We need to talk. Seriously, all of us need to open up and have a good, honest talk about money. Because clearly most of us have no idea what we’re doing.
And why would we? How could we? What were you taught in school about money, budgeting, spending, saving or even about paying bills? What were you taught at home about these things? If you’re like many Americans – of any age – the answer to those last two questions is ‘nothing.’
Most of what we think we know about money quite likely originated in advertising, just like much of what we think we know about nutrition. Who would pay to teach Americans about money? How about banks?
Even classes in so-called “Life Skills” fails to teach basic economics that people need to understand in navigating day-to-day life. Instead they preach, “get a credit card, establish credit,” when students should be taught to pay cash and establish good money habits.
It’s easy to see where this has gotten us. U.S. consumer debt totaled $3.75 trillion as of November 2016. That’s over $11,000 of debt for each person in the country. Student loan debt alone is over $1.3 trillion owed by more than 40 million Americans.
Carrying debt costs more than you think. It’s more than just the added expense of interest charges. One study showed that average student loan debt can cost an individual a whopping half a million dollars in lost retirement savings, as well as delaying home buying for five years or more. Imagine all the vacations, dinners out and luxury cars that could be purchased instead of paying off loans.
Parents aren’t teaching their children how to handle money before they send them out into the world, and couples aren’t talking about it before they combine households, bank accounts and credit scores. Adult children aren’t talking to their aging parents about money. It doesn’t have to be that way.
Talk about money at work. Pay transparency is a good thing, forcing employers to be more fair in their compensation. People should know how much they’re making in relation to their colleagues – it encourages excellence and discourages complacency. It also offers more negotiating power for workers.
Talk to your friends and family about money. Build a network of people in your life who are interested in making smart choices with money. What better way to know you’re getting a great deal on an apartment or who happens to be selling a used car just when you need one?
Being honest and open with people about your own financial choices can inspire others to make better choices of their own. “Yes, I did buy a used car, and then I used the money I saved to take a lovely Caribbean vacation.” Some people even compete at bargain-hunting!
It’s crucial that parents talk to children about money, and teach them good financial habits from an early age. Even toddlers can learn to save something for later, and preschoolers can learn to count money and make change. Middle schoolers should be made aware of the cost of things and of household income, and should observe the process of paying bills.
Financially smart high schoolers have a great advantage, because they’re earners without many expenses. This is a great time to get into the habit of socking away a portion of income into a savings account.
When we don’t talk about money openly, we end up believing there is no other way to achieve our goals than through the ways presented to us (by banks and credit card companies). That’s why our country is burdened by staggering debt, because it’s more uncomfortable to say “I’m economizing” than it is to be in debt up to our eyeballs.
The tide is changing, though, and it’s far overdue. Houston radio talk show host Michael Berry has a tendency to ask his callers straight out how much they earn, insisting that people take pride in the value they create in the world.
Money guru Dave Ramsey likes to talk about income too, as well as expenses, debt and priorities. He insists that “normal” means in debt, and that’s just dumb. Ramsey advises people to “be weird,” by talking about money without shame and embarrassment, by being critical thinkers about money and finances, and most especially, by avoiding debt.
There are other ways to live, you know, but we have to be able to talk about them, to share ideas, to speculate and dream. How else can we learn what is possible? Go out and learn some things about money and personal finance from a source that doesn’t sell money and financial products, whether it’s Dave Ramsey, Suze Orman or someone else. We have to stop being ignorant and provincial about our money, and start acting like mature adults.