It’s Financial Literacy Month – and we need to step it up!

Author: Michael Kitces

Team Kitces

Michael Kitces is Head of Planning Strategy at Buckingham Strategic Wealth, which provides an evidence-based approach to private wealth management for near- and current retirees, and Buckingham Strategic Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors through the scaling phase of growth.

In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Read all of Michael’s articles here.

The press release of the survey, which was run by the Jump$tart Coalition and funded by the Merrill Lynch Foundation, shows that high school seniors are actually performing even worse on financial literacy than they did two years ago. For the first time, the Jump$tart survey also evaluated college students, and although they performed better than high school students, the results were still rather abysmal.

So what can you do about it? Well fortunately, there are some great programs and initiatives emerging that show signs of promise.

The first is from KidsWealth, which provides some great tools and materials for teaching young children about money and basic financial literacy. Although not a non-profit organization, their mainstay KidsWealth Money Kit is available for a very reasonable $39.95. Perhaps most notable about KidsWealth, though, is their willingness to bust myths about financial literacy. Their materials provide some very compelling reasons about why a piggy bank is a terrible way to teach kids about money (no one tell the AICPA!), and put forth the somewhat controversial idea that the best way to teach kids about money is to give them a material amount of responsibility for some money from a very early age. On the one hand, the thought of giving children a much larger allowance, and making them responsible for buying some of their own clothes seems shocking to some; on the other hand, if your kids are going to make mistakes with money while they learn about prudent spending, wouldn't it be far better for them to do it while they're still living at home and under parental guidance?!

Another very interesting program is MoneyU, which is seeking to deliver financial literacy education from a games-based approach that seeks to really engage students in the learning process. In a world where it is increasingly difficult to get kids to pay attention to anything for a sustained period of time, the programs at MoneyU are showing some real signs of promise, with some early efficacy studies already reflecting positive results.

Clearly, we are paying for our sins of weak financial literacy in the United States right now, between our national-level inability to save and the astronomical average amount of debt that a college student has at graduation. Ultimately, we all need to take part in the efforts to advance financial literacy if we're going to improve the situation for the next generation!