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Well, there's obviously an importance of
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thinking about financial literacy as a
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life skill, something that we need to
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have to build on our culture. Michael
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Roberts is a finance professor here at
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the Wharton School and joins us to talk
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about that side of the story. Hi
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Michael, great to talk to you again. Uh,
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good to be here, Dan. And I don't think
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it can be overstated in any way, shape
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or form, how important financial
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literacy can be in the scope of what
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we're talking about with with life
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skills.
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Yeah, I couldn't agree more. Many of
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societal ills are directly or indirectly
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linked to financial literacy.
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What is it that has gone wrong to a
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degree, maybe? Cuz it feels like maybe
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we've dropped the ball a little bit in
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terms of developing those skills,
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especially on our on our kids as they're
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growing up.
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It's a It's a great question and one
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without a simple answer. I think there's
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many factors that weigh in
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to the financial challenges and
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struggles people face beginning very
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early. Just
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getting kids acclimatized or used to
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engaging with finance and financial
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decisions. Um, getting them comfortable,
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you know, speaking to someone
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who understands finance, going to a
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bank, these sorts of things. Then in,
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you know, high school, middle school,
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high school, the the education um, I
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believe is lacking despite a lot of
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efforts and a lot of good faith efforts.
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And there's this inertia, Dan, that
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moves with people throughout their lives
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that if they don't get started on the
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right foot,
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it can be very difficult to recover.
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Um, so so the process needs to start
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early and it needs to be done correctly.
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Is it fair or unfair to say that some of
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this lies in the laps of parents as
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well? Yeah, I think there's blame
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to spread all the way around and and I
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speak as a parent myself.
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You know, I'm very conscious, perhaps
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because of my position,
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of my child my own children's comfort
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and knowledge of finance even though
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they're they're relatively young. So my
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goal has been to get them comfortable
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not just talking about it, but engaging
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with it. Right? Understanding what it
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means to have,
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if not a checking account, you know,
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a credit card with a limit or how to go
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into a bank, how to check your your
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balance, how to budget. You know, really
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sort of ingraining these things, simple
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things early, so it becomes part of the
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of who they are in some sense. It
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becomes automatic later in life. Let me
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throw one in from my own personal
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experience. My oldest daughter has her
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first job this year. She's working at a
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restaurant here in the Philadelphia area
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part-time. And so it was the first time
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she's gotten a W-2. And you know, that
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experience and I helped her do the taxes
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this year, but my goal is next year for
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her to be the one who will sit down and
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go through the tax form in terms of
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filing it. And you know, that's that's
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obviously a step up the ladder, but it's
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one of the pieces that I think we need
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to do and consider more as we move along
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here. I couldn't agree more, Dan. And
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look, if if you were to ask me, what are
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the two biggest barriers to getting
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comfortable with finance?
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One is just the language. It's just
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almost impenetrable. All the acronyms.
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It can be very daunting. And number two
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is familiarity or comfort. It's really
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scary or can be doing something for the
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first time. And and that that applies to
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me as well. So getting kids doing stuff,
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right? Setting up a budget, doing their
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taxes,
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going to the bank early and frequently,
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even on a small scale, is incredibly
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powerful for them for the rest of their
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lives because then they no longer fear
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it, right?
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When did this first come onto your radar
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as being an important component? And was
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some of this even your experience
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growing up as a teenager and having that
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first job and that first bank account?
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Yeah, I mean I mean this started
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resonating with me as a child when, you
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know, my my grandmother gave me I think
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they were Series Triple E Savings Bonds.
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Yes. And maybe some of your listeners
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will remember what those are, but but
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you know, I saw these bonds in $50
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increments and I thought I was just set
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for life. Right? So my my attempt to
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cash those in at the bank the next day
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failed miserably for a variety of
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reasons. But But you know, ever since
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then, you know, my life growing up,
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frankly, was littered with a lot of
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financial mistakes and challenges
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because I didn't understand things and I
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was partly afraid to engage with them.
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And it's really only been through my
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teaching and my research that I
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realized, well, wait a second. This
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isn't difficult. It's not scary. If we
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can deliver it properly to people,
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right? High school students or or
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younger, boy, we can have a massive
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impact. And the emphasis is on deliver
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it properly. And I think it's
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interesting because, you know, when you
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think about grade school education,
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there there are components of financial
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literacy that are included in there.
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Being able to, you know, count coins and
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the value of coins and stuff. But it
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seems like maybe it stops somewhere
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along the line, fifth grade, sixth
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grade, somewhere in that realm.
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And and some school districts have it
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and some states mandate it, but it's
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not, you know, across the United States,
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which I guess is is a little surprising
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to me. Yeah, I think there's a lot of
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really good intentioned people out
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there.
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But the sort of heterogeneity or
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diversity in topics or subject matter
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and delivery leads to
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an inadequate life skill when it comes
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to finance.
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So sometimes finance is buried in a math
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class or a home economics class.
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Sometimes they only talk about taxes.
