Financial Education Creates Options
Financial education creates options. The most popular way of doing things is not the only way of doing things. An individual’s parents’ way of doing things is not the only way of doing things. Without education, people will be limited by the often narrow views passed down from others or shared by the majority.
But traditional methods of financial management aren’t necessarily the best methods, nor do the methods of the past always work in today’s changed economy. Personal goals and values affect how money should be handled, but the common methods of money management are just that–common. They do not take into account personal situations and values. But financial education grants individuals the power to choose how to manage their money by giving them options.
One Way of Thinking
It’s easy to get stuck with one way of thinking when that same thought is perpetuated among peers and in the media to the point where it’s the norm. When it comes to finances, this thought might be “all debt is bad” or “a 30-year mortgage is the only way to buy a house” or even “real estate is the best way to build wealth”. These norms, sans their superlatives, might be true to some people or true at some times. But they are highly restrictive and imply individuals have little choice or control over their financial lives. In contrast, financial education reveals there are many more ideas than just the most common ones. Some debt is good. There are many ways to purchase or finance a house. There are many ways to build wealth.
A traditional approach to buying a house, for example, is to get a mortgage and pay it off over 30 years. This is a fine option, but the problem is many would-be homeowners believe this is their only option. Through financial education, people learn this is one of many options. Options translate to more freedom as people can choose what works best for them.
Another example of one way of thinking is that all debt is bad. This may be true for some people, particularly those who don’t know how to get out of it (yet another reason for financial education). But financial education teaches there is good debt and bad debt. Good debt can be used as a tool. Debt grants people the ability to purchase things they otherwise wouldn’t be able to afford. It helps students fund an education, entrepreneurs fund startup businesses, homeowners buy houses, investors grow money faster, and so much more. Financial education helps people take advantage of debt instead of being burdened by it.
Aligning Goals and Values Through Education
Financial education allows individuals to use money in ways that align with their goals and values. Traditional methods of managing money might assume an individual’s financial goals include getting a full-time job, buying a house (using a 30-year mortgage), and taking an annual family vacation. However, personal goals can vary widely, which makes traditional methods very limited. For example, there are plenty of people, especially those in younger generations, who do not have goals of homeownership. Many would prefer the flexibility to move to new places frequently. Some might prefer flexibility over stability, or more family time over higher income, or owning a business over retiring early. Without financial education, individuals might never even learn about the options, let alone how to take advantage of them.
Having options means having freedom to choose. It’s only through financial education that families and individuals can become financially free. Consumer Finance says, “Financial freedom might mean being able to be generous with family, friends and community; or having the ability to go back to school or leave one job to look for a better one; or to go out to dinner or on vacation; or to work less to spend time with family. Because individuals value such different things, traditional measures such as income or net worth, while important, do not fully capture this aspect of the concept of financial well-being. It is these deeply personal preferences and aspirations that give meaning and purpose to the often challenging day-to-day financial decisions and tradeoffs we all must make to achieve it.”
Education Creates Options
Financial education grants individuals the ability to challenge traditional financial norms by considering alternatives. Without financial education, individuals would be limited in their options to what they were taught by society or their parents. Often these views reflect concepts such as “spending money is bad” and “saving is the only wise or honorable way to use money”. But education empowers individuals by broadening their understanding of money.
More importantly, financial education gives individuals the freedom to choose. By illustrating the options available, financial education allows individuals to choose how, when, and why to save or to spend money. Consumer Finance explains, “Financial well-being can be defined as a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life.” Knowing the options, and how to take advantage of them, is a key part of overall financial wellbeing.
Education is one of the most empowering tools in a person’s life. It gives them the ability to make choices, to live their values, and to consider alternative ways of thinking. As Jason Vitug says in his TED talk, “Knowledge is power. Financial knowledge is life-changing.” Through financial education, individuals obtain power over their financial lives by understanding the options available to them and how to take advantage of them.
Find out how 101 Financial’s Workplace Wellness program provides financial education to empower individuals by creating options.