FINANCIAL LITERACY
ESSENTIAL TO REDUCING POVERTY
Groups that are angered by “the rich” often feel that just funneling more money to the poor is the answer to everything. It isn’t. We have to look at “the rich” by considering only the working rich, not the ones who inherited their wealth. By examining how they became rich and sustained it, we learn lessons on what works to keep anyone on a better financial footing. None of them “stole” from everyone else, or were significantly given success by the government. It takes hard work, diligence and the secret sauce…knowing how to manage your financial affairs. This is what we’ll talk about today.
Why The Subject is Relevant Now
There is increasing demand from the Democrats to provide Universal Basic Income (UBI) to minimally working or idle adults so that they don’t become homeless. In general, it is a fairly limited amount of money for a defined term—often 18 months. This temporary increase in income doesn’t really do much; for those not good at managing money, they can take on obligations they can’t meet, as the increase is temporary.
But even if the program was permanent, it will not have any real impact on creating real wealth. The core problem isn’t income; it’s learning how to manage your money. If you don’t know how to do this, you will always be poor or broke. Look at poor people who win the lottery. Almost all of them are broke within a year. It’s a bad solution to a real problem—fiscal illiteracy.
We need to push back on UBI…and push forward on something that may actually make a difference.
Financial Education
Many readers probably remember their parents sharing at least some of their financial management strategies as they grew up. If you had an allowance and some money coming from gifts and chores, a good start was encouraging you to save some of it. We had a school field trip to a bank to open a savings account. I really loved having my passbook and seeing it grow, albeit in financial terms, not a really huge amount. But it started me learning to save and defer desires.
I heard my parents talk about money, and the words “we can’t afford this now,” came up relatively often. We were solidly middle class, but my parents understood the need to have funds that were off limits, except for the specific circumstances they were designed to meet. One – an emergency fund, because sometimes, a big cost comes up. An appliance dies, your car is wrecked, a huge medical bill has to be paid. Or worse, one working parent is laid off, dropping the family income by half. Two – a vacation fund, assuming you made enough to consider a vacation. I remember a few trips where we stayed in college dorms on the East Coast, as they were really cheap. We bought food and made sandwiches, or ate in cafeterias. For me, the latter was a treat. I got to pick what I wanted to eat. Just to make you smile, I discovered I loved stewed prunes and quickly learned why this is one dish best consumed in moderation. Three – a college fund, assuming this is in your parents’ plan. Four (and very important) – retirement savings. Even then, my parents knew that the government wasn’t going to cover their needs. And my father actually had a pension coming.
But I was lucky. I understood the cost of things. My parents asked us to chip in for such “luxuries” we wanted as contact lenses. Nowadays, it would be cell phones. But too many kids haven’t learned how to save money, invest it and budget, deferring wishes till later. This is critical. Any person who retires with a good financial picture learned all these things and looked to the future more than to the lure of immediate pleasure. I contrast my situation with friends who replaced TVs, cars and clothes much more frequently than I did, leaving them with little money to save and invest.
Better Use of Money Than UBI
If we are going to invest money in the poor, we need to teach them how to fish, not keep handing out fish. Dependency on the government will cripple adults instead of empowering them. Dems speak of self-esteem. You can’t get it without your own effort and success.
Financial management should be incorporated into every math class, starting at the earliest age. Practical experience could be worked into other subjects, such as how empires failed because of profligate spending. King Ludwig II of Germany is a fun example. New parents should be given some kind of guidelines on how to help their children build savings and ultimately, a credit rating (this information would probably help them too).
With EVERY welfare program, mandatory financial training should be required. This should include prudent shopping strategies, to wean people off heat-and-serve junk and onto healthy and cheaper food. Perhaps the money wasted on UBI could fund adult training programs as well. No one should live off our forcibly taken tax money forever. No one has that right, unless so severely disabled that they cannot support themselves. And though you may be surprised, this isn’t a large number of people. I’ve worked with people with a variety of handicaps and many can find successful and rewarding employment. Even those whose IQs fall below average; a project my father was involved in hired people who were challenged to do assembly line work, which was challenging and interesting to them. AND, they made their own money.
The investment in nationwide financial literary programs would be offset by fewer people on the streets and on welfare. When Bill Clinton changed welfare rules to make them less generous, many single moms told him how empowered they felt and how proud. Coming home to their kids with a paycheck in hand, setting an example to their kids and knowing that they had earned a living made them happy. Happier than being “on the dole.” We used to be ashamed of needing help. Now, it’s seen as an entitlement, but it should never have been that.
Education Not Entitlements
Contact local, state and national politicians on this subject. There are many trials of UBI going on, but nothing on financial education. This has to stop. I’ve seen no success cases at all. And it sends a message that “I’m from the government and I’m here to help you.” Ronald Reagan said these were the most frightening words he ever heard. We should remember that.