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They don't talk about savings or
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investments. And so there really needs
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to be a broader, more unified approach
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and consistent delivery throughout
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children's formative years to set them
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on that right path as young adults and
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beyond. How do you think we approach it
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now because it's showing to be more and
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more important. And obviously something
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like the student loan debt crisis has
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really amplified this over the last
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decade or so.
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But how do we better do that? Because
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part of that is also going to be having
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enough educators in place to be able to
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deliver this this component of education
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moving forward. Yeah, so I I I
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Now you're striking at a chord that's
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very close to to my heart and what I've
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been working on lately is I I think we
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need to train the train the teachers, so
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to speak. A lot of teachers, whether
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it's a math teacher or a home economics
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teacher, whomever's teaching this
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finance at their school,
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very relatively few have actually been
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trained in finance. And that's not their
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fault. It's just sort of fallen on their
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lap based on what they tell me. Hey, I
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have to teach this. It's part of some
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requirement, state requirement.
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Um,
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so what what I think needs to happen is
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that finance
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educators need to teach these
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non-finance educators to be finance
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educators, to deliver it to their
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students in a way that's going to
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resonate and stick. And the beauty of
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this, Dan, is by training the teachers,
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there's huge benefits for the teachers
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themselves because many of them struggle
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with these challenges as well. Yeah. So
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it's really a win-win. You help the
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teacher, you help the student, and by
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extension, you help the family and
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community. And then I mean, not that we
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are enjoying the financial issues that
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we're in right now, but all that is kind
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of gone on, you know, with inflation and
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the impact because of the pandemic,
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these are kind of case studies of the
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impact of of
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finance and what it goes through.
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And really at a base level for in many
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cases. It is. And Dan, you know, a lot
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of people out there, including myself,
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to some extent are thinking, okay, it's
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getting really expensive to live. What
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do I do? Right? I mean, when I talk
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about teaching finance, it's not telling
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you what a stock is or what a bond is.
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It's helping you make decisions about
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what where you should save your money,
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what the risks are, what the what is
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inflate How can I deal with inflation
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now in my life? How do I alter my
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budget, my savings?
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This is the way finance needs to be
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taught, how to make better decisions.
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Do you feel like there's there's a path
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that we can develop here and I would
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think it's probably going to be over the
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next several years,
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but to be able to to get to that point.
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And it's going to be a multi
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I think faceted approach here because
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you're talking about the education
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piece. You're talking about the public.
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You're probably talking about
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legislators being involved in this as
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well. So there's a lot of hands that
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could be involved, you know, in this
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process.
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There are. But But the I think the
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beauty is that a lot of the
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a lot of the
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material and delivery work has already
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been done. It's what we do at Wharton.
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Right? When when when me and my
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colleagues teach finance, we teach
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people how to make these decisions for
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themselves. And so as you pointed out,
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Dan, the real challenge is just getting
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it out there. Working with
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educational systems, superintendent
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superintendents, educators, and
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eventually legislators to get this type
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of material and delivery system into the
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hands of teachers and kids. That's the
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real challenge at this point. And we're
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already starting We are We already have
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some inroads. We're already starting to
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work with with some school districts. So
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slowly but surely.
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How are you seeing that then on the
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ground level with the work that that
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you're doing it with some of the
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schools in the in the Philadelphia area?
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So, I haven't personally engaged with
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schools in the Philadelphia area. I've
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I've worked with I'm working with some
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other districts and I got to tell you
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there's a real appetite and a hunger
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because everybody from the
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administrators to the teachers to the
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students understand how important this
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knowledge is. They all want it. And so,
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you know, we're here to we're here to
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give it to them. We just need to work
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within the system as you pointed out.
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Can you then
00:10:31
can you guesstimate the the downstream
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benefit of having that education piece
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in terms of impact on life, impact on
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education,
00:10:42
you know, potential earnings benefits?
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You know, are are there is there a path
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that you you can see there? Yeah, so so
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instead of boring you with lots of
00:10:50
statistics, let me give you an anecdote,
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a personal anecdote that's illustrative.
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Um
00:10:58
I racked up a whole bunch of credit card
00:10:59
debt in college.
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And so, after I graduated during my
00:11:03
first job, what I realized is that the
00:11:06
only way I was going to pay down that
00:11:07
debt is I had to liquidate my 401k at
00:11:10
the time and just get rid of it. Yeah.
00:11:13
So, what I did last year and and I
00:11:15
probably shouldn't have done it is I
00:11:17
computed, "Hey, had I not made that
00:11:19
mistake, had I just left my 401k, not
00:11:22
added any money to it, just left it
00:11:24
alone for the last 25 years, hey, how
00:11:26
much money would I have today?"
00:11:29
I actually lost out on over a quarter
00:11:31
million dollars from that just small
00:11:32
start. Yeah. I mean, that's a lot of
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money. And now, granted it's anecdotal,
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but you can see that small mistakes
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early on have big implications later in
00:11:44
life and that's what we want to avoid.
00:11:46
Michael, always great to talk with you.
00:11:48
Thanks for a few moments today. Thanks,
00:11:50
Dan. Take care. You got it. Michael
00:11:51
Roberts, who is a finance professor here
00:11:54
at the Wharton School.
