Summary
Highlights
Despite having a PhD in economics and extensive experience in finance, Ryan Decker points out that he only had one undergraduate course on personal finance. He argues that if someone passionate about the field receives so little formal education in personal finance, others in different fields are likely receiving none, leaving them unprepared for managing money in life after college.
Decker challenges the notion that college's sole purpose is to prepare students for employment. He asserts that college should prepare individuals for all phases of life, including understanding personal finances, regardless of whether they pursue full-time work, graduate school, or raising a family. He illustrates this by showing how various post-college paths, such as managing a 401k, paying off student loans, or budgeting on a single income, all require financial literacy.
Personal finances are ranked as one of the most difficult topics to discuss, alongside death, politics, religion, and taxes. Decker notes the irony that people readily discuss other sensitive topics but shy away from money. He posits that this reluctance starts at home, as three-quarters of people cite parents as their primary source of financial knowledge, yet only one-third of parents frequently discuss finances with their children. He attributes this to a generational issue, as previous generations also lacked financial literacy discussions.
Decker highlights the essential nature of early retirement savings, noting that many nearing retirement regret not starting sooner due to a lack of understanding of compound interest. He explains that the concept of retirement as we know it is relatively new. A century ago, life expectancy was much lower, making a long period of retirement financially supported by savings an unfamiliar concept, contributing to the historical lack of financial discussions.
Decker proposes three main avenues to address financial illiteracy: family and friends, formal education through schools, and employers. He suggests initiating conversations with friends, focusing on the decision-making processes rather than specific dollar amounts, such as asking about mortgage or car financing choices. He acknowledges that parents are often a weak source due to their own lack of education or shyness on the topic.
Decker criticizes the inadequacy of financial education in schools. While 45 states require personal finance standards, only 22 offer a high school class (often just a module within another subject), and only 5 states mandate a semester-long personal finance course before graduation. College fares no better, with professors often claiming to teach these topics in other finance classes, which Decker argues focus on theory for future jobs rather than personal application.
Decker notes that millennials are starting to demand financial education from their employers, a trend he supports by sharing his experience teaching a personal finance class at PwC. He finds it unfortunate that such education is often provided by employers rather than schools. He concludes by urging students to demand personal financial education from their schools, lobby politicians for better state standards, get involved with financial literacy organizations, and, most importantly, talk about money to demystify it and remove the taboo.