Personal Finance Education Adds up Better in Real World

February 5, 2015

The best way to teach children about financial management, it turns out, is to not teach them financial management. That’s according to new research from Harvard Business School and a just-published book by New York Times columnist Ron Lieber called “The Opposite of Spoiled.”


The way to go is with math and words — that is, by talking children through the concepts of money and budgeting throughout their upbringing — and not formal courses.


Traditional personal-finance education has flunked.

For years, there’s been a growing consensus that schools should be teaching children the principles of personal finance and, subsequently, 43 states now require it. Yet despite these efforts, most children continue to become financially unsavvy adults who are in debt and don’t save enough.


Harvard Business School Finance Professor Shawn Cole along with Federal Reserve Bank of Chicago Vice President and Director of Financial Research Anna Paulson and Wellesley College Assistant Professor of Economics Gauri Kartini Shastry, investigated vast amounts of financial data on students that graduated high school from states with mandates on personal-finance curriculum, comparing the financial status of students who graduated up to 15 years before the mandate to those that graduated up to 15 years after the mandate. After controlling for state, age, race, sex and time, the researchers found no statistically significant difference in the pool of graduates’ asset accumulation and credit management: simply put, it didn’t work.


Math makes personal finance add up.

What the study did find was that students who had been required to take additional math classes did fare better in their personal finances: They had a greater percentage of investment income as part of their total income, practiced better credit management, had more home equity and were better able to avoid home foreclosure and credit-card delinquency.


•Talking sheds light on the mysteries of money.

The results can be much the same for children who grow up in households that avoid discussing the issues of parental income, budgeting and debt. As New York Times “Your Money” columnist Ron Lieber writes, “Money is a source of mystery to children. They sense its power, so they ask questions, lots of them, over the years.” Often motivated by a sense of etiquette, the shame of our own mistakes or the desire to keep them innocent of matters so adult and filthy as lucre, we adults “tend to do a miserable job of answering.”


As a parent and a financial adviser that’s taught money workshops to clients’ children and grandchildren for many years, I could not agree more. We’re much better served by satisfying their curiosity with real-world lessons in finance. Starting as early as age 6 or thereabouts, begin slowly introducing your children to the concepts of money, earning, wants versus needs and saving. You can do this while grocery shopping, deciding the family budget around the kitchen table or as you head out to a movie, restaurant or other non-essential activity.


Address the taboo before it’s too late.

Lieber says that even topics as taboo as household income (or a parent’s unemployment or a family’s high net worth) shouldn’t be off limits if the child is old enough to be both curious and able to comprehend. With their innate ability to pick up on the subtlest clues as well as instantly, infinitely available information on the Internet, your kids may already know more than you realize. If the information is sensitive, and the kids are already in the know, then convey to them the importance of discretion and the principle that with maturity comes responsibility. Inevitably, you’ll have to do the same with other private issues such as medical information, family secrets and the like as your children grow up. Far better that you try to control the message, and let your children know that you trust them, than to let their imaginations and the influence of their friends control it.


Phoebe Venable, chartered financial analyst, is President & COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.


April 10, 2025
Tim Pagliara named Best-In-State Wealth Advisor for Tennessee by Forbes 2025, marking his 8th year earning a top 3 spot and multiple #1 rankings.
Businessman in a suit works on a laptop while sitting on a bar chart column, with an upward red line
April 9, 2025
Discover how CapWealth’s portfolio management strategies help investors stay focused, diversified, and confident during times of market volatility.
April 9, 2025
CapWealth CEO Phoebe Venable tells BNN Bloomberg how to find opportunities amid market sell-off through value-based investing and smart entry points.
Tim Pagliara joins BBC to discuss the impact of tariffs on financial markets.
April 8, 2025
Tim Pagliara breaks down the impact of trade tariffs on markets, inflation, the US dollar, and jobs—highlighting key economic shifts and strategies.
A black and white logo for the Wall Street Journal
April 3, 2025
Discover a key reason for the selloff as CapWealth CEO Phoebe Venable weighs in on market uncertainty and Trump tariffs with The Wall Street Journal.
Headshot of Tim Pagliara; ranked #6 in 2025 Barron's Top Advisor list.
March 27, 2025
Tim Pagliara of CapWealth rises to #6 in 2025 Barron’s Top Advisor in Tennessee—the only RIA in the top 10. Discover his client-focused approach.
Jennifer Pagliara Horton is being interviewed on Fox News about Wall Street worries
March 11, 2025
Stock market worries after Trump tariffs take center stage as CapWealth’s Jennifer Pagliara Horton shares insights on investor strategy.
President Donald J. Trump signing a federal document.
March 6, 2025
Where to hide right now as CapWealth’s Grant Stark shares smart investment ideas as tariff-driven market volatility shakes investor confidence.
The Barron's advisor logo is on a dark blue background
March 5, 2025
Nasdaq pops 1.5% as markets rebound. CapWealth CEO Phoebe Venable weighs in on volatility after Trump eases stance on auto tariffs.
Show More

Share Article