Just a few days ago, CNN/Money reported that the average student loan debt load for the college class of 2012 is $29,400. Worse, that represents a $2,800 increase – or more than 10% – above the 2011 figure of $26,600. As the situation with student loans continues to get worse, it’s time to ask if a lack of financial education is to blame.
It’s not at all a ridiculous question. The general assumption is that student debt levels are rising simply because college tuition and fees are going higher, as though it’s some sort of natural progression . But students and their families always have options to exercise lower cost alternatives. The real question is why aren’t they choosing those lower-cost options? Why do they continue to pay – or better put, borrow to pay – the higher cost, no matter what?
The conventional answer is that you need a college degree – and you need to get one from the best school you can afford – in order to survive in the job market today. Parents believe that, students accept it as an article of faith.
That sounds reasonable on the surface, but I don’t think that’s all of it. I’m beginning to sense that the real answer is that they simply don’t know any better.
And why would they? The education system isn’t teaching them anything different.
An eye opening revelation
My son committed a social heresy a few weeks ago. On his Facebook page he wrote “I don’t believe in evolution“ – a dangerous claim in this day and time.
You would’ve thought that he was trying to resurrect the Flat Earth theory. The replies, mostly from college age kids, took exception and as much as declared that he had no right to make such a claim. After all, where was his scientific proof???
For moral support – and for kicks – I joined the debate on his side. I don’t believe in evolution either – at least not in the all inclusive way that it’s currently taught in schools. And it’s not a religious thing either – yes, I‘m a Christian, but Christianity and belief in evolution aren‘t mutually exclusive.
In my humble opinion, there’s too much that “science” doesn’t know about what’s going on today to reach back into prehistory and make declarations of implied fact about things that played out millions of years ago. The level of certainty that’s assumed when it comes to evolution is downright embarrassing. For example, scientists aren’t sure whether or not the currently living, breathing Komodo dragon is venomous, but they seem quite certain that T-Rex evolved into some form of modern day bird.
But I digress. There’s a bigger picture point to this story.
You can hardly blame the college crowd that reared up and defended the presumed certainty of the theory of evolution on that Facebook exchange. After all, they spent the better part of their 12 years of primary education – as well as college – being taught that evolution is a “done deal”.
What kids learn in school…
What exactly is the educational purpose of emphasizing teaching the theory of evolution in school? If they introduced it as a pure theory, and spent a little bit of time on it (maybe one year in high school), no problem. But why does it need to be taught to kids for years?
What’s the harm? How about opportunity cost. What is it that kids could be learning that might be of higher and more practical value – to themselves and to society at large – in all the time that’s dedicated to learning about evolution?
We could – and should – ask the same question in regard to other commonly accepted education doctrines, including:
- Environmentalism and global warming
- Political correctness/group think
- Years and years of studying higher level math – that the vast majority of them will never use in adult life
- The heavy and increasing emphasis on science – again, that the vast majority of them will never use in adult life
- Learning history as a series of names, dates, wars, battles and big picture events, rather than the practical application of how the average Dick and Jane survived it on an everyday level
While we’re at it, let’s dare to ask an even more fundamental question: how much of what kids learn in school today is true education – and how much is societal indoctrination?
…and what they don’t learn – defining educational opportunity cost
If education – particularly public education – is primarily a system that will teach young people how to function successfully in adult life, we have to ask how all of the above fits into that dynamic. But perhaps we’ve all been so conditioned by the seeming normalcy of all that we don’t dare to ask questions.
I would argue that our entire educational system has become far too academic while it has become chronically impractical.
Let’s look at a few adult level survival skills that kids are not being taught in the school system, at least not in K-12, and certainly not at any in-depth level:
- How to balance a checkbook
- How to manage a household budget, including a detailed understanding of the expenses students are likely to face in adult life
- How to run a business – and why you should
- The fundamentals of buying and selling (ie, buy low, sell high)
- Basic investing, including investment risks and portfolio theory
- The advantages and pitfalls of debt (student loans should be carefully covered here)
- The reality of taxes and their impact on our lives
- Real world writing – business letters, emails, resumes, even advertising copy and blog posts (the 21st Century version of the public forum)
- How to launch and maintain a successful job hunt
- Tapping into the resources and networks likely to help students in adult life
- Problem solving of real life issues that encourages creativity and thinking outside-the-box (ie, learning how to think, rather than being taught what to think)
These need to be taught, and not merely as electives, or as sub-parts of a single personal finance or home economics course either. These are all survival skills in the modern world that people use every day in adult life, far more so than high level math, or the theory of evolution.
Why do they get so little attention?
My best guess: because they fall outside the realm of traditional academic disciplines.
If we think that it’s necessary to provide sex education for kids, why are any of the above subjects less deserving? All are practical survival skills, and just as is the case with sex education, we know that they aren’t always being taught in the home. A young person goes off to college and accumulates five or six figures in student loan debt largely because he doesn’t know any better. The people who should have known better didn’t think it was important enough to teach him as much.
It’s up to us to give our kids a financial education
Hopefully by now you’re developing a clear picture of the connection between monster student loans and a lack of financial education. High school kids will go on to high-priced colleges – even if they can’t afford it – with the comfortable assumption that they’ll use any needed amount of student loans to make it happen.
The topic isn’t covered in school. In fact, quite the opposite. Since a purely academic education mostly trains students to go on to the next level of education, student loans won’t be discussed in anything but positive terms. Student loans are the “grease” that enables the entire education continuum. It’s why professors have lucrative jobs, and why education has become Big Business.
The end result – which is what we now see in the legions of over-indebted, but un-/under-employed college graduates – should come as no surprise. It’s a completely predictable outcome.
A solid measure of financial education – the exact kind that kids are not getting in school – could go a long way toward changing that negative outcome. But the only way that kids will get that financial education is if we as parents provide it.
Study the list of financial topics above, and plan to teach your kids as many and as much as you think they can stand. And teach them over a period of years, supported by real life experience.
Try some of the following:
- As early as possible, put them on an allowance and tie it to chores – no matter how small – this will teach them the basics of working for money
- Teach them how to allocate their allowance – this is Budgeting 101
- Don’t give them extra money anytime they need it – that won’t happen in the real world
- Start a bank account for them, and show them how to fund it on a regular basis; create savings goals
- Start an investment account for them, and get them actively involved in research and management
- Lend them money every now and again – but have a written agreement, complete with a payment schedule, and hold them to repayment; this will teach them that debt isn’t benign
- Encourage them to get a job – no matter how small – as early as possible
- Teach them to sell, rather than throwing away, old possessions; help them to sell them at garage sales, or on eBay or Craigslist – that will teach them that everything has value, and they might even learn a thing or two about buying on the cheap
- Keep them in the loop on household finances – if times are tight, share that will them, and encourage them to come up with ideas and activities that will help
If we don’t teach these skills to our kids early, we’ll be condemning them to learn by baptism by fire. The education that they’re getting in school is only partial – meaning it’s purely academic – learning basic financial skills won’t be part of the program.
When the time comes for them to go on to college, armed with the financial knowledge that you have given them, they just might avoid the student loan mess that many of their peers are facing right now.
Isn’t that at least as important as learning the fine points of the theory of evolution?