

I think the only way to make it sink in is to limit credit availability.

Then your forced to budget and manage your finances.
But that's not going to happen.

 

[Wysiwyg]

At work when new processes are being explained to us, most nod they understand and when I ask for further explanation about a new process I get ridiculed by the team. As if I am a dummy. So I asked one of the nodders to explain the new process in front of everyone, they fumbled their way through and got one of the steps wrong. I think the nod in agreement is to look smart as if not understanding is a sign of low intelligence.

 

[Value Collector]

Derek's teaching method certainly works, But it does generate some haters who think he is just trying to much people look stupid by starting videos with misconceptions.

He made this great response to people that say this.

 

[sydboy007]

perhaps it because money is tied to some very powerful human desires that can't be over come by a high school course.

Very true. Our brains are still based on primitive impulses. Society has changed much faster than our ability to mentally cope with it. Companies bombard us with too many choices which helps intertia to keep people from making a decision.

Excellent video sydboy007, I found it very interesting despite the fact that I'm one of the dummies who would have given the wrong answer on the initial question - but then again, I didn't study physics.

I agree, how your parents manage money can be a big influence to how you will likely manage money. All the scandals we're seeing around CBA and financial advice helps make people fearful - damned if I try to do it myself and damned if I seek help because they're likely trying to rob me.

Glad you enjoyed the video. I found myself watching too many of them on a day off, but getting some of my misconceptions fixed.

The availability of easy finance has a lot to answer for!

I think the only way to make it sink in is to limit credit availability.

Then your forced to budget and manage your finances.
But that's not going to happen.

Fully agree. When you look at Australian debt it just hockey sticks after financial deregulation in the late 80s.

I'd like to see a lot of macro prudential brought in. Certainly need to col the housing market, while making it easier for viable businesses to get funding to expand.

At work when new processes are being explained to us, most nod they understand and when I ask for further explanation about a new process I get ridiculed by the team. As if I am a dummy. So I asked one of the nodders to explain the new process in front of everyone, they fumbled their way through and got one of the steps wrong. I think the nod in agreement is to look smart as if not understanding is a sign of low intelligence.

I've never understood this. If I don't know I ask. If someone wants to try and make me feel silly that's their problem. I always find the person who truly understands is able to explain a concept in a number of ways until they see the aha look on the face of their student.

Derek's teaching method certainly works, But it does generate some haters who think he is just trying to much people look stupid by starting videos with misconceptions.

He made this great response to people that say this.

I quite enjoyed having some misconceptions fixed. Anyone who thinks his videos are make people look stupid need to realise those in them have gave their permission to have them on youtube, so if they don't have a problem with it why should anyone else. Some people just have to find fault with nearly anything in life

 

[sptrawler]

Managing ones money is no different to managing ones weight, it takes self discipline, effort and saying no to yourself.

That is why out of 100 people, only about 5% become financially well off.

 

[Wysiwyg]

Managing ones money is no different to managing ones weight, it takes self discipline, effort and saying no to yourself.

That is why out of 100 people, only about 5% become financially well off.

Many of the 95% don't want to be financially well off so don't seek the knowledge. They reach a comfort zone and look no further. Others prefer to deal with life stages, e.g. marriage, mortgage, raising children, retirement when those stages arrive. Creatures are habitual too and as someone mentioned previously, bad financial habits can be passed on.

 

[sptrawler]

Many of the 95% don't want to be financially well off so don't seek the knowledge. They reach a comfort zone and look no further. Others prefer to deal with life stages, e.g. marriage, mortgage, raising children, retirement when those stages arrive. Creatures are habitual too and as someone mentioned previously, bad financial habits can be passed on.

Very true, I've grown up with a lot of friends. We all started off on the same footing, we have all ended up in different financial spaces.
It isn't dependent on their marital or single status, it has been their ability to live frugally and invest their money in something that makes money. Rather than something that gives immediate gratification.
Of the circle of friends, there is only two who have 'made it', one is older than me and one is younger than me.

As for bad financial habits being passed on, I found my parents bad financial habits as a motivation not to end up in the same situation.
Nothing like the police arriving with a bluey, to spark the old man up.lol
Unfortunately you have to be from my generation to understand that.

 

[Julia]

Managing ones money is no different to managing ones weight, it takes self discipline, effort and saying no to yourself.

That is why out of 100 people, only about 5% become financially well off.

Exactly.
You can come up with all the esoteric reasons you like for why people fail to observe basic money management and investment.
Essentially, they just can't be bothered. Prefer to indulge their impulses to buy stuff all the time, mostly what they don't need.

