It’s the time of year when you may hear politicians wringing their hands about the low levels of financial literacy in our country and advocating for teaching financial literacy in our schools.
While I absolutely applaud efforts to help everyone become more knowledgeable and empowered about finance, I am concerned about what financial literacy programs teach.
A scholarly analysis that reviewed financial literacy teaching materials in the U.S. and Canada found the following:
- financial misfortune is attributed almost exclusively to personal failures such as the failure to get an education, open a savings account, etc.
- fewer than 10% of the materials mention wealth or income inequality and almost none provide explanations for it
- conditions of financial insecurity are presented as natural and inevitable and instead of students being asked how collective solutions could remedy these conditions, they are urged to develop good individualized financial habits to increase their chances of survival.
When it comes to learning how to be a good investor, the message is simple: maximize your contribution to tax advantaged retirement savings accounts and choose investments that maximize financial return and minimize risk.
In their recent Harvard Law Review article, “Rethinking Retirement Savings,” Jason Fernandes and Janelle Orsi describe how U.S. law governing our retirement accounts requires our retirement funds to be invested in a way that maximizes financial returns. But as Fernandes and Orsi point out, this mandate has led directly to outcomes that create great harm to our society and planet – worker disenfranchisement, climate change, and the hollowing out of our communities’ economic well-being.
To address the existential threats created by the mandate to maximize financial returns, we need to re-examine our most basic assumptions – those taught in financial literacy 101.
Join Angels of Main Street, our club for people of all levels of wealth or income to learn about investing, if you would like to be part of these conversations!