The Problem with Investment Education and What to Do About It
For years, we’ve observed a well-meaning desire by various stakeholders to support financial education in schools.
For years, these efforts have failed to move the needle.
Lack of Focus
We could make the case that financial education is as important as any other subject students are taught in school. After all, regardless of career path, everyone needs a sound foundation in how to deal with money.
Yet, even when mandated, financial education rarely receives the same level of focus as core subjects.
And, to the extent financial education is taught, it is often done so with a hodge-podge of materials taught by teachers who aren’t comfortable with the topics themselves.
It seems like the quality of content and instruction isn’t as important as “ticking a box” to claim the task was done.
Financial Mastery
We suggest the goal of financial education should be Financial Mastery.
We’re not suggesting we turn students into financial “gurus,” but rather educate them to the point that they can make smart financial decisions automatically.
Compare it to your somewhat scary experience of learning to drive a car, compared to how, after sufficient experience, you can get from A to B without really thinking about it. It’s become automatic.
Content
To achieve Financial Mastery, we need good content and good experiences.
If you’re an educator or sponsor involved in financial education, have you carefully examined the content? Or did you, perhaps, assume it must be OK because it was provided by someone who seemed like an expert?
Have you considered whether the content is designed to earn the trust of the students (and of the teachers)?
Students—especially from underprivileged backgrounds—will not trust the idea that using a bank or buying stock is “safe.” If given a choice of accepting $100 or a share of stock trading at 3 times that value, they’d likely take the cash.
It’s important to provide educational content that can be easily understood. But that’s not enough.
The core concepts—the theory—should be supplemented by experience, including simulated experience. This allows students to “discover” that the core concepts actually work—that they can be trusted.
This requires a far more thoughtful approach to content development than simply grabbing what’s currently out there.
Investment Education
Consider the following questions:
What aspect of financial education has the potential for the greatest impact on students’ long-term financial well-being?
What aspect of financial education are teachers the least comfortable with teaching?
The answer to both questions is: investing.
That’s not to say that other aspects of financial education are not important—they are.
They are easier to teach and master, but lack the life-changing potential of understanding investing.
Understanding investing is important for everyone, but the payoff for teaching investment education for underprivileged students may offer the greatest impact because it is the key to ending generational poverty.
The Wrong Experience
While content and experience are necessary to achieve Financial Mastery, the wrong experience can be dangerously counterproductive.
Investing is a long-term endeavor. Compounding—the ability to grow money exponentially over time—is the secret to investing.
Stocks have the highest long-term compounding rate of the major asset classes and, therefore, are the least risky asset for long-term investors.
Yet Stocks, due to their short-term volatility, are the most risky asset in the short term.
Directing students to read short-term market commentary or play short-term investment trading games, focuses students on the wrong message—potentially costing them hundreds of thousands of dollars over their lifetime.
This is only one example of why getting the content and experience right is critically important.
Where to Go From Here
It’s time we quit accepting poor financial content and experiences and focus on developing curricula that work for students and teachers (and, ultimately, society).
We have been developing engaging content and experiences that teach the right things for over two decades.
Over the next school year, we will be working toward organizing these into a comprehensive investment education curriculum.
We are currently looking for schools and sponsors interested in getting on board as we test and validate our programs.
If you’re interested in helping take investment education to the next level, please get in touch.
Best regards,
Stuart and Sharon