And then they whine about the unfairness of why some people are financially OK and they are not.

 

[sptrawler]

Exactly.
You can come up with all the esoteric reasons you like for why people fail to observe basic money management and investment.
Essentially, they just can't be bothered. Prefer to indulge their impulses to buy stuff all the time, mostly what they don't need.

And then they whine about the unfairness of why some people are financially OK and they are not.

It's not rocket science, you can spend now and enjoy life, or you can save some now for later.

I had a lot of arguements with my wife when we were young, 'why can't we have what the Jones have'?

Well now my wife says look at the Jones, they don't have their own home and are coming up to retirement.
It's funny how people forget the arguements, now I'm told we have plenty of money why keep worrying about it.

You can't change your DNA, what made you save your nest egg , will make you keep it.

 

[luutzu]

Beside the usual personal responsibility like "don't waste money, don't buy things you do not need", there are more important things to teach kids than personal finance if that is defined as saving accounts and financial planning, stocks and bonds.

The world will be much poorer and society a very dull and harsh place if kids actually took interests in money.

I know a guy who chose to study Medicine for no other reason than because he got a really high TER/UAC score and he shouldn't "waste" it studying anything else. He's a GP now and not a very good one.

I heard of another GP doctor who's admired by some people because aside from his Medical practice, the dude is also a real estate/shopping centre/apartment developer. As in he buy the property, deal with the contractors, have the thing built, collect the rent himself kinda Doctor.

A good friend of mine did very well in the HSC, got in the 90s... and he chose to study Electrical Engineering - with cut off of 60-65? We asked him why and he said 'cause he love it. I mean, he did crash his company's entire network system on his second day as a Graduate, but yea... the guy's the most interesting person, the nicest friend you could hope to have.

--

I think we should be glad that most young people have no interests in money - for one, most do not have any or have that much to take interests in growing what they do not have enough to spend, let alone save and grow and compound.

Most importantly, the world does not progress and Australia does not advance because people look at the bottom line or taught how to manage money better.

I don't think there's ever been any great fortune made by people just caring for money. In fact, just about all fortunes, great or small, are made by people who are passionate about the things they do, about serving and contributing to society - and in doing so, they created great value for people (the customers) and in return, great value comes back to them.

The government should fund better education, more tertiary places, more R&D support for innovators, more programmes so that a lot more than 40% of high school graduates can attend uni and not forced at least 50% to attend a technical/trade college or get a job and be made to feel that the ones that go to uni are somehow superior and they who missed out are not as intelligent - hence a tradie.

If you support scientists and engineers, promote innovators and entrepreneurs, encourage social equality and a sense of compassion for, say, refugees... maybe we'd all be better off than counting unemployment figures and admiring moneyed-people because of all the money they have.

---

Now, for those whose age of innocence has long ago disappeared... Yes, financial literacy.

 

[sptrawler]

Beside the usual personal responsibility like "don't waste money, don't buy things you do not need", there are more important things to teach kids than personal finance if that is defined as saving accounts and financial planning, stocks and bonds.

The world will be much poorer and society a very dull and harsh place if kids actually took interests in money.

I know a guy who chose to study Medicine for no other reason than because he got a really high TER/UAC score and he shouldn't "waste" it studying anything else. He's a GP now and not a very good one.

I heard of another GP doctor who's admired by some people because aside from his Medical practice, the dude is also a real estate/shopping centre/apartment developer. As in he buy the property, deal with the contractors, have the thing built, collect the rent himself kinda Doctor.

A good friend of mine did very well in the HSC, got in the 90s... and he chose to study Electrical Engineering - with cut off of 60-65? We asked him why and he said 'cause he love it. I mean, he did crash his company's entire network system on his second day as a Graduate, but yea... the guy's the most interesting person, the nicest friend you could hope to have.

--

I think we should be glad that most young people have no interests in money - for one, most do not have any or have that much to take interests in growing what they do not have enough to spend, let alone save and grow and compound.

Most importantly, the world does not progress and Australia does not advance because people look at the bottom line or taught how to manage money better.

I don't think there's ever been any great fortune made by people just caring for money. In fact, just about all fortunes, great or small, are made by people who are passionate about the things they do, about serving and contributing to society - and in doing so, they created great value for people (the customers) and in return, great value comes back to them.

The government should fund better education, more tertiary places, more R&D support for innovators, more programmes so that a lot more than 40% of high school graduates can attend uni and not forced at least 50% to attend a technical/trade college or get a job and be made to feel that the ones that go to uni are somehow superior and they who missed out are not as intelligent - hence a tradie.

