Learning a skill (like tracking your money).

Becoming more aware (like understanding the “why” behind your money choices).

Changing a mindset (like going from believing you don’t deserve to use money for your enjoyment to believing you do).

Whether I am coaching, conducting workshops or writing, my goal is to bring about a transformation in one, two or all three of these areas. And since I am in the business of teaching and training, it may come as a surprise to you to discover this…

I loathe the term “financial literacy.” Each time I hear the phrase, I cringe…to my ears it’s like nails on a chalkboard.

Unfortunately, I do a lot of cringing in April – aka “financial literacy” month.

Wrong Focus. Wrong Approach.

A quick financial history lesson: The financial literacy movement began mostly as an outreach effort undertaken by commercial banks so that they could meet the requirements of the Community Reinvestment Act.

For some banks, this included developing and/or delivering programs to reduce poverty and help lower to middle income families (primarily in under-served communities) “understand money and how to manage it so that a person can make informed financial decisions.”

Obviously, this is an awesome mission. Noble in fact.

It’s the approach that most banks take to fulfilling this mission that irks the heck out of me.

Frankly, it should bother you, too.

Because when you hop on the “financial literacy” bandwagon as it is currently promoted and taught by most banks and non-profits, it distracts you from what matters most when it comes to managing your money.

How you may ask?

Let’s start with the previously noted definition of financial literacy, “…to understand money and how to manage it so that a person can make informed financial decisions.”

Would you agree with me that this is beneficial for us all? That being wise with your money is a good thing regardless of where you fall on the income or wealth spectrum?

Yet, most banks and non-profits only target their financial literacy programs to lower to middle income households (LMIs).

In my opinion, that’s short-sighted. First, from what I have observed, most LMI households understand money and how it works quite well. They have to; their circumstances don’t really allow for much else. Unlike others with more resources, they can’t easily dismiss or overlook too much.

Second, these institutions are missing out on the chance to be of service to a whole lot of other people. Whereas financial literacy ought to be inclusive, it’s usually presented as something that is exclusive – but for all the wrong reasons.

And to add insult to injury, most of these programs just focus on the math of money. That’s akin to saying if you just spruce up your math skills, you’re good. This delivers the message that as long as 1+1=2 not only will you avoid making a bad choice, you won’t have to make any tough choices, either.

It also fosters this weird notion that only financially irresponsible people need “literacy.”

So basically and as confirmed by a Google search of “financial literacy,” you only need it if you are poor, bad with math, and irresponsible.

I take issue with that. How about you?

And what if you are the person who is a B student looking to become an A student with regards to your money?

For me, a major flaw with the current focus of financial literacy is that it promotes a false sense of financial empowerment for the people getting help and a false sense of accomplishment for those providing that assistance and guidance!

The Next Frontier Looks Like…

As irony would have it, my biggest pet peeve with “financial literacy” is the phrase itself.

If you approach learning about money as you would learning any other language, do you call it “literacy?” I’ve never heard anyone say, “I’m taking French literacy classes.”

Plus, when you study another language, you kinda embrace the idea that your learning is on-going – improving the more you implement what you learn and internalize.

So, wouldn’t the same principle apply to money? #IJS

I’m not the only financial professional who has a strong dislike for financial literacy as it is currently facilitated and pushed. And while our reasons vary, luckily there’s research to backup our individual and collective stance: financial literacy simply doesn’t work.

It doesn’t work because of the perception many of the banks and non-profits that promote it have in terms of who needs it.

It doesn’t work because it’s not holistic.

It doesn’t work because it stunts financial innovation.

It doesn’t work because it limits the creation of policy initiatives that can protect both the wealth you have today and the wealth you’re working to accumulate for the future.

It doesn’t work because it hurts you. Especially if you’re not inclined to raise your hand – so to speak – and say, “I want to understand more about my money and discover ways to manage it so that I can make informed financial decisions.” This hurts you because you don’t know you don’t know you aren’t asking the right questions.

As much as I dislike the phrase “financial literacy,” I admittedly don’t have an alternative one to suggest. Of course, I could selfishly offer up financial intimacy as an option. 🙂

But by whatever name you call it, stay engaged with your money. Know your numbers; notice your patterns; ask why; ask how; and remember what it is you are really, truly, managing. Hint: it ain’t (just) your money!

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