Editorial Policy

Are Personal Finance Courses Pointless?

Kristin McGrath

February 15, 2013

The UK government has decided to implement mandatory personal finance education in schools, and the news has been making headlines all week. Some experts predict that the move will save the UK billions in the long run, as financial ignorance and bad choices about debt are a financial drain on the entire population. The Personal Finance Education Group, which campaigned for the overhaul, is calling it a victory.

But will it actually work? That’s the question some are asking. This article from The Economist, which cites several American studies, pokes holes in the idea that personal finance education is a silver bullet that will turn a financially ignorant population into a financially savvy one.

A 2010 paper from the Federal Reserve Bank of Cleveland, for example, concluded that most of the research on the subject provides no “conclusive support that any benefit at all exists” to personal finance education — and that financial education doesn’t reliably lead to proficiency in complex financial matters.

The reason why isn’t clear, but the researchers surmised that perhaps the timing is off. Personal finance courses may simply be teaching students important skills at times when they are irrelevant. How many 18-year-olds need to know how to navigate the process of getting a mortgage? How many middle school students care about credit card interest?

This conclusion resonates with my own experience. I took a personal finance course in college. Yet it wasn’t until I entered the real world that I actually made an effort to learn about retirement savings options, money market accounts, health insurance and credit products. I learned about those things when I had to — not when I was sitting at a desk struggling to stay awake.

Does that mean personal finance education in schools is pointless? I don’t think so. I may have struggled to see the point of my calculus courses at the time, but the problem-solving skills have stayed with me. So have the critical-reading skills I picked up in my long-forgotten English courses.  Likewise, although I remember little of the number-crunching I did in my personal finance course, the basic message behind it (start saving early!) bubbled to the top of my mind when it came time to determine my contribution to my 401(k).

So, instead of looking at personal finance courses as an all-out miracle cure for bad financial decisions and a way to breed financial experts, perhaps we should simply look at them as a foundation. People will still make mistakes and bad choices — but the lessons learned in personal finance courses could help them move on from those mistakes when they’re ready.

With financial wisdom in mind, here are some of the best personal finance blog posts of the week:

The Frugal Path demonstrates how speeding is dangerous in driving — and in personal finance.

One Smart Dollar tells the story of a man who turned his too-large house into an investment opportunity.

Budget & the Beach lists some gambles that could have big payoffs.

Eyes on the Dollar compares paying off debt to dealing with a blizzard.

Frugal Habits shares some hard-won advice for recent grads.

See Debt Run suggests some things to consider before buying your next home.