If you support scientists and engineers, promote innovators and entrepreneurs, encourage social equality and a sense of compassion for, say, refugees... maybe we'd all be better off than counting unemployment figures and admiring moneyed-people because of all the money they have.

---

Now, for those whose age of innocence has long ago disappeared... Yes, financial literacy.

I think you will find, people who save money, do so because they enjoy the satisfaction of the achievement.
This is no different from the engineer or the doctor, who enjoys satisfaction from what they do.

I have a daughter who is severely dissabled, yet holds down a job in mainstream, her greatest enjoyment is being able to pay her bills.
She actually enjoys it, it gives her a great sense of personal achievement and gives me a great sense of humility and pride.

I feel humble when I see her take life in her stride and refusing assistance.
But when you see the esteem her workmates hold her in, you realise it isn't about money, it's the respect, personal pride commands. It breaks down barriers and prejudice.

It's easy to say I can't do it and put your hand out, the problem is that is becoming the norm and everyone is excusing it. IMO

 

[PurePA]

I’m sorry to read about your daughter and am sending her my deep respect and best wishes. It shows why some healthy and fit people who are unemployed for years or generations are so because then don’t value work or money. So if a person doesn’t value certain thing then the person won’t have the motivation and commitment (at least long term) to seek the information that is needed to obtain it. It doesn’t matter whether it is learning to manage money or any other endeavor.

I’d also add that many people may experience prosperity conflicts that can make it difficult for them to save money or win in the market on consistent basis. For example one subconscious part of a person may be dedicated to carrying out a positive intention, but another subconscious part might stop the person from carrying out such positive intention because it might want to protect the person from failure or success, or the person might have conflicting values or beliefs about money, and things like that. We as people are very complicated.

 

[Craton]

@sptrawler nails it on the head when he describes the joy of being able to pay ones bills. I know this feeling only too well.

Without seeing the vids and just my own personal experience.

If ya don't save and live pay packet to pay packet, dole cheque to dole cheque, living the here and now, wanting IT (what ever IT is) now, accumulating debt, there is no escape. These were my apprenticeship years.

If one saves, even a token amount, eventually there is light at the end of the tunnel. Was with AMP, saved $20 per month (I canned the yearly CPI indexation, could not afford it) for 21 years, doubled what I saved and was the most money I'd ever seen/owned to that point in time. Plus later and what luck, the AMP float got me into the stock market and a whole new world of learning about that necessary evil, money!

There is no mystery, we chose the path on how we manage money. Eventually though, the reality is that if ya don't manage it, it will manage you!

 

[Judd]

Probably some of the most dangerous phases when it comes to investing or other issues for that matter.

They say you should...

So who is “They?” When finally identified, please let me know who “They” is because “They” needs a jolly good talking to considering the damage “They” has caused in following “They's” suggestion.

If you want my advice..

Probably not since I haven't asked you for an opinion.

If I were you...

Well you're not so let us be grateful for small mercies.

If I can do it, so can you..

I've recently composed a Violin Concerto which far surpasses that of Mozart’s so if I can do it, so can you.

It's just common sense

A statement by which a person attempts to convey their beliefs, gathered from views of others with whom they agree, as being the norm. It may not necessarily be the case.

 

[DocK]

Probably some of the most dangerous phases when it comes to investing or other issues for that matter.

They say you should...

So who is “They?” When finally identified, please let me know who “They” is because “They” needs a jolly good talking to considering the damage “They” has caused in following “They's” suggestion.

If you want my advice..

Probably not since I haven't asked you for an opinion.

If I were you...

Well you're not so let us be grateful for small mercies.

If I can do it, so can you..

I've recently composed a Violin Concerto which far surpasses that of Mozart’s so if I can do it, so can you.

It's just common sense

A statement by which a person attempts to convey their beliefs, gathered from views of others with whom they agree, as being the norm. It may not necessarily be the case.

Great post!

 

[sptrawler]

Probably some of the most dangerous phases when it comes to investing or other issues for that matter.

They say you should...

So who is “They?” When finally identified, please let me know who “They” is because “They” needs a jolly good talking to considering the damage “They” has caused in following “They's” suggestion.

If you want my advice..

Probably not since I haven't asked you for an opinion.

If I were you...

Well you're not so let us be grateful for small mercies.

If I can do it, so can you..

I've recently composed a Violin Concerto which far surpasses that of Mozart’s so if I can do it, so can you.

It's just common sense

A statement by which a person attempts to convey their beliefs, gathered from views of others with whom they agree, as being the norm. It may not necessarily be the case.

+1 we should probably start a thread, phrases that should wave a red flag.

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But if anything can, it will.