Wealth...Uncomplicated

LearnVest Launches Beta - checklist lovers UNITE!!

Previously I wrote about LearnVest as a terrific financial literacy solution.  Guess what?  I was wrong.  It's a helluvalot more than that!  If you're one of those checklist loving freaks like me, you will be spending a big chunk of your Thanksgiving weekend getting your financial life in order with the multitude of checklists available at LearnVest.

While I don't have a lot of time tonight to do the site justice, what I will say is that I am nothing short of ecstatic to see this site go live.  I'll post a more detailed review later.

Before I forget, you should sign up for The LearnVest Daily as well.  This is a terrific email newsletter/blog/give-it-a-name-it's-great-content.

Read the press release

Visit LearnVest

TechCrunch50: LearnVest, a terrific financial literacy solution

Earlier this year, I featured a series on financial literacy and low and behold, TechCrunch50 debuted a terrific solution to the problem--LearnVest.  The site was initially designed around providing financial education to women, but I think all of us could benefit from spending some time on the site.  They are currently in a closed beta, so you'll have to click to get on the waitlist so to speak.

However, when the site launches, you can bet that learning about money will be a much simpler endeavor, as the creators have organized the content based on life events.  If you're drowning in debt, need to buy a car, or whatever the situation may be, LearnVest provides an excellent resource for learning about each subject.  In briefly reading some of the information, it was clear that the content was very well written--and with good reason.

LearnVest's material comes from experienced financial journalists who have been doing the job for a number of years.  Their experience shows, as even complicated topics were broken down into language that was both enjoyable to read and easy to understand.  When the site goes live in a wide release in the coming weeks or months, go ahead and hit the site now to be an early user at www.LearnVest.com.

Financial Illiteracy Series Part III - education's shortcomings

If parents aren't able to teach their children financial literacy, the next logical place to gain this important life skill would be the educational system.  Unfortunately, our system is so focused on core literacy that the topic of personal finance is virtually ignored.  In the end, the roots of education's shortcomings are not in the skills or abilities of our teachers, but in the policies that our schools have adopted.

The K-12 System

As an example, my children are in the public school system where the state tests students each year to assess their learning in areas such as math, reading, social studies, and the like.  However, they no longer teach or grade handwriting the way they did when I was growing up.  The reason?  Handwriting doesn't show up on any of the state's exams.

The same is true of personal finance.  Since basic financial literacy isn't tested, it isn't taught, and it certainly isn't learned.  The policy is to teach core literacy and personal finance simply isn't part of the curriculum.

Sure, schools teach children how to count and might even have a class in high school dealing with business or economics, but this does very little in the area of financial literacy.  This results in a mean score on basic financial literacy exams of just over 50%.  In other words, we fail.

College Isn't Much Better

Moving beyond high school, we see that even a college graduate that spent four years at a top flight school is just as likely to be financially illiterate as a high school graduate.  This is understandable for those with majors that don't have the word 'finance' in it, but even a finance major can find themselves lacking in personal finance knowledge.

In reviewing the curriculum for finance majors at a number of colleges in the area, I found that all of them gave only a cursory overview class of personal finance.  The rest was spent on more general business courses and more detailed corporate finance topics.  This is fine for learning to earn an income in corporate finance, but wouldn't it make sense to fit a detailed treatise of personal finance somewhere in the four year program?  Surely it would deliver more value than some of the electives offered.

Of course, the students in these programs are simply doing what the college or university is telling them to do.  Again, it's a matter of policy rather than the ability to teach, resources available, or desire of the students to learn.  Students will do what these institutions require of them and little more.

Ultimately, this results in even our 'brightest' people going to school, earning a degree, and developing a great base with which to earn an income, but finding themselves in the uneasy position of not knowing what to do with their personal finances once they enter the real world.

Changes are Coming

This needs to change and fortunately for all of us, it is.  Some states and institutions are changing their policies to reflect the reality that personal finance is every bit as important to individuals as any other courses currently offered.  These changes are being implemented in a variety of ways and we'll no doubt see some missteps along the way.  However, making small changes that give credence to the importance of financial literacy is the way that big problems are solved.

