Growing up, I would get in trouble when I said the word “hate.” In our household, it was akin to cursing and that was something I did not do in front of my mother, unless it was a slip of the tongue! 

As a result, it’s not a word I use liberally. Yet, there are times when it is appropo; my visceral reaction to the phrase “financial literacy” is such an example. 

Each time I hear the phrase, I cringe…to my ears it’s like nails on a chalkboard.

And I often get flack for this from some of my professional peers

Mostly because they think I’m dismissing the “spirit” of the phrase. When I’m not. 

I am all for folks increasing their competence and knowledge, in all disciplines. After all, my body of work as a financial behaviorist – whether through my work as a coach, speaker for hire, or writer – is centered around helping you expand your financial self-awareness. 

So, yes, I want you to: 

  • learn a skill (like tracking your money, so you can identify patterns); 
  • become more aware of your relationship with money (like understanding the “why” behind your money choices, so you can make more informed ones moving forward); and 
  • be proactive about changing your mindset (like going from believing you have to give your business everything, including your financial future, to designing one that puts you and your loved-ones first, because you don’t have to sacrifice your personal financial health in order to have a thriving business.) 

Wrong Focus. Wrong Approach

My problem with the phrase “financial literacy” is with its application. And given how much this shapes the personal finance industry, this is a big deal!

In case you’re unfamiliar, let me give you 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 (or application) 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, or inside the financial wellness programs of some companies, 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?

What if you are a person with financial means, who is good with math, and is responsible with your money, but you want to improve your skills, awareness, and mindset? Shouldn’t there be a place for you to raise your hand when you’re ready for help, too? 

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? #justsaying

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. Do you? Of course, I could selfishly offer up financial intimacy as an option. 🙂

But by whatever name you call it, here’s what I want most for you:

  • To stay engaged with your money; 
  • To know your numbers, and heed the clues they give you; 
  • To notice your patterns; 
  • To put you and your loved-ones first – when it comes to your money and your business;

And…to 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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