April is National Financial Literacy Month, and while I would never argue against financial literacy, I have a fundamental problem with the moniker. Who, after all, would willingly step forward and proudly announce themselves illiterate—at anything?
Unfortunately, I believe that’s what fully embracing the financial literacy movement requires. It positions financial educators as the Dickenses of currency and those who struggle with money as the collective Oliver Twist. Yes, it’s unfortunately true that too many Americans lack optimal—and perhaps even sufficient—personal financial education. But a sweeping declaration that labels the majority of the country financially illiterate does little to advance the cause. And it may even slow the progress we seek.
My own experience as a financial educator has taught me that financial failure is surprisingly egalitarian. People with means and higher education fall prey to money mishaps with a frequency very near to that of people without means and lacking in education. And they often fall harder because more is at stake.
Of course, there are many areas of personal finance where a lack of knowledge leads to poor decisions. I’ve found this to be especially true regarding the establishment and utilization of credit. But while the just-scraping-by are the preferred quarry of predatory pay-day lenders, it was engineers who lost their life savings because they were consolidated in Enron stock, 401(k) owners who got slammed by the 2008 financial crisis and often the now proverbial “1%” who were cleaned out by Bernie Madoff. More often than not, it’s general (and/or financial) overextension, hopeful self-deception, the misapplication of knowledge or a lack of motivation that leads to poor financial decisions—not financial illiteracy.
The good news is that the real problem, that of financial unawareness, should be relatively simple to fix because most people are not starting at the baseline of financial illiteracy. If you can write a check, then you have all the skills necessary to balance a checkbook. If you can apply for a credit card, then you are also capable of chopping that card in half with a pair of scissors and reviewing your creditworthiness for free on CreditKarma.com. Most of us who know the pain of overspending can spend less.
The bad news is that, while the problem is simple, the solutions are not easy. Money is simple, but we are not. The work of behavior management is far more difficult than money management.
For starters, let’s drop the paternalistic language. I find “financial literacy” more disempowering than enlightening. I could, however, wholeheartedly stand behind a month devoted to “financial awareness,” or even “financial wellness.” But in the end, any initiative must begin with an understanding that personal finance is often more personal than it is finance.