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The majority of Americans cannot pass a basic financial literacy quiz featuring questions like:

A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less. True or False?

Go ahead and try it yourself.  Only 14% of people are able to answer all five questions correctly and only 37% are able to answer at least four questions correctly.

Last September, which marked 10 years since the depths of the financial crisis and with stocks up nearly 200%, Barron’s reported:

“Of the 2,000 people who recently took a survey commissioned by robo-advisory firm Betterment, 48% thought the stock market had not gone up at all in the past 10 years, while 18% actually said it had gone down.”

In other words, with stocks tripling, 66% of survey respondents thought the market was flat or down over the past ten years!  49% of Americans don’t know what an index fund is44% can’t cover a $400 out-of-pocket expense.  52% have no retirement savingsWhen all households are included, not just those with retirement accounts, the median retirement account balance is $2,500.  I could go on, but you get the point.  We have a problem with financial literacy and preparedness in this country.

There’s a lot of blame to go around, but poor financial education in our schools is an obvious culprit.  Only 17 states require a personal finance course to graduate high school, with a mere 5 requiring a semester-long, stand-alone course.  Of the 13 million high school students in the U.S. in 2017, only 16.4% were required to take a personal finance course to graduate.  How can we expect people to understand the basics of personal finance if we don’t teach them?

While adding financial education to the school curriculum seems like a clear solution, there has actually been pushback on the idea.  Studies on the benefits have been mixed.  The Wall Street Journal recently cited a common rebuttal:

“It is a serious mistake to spend money on all-purpose financial-education courses in high school because the vast majority of the education pertains to topics that the students will not have a chance to act on for years.”

Famed behavioral economist Robert Thaler has echoed this sentiment:

“In some ways, the finding that financial education doesn’t provide long-term payoffs is hardly surprising.  After all, how much do you remember from your high school chemistry class?  Unless you use chemistry at work, you probably don’t recall much about iconic bonding.”

Other studies have suggested financial education might actually make people worse off.  From the incomparable Jason Zweig:

“Taking a fin-lit class might well give the least financially knowledgeable people just enough confidence to make them think they can safely take extra risks. (That might also explain why the victims of fraud tend, on average, to be more financially literate than those who aren’t victimized.)”

Each of these arguments against financial education may hold some weight, but ask yourself the following (and may my high school teachers forgive me!)…

Does a lack of physical chemistry result in divorce?  Maybe.  Does a lack of chemistry knowledge, as in periodic table stuff, make the divorce attorney’s phone ring?  Probably not.  Money issues are a leading cause of divorce.

What about health issues?  Does not knowing the innerworkings of photosynthesis stress you out?  Are you getting sick over not knowing why plants are green?  Financial stress is a factor in health-related issues.

How about that art class?  If only you knew the difference between a Picasso painting and a Mothersbaugh, you’d be performing better at your job right now – right?  But personal finance issues do impact job performance.

survey conducted by the American Psychological Association found 72% of Americans reported feeling stressed about money at least some of the time during the past month.  Northwestern Mutual found 44% of Americans view money as the dominant source of stress, more than personal relationships (25%) and work (18%).

I’m sorry, but you can’t tell me learning a second language or how to play the trombone is more important than learning basic personal finance skills.  Simply ignoring financial education is NOT the answer.  I will debate anyone who thinks my 6th grade daughter should be learning about donkeys in China (true story) instead of what a stock is.  Should we spend more time focusing on math and reading instead of chemistry and art?  Maybe, but a study from the Program for International Student Assessment found:

“38 percent of the performance on the financial literacy test cannot be explained by a student’s ability in math and reading. Which means your young one can do just fine in algebra and geometry and still mess up personal decisions involving, say, how to use a prepaid debit card.”

In other words, just because little Sally is good at math and reading doesn’t mean she’ll understand how to save and invest for retirement.  Anyone who has worked in financial services will attest to this.  I’ve visited with doctors and engineers – literally some of the smartest people I’ve ever met – who can’t tell you the first thing about basic money concepts.

What kills me is we know with certainty nearly every American will need to manage a budget, buy a house, save and invest for retirement, and make a host of other financial decisions throughout their lives.  When is the last time you referenced the periodic table of elements or regurgitated the details of photosynthesis?  If the argument is that financial education doesn’t provide a long-term payoff, then why are we teaching chemistry and biology?

All that said, I will agree financial education doesn’t fully solve the problem.  Schools require Physical Education and guess what?  We have an obesity epidemic in this country.  The more I think critically about our financial literacy problem, the more I come back to basic human behavior.  Let me explain.

Go ask anybody – seriously, anybody – if they know they need to save for retirement or paydown high interest credit card debt.  The answer will be a resounding “yes”.  Ask if they know spending less money than they make is important.  Again, pretty obvious.  When it comes down to it, it probably doesn’t matter if more than half the population doesn’t understand compound interest.  They do understand the basic building blocks of a strong financial foundation.  The problem is BEHAVIOR.  We all know a healthy diet and exercise helps us live longer.  How many of us do it consistently?  We know smoking is responsible for 480,000 deaths in the U.S. each year.  We also buy 250 billion cigarettes annually.

Behavior is the riddle in the financial literacy problem.  A crash course on every personal finance topic under the sun exists online 24/7, but as Ben Carlson aptly pointed out:

Anger, stress, get rich quick schemes… those all speak to BEHAVIOR.

I’m no sociologist or psychologist, so I don’t have the answers here.  Again, I do believe education helps.  As public awareness has increased around the health issues associated with smoking, the number of people smoking has declined.  There’s no reason to think personal financial education can’t lead to better outcomes.  But that only goes so far.

Behavior is all about incentives.  What incentives are in place to help people make the right financial choices?  I have tried focusing on behavior with my two daughters.  Each had a bank account with a debit card by the time they were 6 years old.  My oldest daughter is a saver and my youngest is a spender.  As money trickled in from birthdays, lemonade stands, and allowance, my older daughter diligently salted away every last penny.  Meanwhile, the cash burned a hole in my younger daughter’s pocket.  And then, boom – my older daughter used her savings to buy an iWatch!  My younger daughter sees that and goes, “hmmm, maybe I didn’t need all that bubble gum and slime”.  Now, her spending behavior is beginning to change.  Even better…  my older daughter is now moving on to asking about stock investing.

I think the starting point is simply having a dialogue on the topic.  For whatever reason, talking about our personal finances – salaries, retirement savings, etc. – is considered taboo.  Friends tend not to talk about their financial situations with each other.  Parents don’t discuss money matters with their kids.  Why is that?  People have no problem talking about their keto diet or deadlifting – they share it on social media for all the world to see – but personal finances are off limits.  Maybe we should focus on changing that.  There shouldn’t be an embarrassment factor if your financial house isn’t in order.  The embarrassment should be that we’ve created a society where we can’t talk about it.