Why financial education alone will always fail

April is Financial Literacy Month and is dedicated to educating people about the basics of money, such as budgeting, saving, debt, compound interest, and investing, just to name a few. Given that only 57% of adults in the United States are considered to be financially literate, it’s certainly something we need to address. Improving the financial literacy of all people is a noble cause, but many questions remain about how to do it.

Google financial literacy and you’ll find that there is no agreed-upon definition, no standardized way to measure it, and no consistent process to ensure that people are learning the right skills and how best to apply them in real-life situations. If you can’t define financial education, you can’t teach it. If you can’t measure it, you certainly can’t manage it or even judge whether financial education programs are improving financial health and well-being.

All we know is that a lack of personal financial knowledge costs American households more than $350 billion a year. Financial education is vitally important to making healthier financial decisions, but financial education alone will fail because it is just one piece of a much larger puzzle that is part psychology, part life, and part money.

These are the three reasons why financial education alone will fail.

1. Financial education is the wrong starting point

While there is no commonly agreed-upon definition of financial education, there is a common theme among them all: poor financial health is due to a lack of education. It is considered a problem of knowledge. Proper education is important, but financial education programs focus on facts and figures and ignore our feelings (our emotions), which ultimately drive our behavior. It’s a mindset problem and not just a money and math problem.

For many, money is a cause of stress, worry, fear, and even shame and embarrassment. Deep-seated emotional issues and limiting beliefs about money will keep most people from making healthier decisions with it. More often than not, financial education programs address the technical aspects of money (the financial and thinking parts) and ignore the attitudes, beliefs, and values ​​(the emotional and psychological parts) that surround it. When more than 90% of the decisions we make are driven by emotions and not logic, existing programs start from the wrong point.

2. Financial education does not lead to behavior change

Tony Robbins has been quoted as saying, “Knowledge is not power. Knowledge is only potential power. Action is power.” It’s not what you know, it’s what you do with it that matters. Financial education and the programs that teach it focus on potential power (financial literacy) and fail to deliver actual power (changes in behavior and actions) that can put people in control of the lives they want to live. In fact, studies have shown that better financial education can explain only 0.1% of behavioral changes that occur.

Our behaviors are driven by a complex web of emotions, attitudes, beliefs and values, and without a clear understanding of how they drive our behaviors, more financial information will fail to produce real change. In short, information does not equal transformation. Today’s financial education programs are cutting the leaves of change when they need to target the root cause and better integrate knowledge with healthier behavior.

If you don’t change your thinking (how you think), your habits (what you do), your systems (how you do them), or your environment (what shapes your choices), all the information in the world won’t lead to better results. financial. Having said all that, it is important to note that in some cases there are larger systemic issues that limit the ability to choose or change circumstances, so the push for more financial education is just the tip of the iceberg.

3. It’s just one aspect of a much larger financial (and life) picture.

There is a continuum of care with financial advice that can lead to better financial health and well-being, and financial education is just one part of it. Improved financial wellness occurs when all the pieces of the puzzle come together (or come together) to support the big picture, and these include:

  • Understanding of beliefs and attitudes, cultural and community values, behaviors and feelings.
  • Appropriate levels of literacy, education, and knowledge on various money-related topics.
  • Access to the tools, resources, and money management systems through which this knowledge can be applied.
  • The right environment to help develop healthier habits and support ongoing behavior change.
  • Continuous financial planning to adapt to a dynamic, increasingly complex and constantly evolving life, personal, professional and financial.

Financial education and the programs that support it fail because they focus on one aspect of this continuum of care. It reflects a problem in the financial services industry where advice tends to focus on one aspect of our financial lives: our investments. We need advice and guidance in all aspects of our lives and ongoing support, and often course corrections and adjustments, to achieve true financial health, well-being, security, and independence.

The biggest challenge around financial education

The biggest challenge facing not only financial education, but also improving financial health and well-being boils down to three words: access, inclusion, and integration. Greater access to financial tools, resources, and expert advice opens the door to opportunity. Greater inclusion leads all people and communities to participate in better education and economic ecosystems (lack of inclusion is a broader systemic problem). Greater integration takes the individual pieces of the continuum of care, puts them together, and really drives greater health and financial prosperity.

Financial education alone will never improve overall health and well-being, just as advice that is limited to investments will not help people eliminate financial stress, make smarter, more informed decisions in all aspects of life. and put them in control of the lives they want. to live.

If we want to create real change, we must create greater access to financial advice and ensure the inclusion of all people and communities. The key is to focus on the integration of all parts and not just one of them, such as financial education, in isolation.

Co-Founder, Facet Wealth

Brent Weiss is a co-founder and CFP® Professional at Facet. He helps guide the company’s vision and informs Facet’s innovative planning solutions, technology and next-generation investment strategy. He is a two-time entrepreneur and business owner who has been featured in Fortune, The Wall Street Journal, Fast Company, US News & World Report and Cheddar News, and is a regular on CBS Radio’s “Jill on Money.” He has also been included in the Forbes “30 under 30” list.

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