Takeaways

The educational system isn't where it needs to be with respect to financial literacy.  Our system is among the best in the world at giving its participants the ability to earn a paycheck, but falls flat when it comes to teaching what to do with that income.  Here are some important things to remember about our system and how to improve it:

1. Fill the Gaps - Assess your child's curriculum to find what is missing with respect to personal finance and try to fill the gaps
2. Support Change - If your child's school is considering adopting personal finance as part of its curriculum, support the changes
3. Advocate Literacy - Many schools simply won't make changes until it is mandated, so become an advocate for financial literacy and get involved in the discussion
4. Ultimately It's on You - Even if the educational system you grew up in or your child is now in doesn't do enough with personal finance, remember that it is always up to the individual to seek out the information and skills needed to succeed in life

Financial Illiteracy Series Part II - parental contributions

All learning begins at home and financial literacy is no exception.  Our parents are critical in shaping the way we value money and how we manage it when we become adults.  If you were fortunate enough to have parents that instilled a sound core philosophy on personal finance, count yourself as lucky.  The unfortunate fact is that most parents simply don't teach their children much of value when it comes to money.

Talking Money is Taboo

Most parents avoid having money conversations with or in front of their children.  They teach their children that it's impolite to discuss finances with others and that these talks should be held behind closed doors.  As a result, children are starved of important financial knowledge and often go through childhood in a sort of bubble--oblivious to the real world.

Shelter Creates the Storm

By sheltering their children from the hard realities of life and money, they hope to maintain their children's innocence for as long as possible.  The problem here is that when their children finally go out in the real world, they get smacked in the face with tough lessons from a financial system that cares little about their well being.  Many with parents that are at least moderately affluent will wind up returning home after taking their licks and become boomerang children, sometimes living with mom and dad into their thirties.

Economic Outpatient Care

This return home or whatever help parents might give to their children has been called economic outpatient care by the authors of The Millionaire Next Door.  Research unveiled in this important book on the habits of America's wealthy clearly demonstrates that supplying children with seemingly limitless resources hurts children far more than it helps.  In their research, they found that children of millionaires that did not receive subsidies from their parents after leaving home were far more likely to become wealthy themselves.

Takeaways

To do a good job as a parent on money matters, you need not be a financial expert, but you do need to teach your children the fundamentals of dealing with their finances.  The most important ways parents can help their children with handling their money are:

1. Set a good example - if your actions tell the story of sound financial management, your kids will certainly benefit from this
2. Involve them in the conversation - rather than keeping your money discussions behind closed doors, let your children have a seat at the table and when they're ready, let their voices be heard
3. Expose them to reality - regardless of your current financial position, let your kids know about the good, the bad, and the ugly so they understand that life is full of ups and downs--particularly when it comes to money
4. Let them stand on their own - barring a major catastrophe in their financial lives, refrain from subsidizing their lives and help them take greater personal responsibility in managing their finances

The bottom line with parenting and money is that you need to have an open and honest dialog with your children.  Prior generations have seriously missed on this teaching opportunity, so don't let it slip by.  I can think of few greater disservices to our youth than treating them like lambs only to be fed to the wolves later.  If we've learned anything during this, the toughest recession in a generation, it's that financial literacy is not optional.  Talk to your kids; they'll be better for it.

Financial Illiteracy Series Part I - overview

The National Endowment for Financial Education (NEFE) has defined financial literacy as the ability to read, analyze, manage, and communicate about the personal financial conditions that affect material well being. It includes the ability to discern financial choices, discuss money and financial issues without (or despite) discomfort, plan for the future and respond competently to life events that affect everyday financial decisions, including events in the general economy.

To put this more simply, financial literacy is the ability to successfully navigate the complex financial world to your benefit no matter the circumstances.  If you're not sure if you would meet this definition, think of it another way.  Would you feel comfortable leading a public discussion on the subject of personal finance?  If not, join the crowd.

A 2007 financial literacy test was given to high school students and the results, while alarming, weren't surprising.  On this basic exam, the mean score was just 52.4%.  One might dismiss these results in light of the relative youth of those taking the exam, but given the fact that fully two-thirds of baby boomers are unprepared for retirement, the problem of financial illiteracy persists well beyond high school.

The reality is that most of us are financially illiterate and it need not be this way.  Over the next several days, I'll help you to better understand the causes, problems, and potential solutions in dealing with this issue.  In addition, after finishing this series, you'll walk away with a hard and fast plan to become not just literate, but financially savvy--a quality that will benefit you greatly over the course of your lifetime.

Next Week: Financial Illiteracy

Next week, I'll be posting a short series on the topic of financial illiteracy in America.  While we have the largest economy in the world and earn more per capita than all but a small handful of countries, the hard truth is that most of us are financially illiterate.  I will argue that this is one of two fundamental problems that plague this country and it has created a looming disaster in the form of entitlement programs and enormous debts.

If you're already a financially savvy consumer, feel free to tune it out.  Otherwise, please join me next week for a healthy treatise of this important issue.  Until then, have a great weekend!