Much of the rhetoric we’re hearing in the media today talks about the huge gap between rich and poor. Politicians of all parties discuss this issue, but none get to the root of the problem. It’s true that the gap between the richest 10 percent of the country and the remaining 90 percent is growing, but from that point on, most politicians get it wrong. The gap is increasing because all sides are making more money. Yes, the top 1% are getting richer, but that also means the economy is growing. The bottom 10% of US households are better off than the top 10% of many other nations.
The real issue at hand, and the reason this is so misunderstood, is that most Americans just don’t understand the basics of finance. They believe what they hear from friends or people selling them products. It comes down to a lack of financial education.
Schools are turning out students who are not fully prepared for the real world. They might know the basics of history, science, math, and English, but there is no real teaching of money in school. I majored in economics and accounting, so I know first hand how boring the topics can be. But I’m not talking about the heavy theory or detailed rules. I’m talking about simple personal finance -- the money issues that will come up for people in the real world.
Students do not learn about debt or savings, and when they break out on their own, they are left unarmed when sellers of credit come calling. To be clear, it’s not that people are dumb -- the sly and ingenious credit card companies make handling credit seem easy. But either way, the new consumers don’t see or know that taking on debt at a young age is killing their financial security. Saving at a young age is critical. Simple facts about personal finance are not taught and thus bright people are caught making financial mistakes.
It’s about education, and I think that we as entrepreneurs can begin to fix this problem. Have a brown bag lunch with your staff (even better -- buy pizza to encourage more to come) and teach them about personal finance. If you want to see an example of a lesson plan for such a class, send me an e-mail and I’ll happily send you the one I use. If you’re not up to teaching the class, bring in an expert. Make sure the expert isn’t selling something or else you could be adding to the confusion. Take it a step further and offer employer-provided educational benefits in the area of financial education.
Providing financial education for your staff has a two major benefits. First, if you invest in their financial knowledge, I’m sure it will help your bottom line. (For more on this, read Jack Stack’s books.) They’ll be more in tune with how their daily decisions impact the bottom line at work: maybe they’ll use less paper, take shorter breaks, get a few quotes before purchasing supplies in bulk or be more mindful of how great customer service means fewer costly “re-do”s. Second, this is a great benefit to give people from a humanitarian point of view. If your employees are better financially-educated, they’ll be happier because they will make better financial decisions, and that really affects morale. You’ll see fewer calls from personal debt collectors at work. Your employees will, effectively, be getting raises as they will have a better handle on their finances and will have more disposable income. They’ll also tell their friends about what a great company you have as you take time to help your employees learn important life skills, which will help recruiting and your standing in the community.
I’ve been asked to speak to many companies about this program and would be happy to share my plan with you if you’re interested – you can reach out to me here.