There’s no magic formula for financial literacy, but talking about it is the first step

Every few days, another plague on the global economy is exposed: UK inflation hit its 40-year high on Wednesday. The US Federal Reserve raised its target interest rate by three-quarters of a point last week. Parts of Europe are bracing for a summer of industrial action, as people protest high prices and stretched wages. In this region, Lebanon, already plagued by political problems and an impasse, recorded inflation which reached 211% in May. If Lebanon is an extreme example, inflation is a clear and present danger across the world.

Markets are also spooked – stumbling and then crashing in the first few months of the year. Gold, a traditional safe-haven asset, has suffered an equally difficult run in 2022. Cryptos, the much-talked-about new asset class, have fallen so much that our money pages were asked this week if Bitcoin was in a death spiral. Those who used to fear missing out on the crypto wave of massive profits that were meant to be there for the taking are now wondering whether to hold or fold. There are plenty of sore heads staring at the sea of ​​red evident in digital wallets.

The benefits of teaching financial literacy are many

This is a time of searing complexity and potential uncertainty for all of us. And how you feel about the dynamics of the global economy will depend on your personal circumstances and, likely, who you lean on for advice.

In recent years, there has been more focus on improving financial literacy at home and abroad. Earlier this year, for example, a major bank and non-profit organization launched a program to help young people save and budget. There are many other examples of this type of initiative.

The benefits of teaching financial literacy are many. These programs are empowering, help people understand the money that comes to them, how they use that money, and hopefully instill a better understanding of personal attitudes towards debt, saving , investment and welfare. Statistics suggest that programs like this are urgently needed. A Visa survey of people under 25 found that almost half were not ready to manage their own money.

But how are you teaching financial literacy at this particular time, and are those lessons really going to be helpful right now?

Perhaps the answer is that most of us need to do better far beyond these courses and initiatives.

Very few of us talk honestly and openly about money. Instead, we tend to obscure. We grow up with clear phrases like “the best things in life are free” or reminders to “watch the pennies” so that the bigger sums take care of themselves, or we are told that “the money is king” even as inflation erodes its value or even that “money does not buy happiness”.

The financial institutions with which we interact must also do better. Another simple piece of advice most of us will have received at some point in our lives is to “read the fine print” before signing any document to borrow money or invest our savings, leaving the client the responsibility to discover any inconvenience rather than the institution to articulate the terms of the agreement. If the financial world were a little simpler, maybe customers would make fewer mistakes. Financial arrangements too often codify the non-prejudice to the institution in the event of failure of its investment recommendations.

People shop at a supermarket as inflation hits consumer prices in Manhattan, New York on June 10.  Reuters

Debt is also a complex issue. Unfortunately, debt is mostly hidden and shrouded in shame and anxiety. In our taboo-breaking world, debt remains a topic that is rarely discussed. Of course, not all debt is bad, especially if it is used for self-improvement through education or to buy property that will appreciate in value.

Most of us fear being judged for the wrong turns we take in our financial decisions or the debts we accumulate when circumstances change or an unexpected bill disrupts the best-laid plans. This organization’s debt panel column has helped spark some of these conversations, but some of the people who have asked for its help only do so as a last resort.

More Nick March

Financial advisers will insist that we should all have a rainy day fund to cover those unexpected twists and turns in life, but that’s little comfort to those who struggle to meet the demands of daily expenses. Some social media influencers may also be overweighted on the side of hot takes and easy money schemes.

It’s a tough landscape and there’s no magic formula for “winning” financial literacy. But if we want to be better at it – especially in a time when predicting what happens next in the global economy is somewhere between a best guess and a wild ride – then we need to talk about the impulses that drive our spending. and our financial decisions. And we need to have more conversations about debt, ambition, budgeting and goals. Personal finance is too often shrouded in the opposing forces of silence, lecture or incomprehensible jargon.

Posted: 24 Jun 2022, 05:08

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