Financial Literacy: Why We Didn’t Learn It From Parents & Educators

Sep 8, 2023

Financial literacy is a 21st century core survival skill. Here’s why we didn’t learn more about it growing up. 

A palpable sense of frustration over our financial situations has become part of the millennial identity.

Our generation feels like we’ve been dropped off in a dense financial jungle with little more than a Lunchable and wished good luck. Perils abound and we’ve inherited what feels like inadequate financial literacy survival skills to combat them.

It has got so many of us wondering how we were expected to thrive with none of the requisite knowledge. We’re all paying taxes, yet we have no idea how they work. Our ability to ever retire hinges on investing, but we don’t know the first thing about it.

But! We did learn how to sew buttons in home ec. class and that the mitochondria is the powerhouse of the cell. 

(Sidebar. This story will inevitably surface when I post this. In 7th grade home ec., I once loaded dish soap [ya know, for the sink] into the dishwasher. It practically flooded an entire wing of the school with suds. So, it’s not to say I was above home ec., but learning the gist of what a Roth IRA was when I was 15 would have been a more fruitful life skill.)

No one flourishes today without financial literacy, so why didn’t we learn anything about investing or personal finance in school? And even worse, not only did our parents not fill that void, but most of them discouraged any money talk altogether.

Well, it was actually for pretty valid reasons…

When we were kids, adults weren’t investing unless they were already wealthy.

When our parents were bustling through parenthood and their key earning years, the barriers to investing were much higher. When they were young, they really couldn’t start unless they already had some wealth.

This is antithetical to how many investors build wealth today – by putting small amounts into the market consistently over time.

“For our parents’ generation, you had to have a chunk of money to start investing. Today, starting with little bits is how you get that big chunk of money.”

Our parents called up a broker – a real, live human! – who would then invest their money. Naturally, who did brokers want to work with? Clients who had fat pockets and were worth their time.

Not to mention, there were far fewer regulations in place to protect our parents from bad actors in those days. Most of those brokers were in the business of pushing individual stocks, not giving high-quality investment advice around diversifying and keeping costs low.

In a nutshell, the financial system was unkind to investors who didn’t have much money or investing knowledge, which was probably most of our parents and educators.

Our parents needed to be on the cutting edge – both technologically & financially. 

When DIY investing via online brokerage websites entered the scene and rose to popularity in the late 90s, consider what our parents would have had to overcome to jump in. They needed to be first-movers in multiple realms.

Home computers were still more of a luxury than a necessity. As of 1997, only 35 percent of American households owned a computer. The internet was just starting its ascent to ubiquity.

At this time, most people were still balancing paper checkbooks. Anything to do with managing money online may as well have been sorcery.

Investing on a brokerage website must’ve felt like sending your hard-earned cash out to float in the ether. (Actually, it still kinda does.)

But, let’s pretend our parents had their in-home dial-up internet tuned up and surpassed this first prerequisite of being tech-savvy. Next, if they were actually shoveling money into their E*Trade accounts, they’d need much greater financial literacy than what’s required today to see lasting success.

Low-cost index funds weren’t mainstream yet, nor could you instantaneously Google money questions. You’d be stuck renting books from the library. Even then, the best sellers were were filled with misguided advice about how to One Up On Wall Street.

(Sorry, Peter Lynch, but this book did not age well. It probably hurts more people than it helps today.)

Most investors during this era were dabbling in super-risky territory (many without realizing it) by day-trading individual technology stocks. As you probably know, that ended about as violently as it began, when the dot-com bubble burst a few months after the turn of the century. 

Since then, many of our parents have started investing through things like their 401(k) plans and have experienced success. According to Fidelity, boomers consistently have the heftiest retirement plan balances across generations.

So, yeah, they’ve figured it out…kinda.

I’ve sat across the table from countless successful boomers who will openly express that despite their success, they feel like they’re bumbling through their own retirement and investing plans. Who are they to teach anyone else how to do it?

The wealth-building playbook of investing earlier in life – the one that millennials are learning on the fly – isn’t something older generations have lived through experience. Teaching it is like coaching someone in a sport you’ve never played. 

Goodbye, Pension! Hello, 401(k)!

A tectonic shift in who bears the risk of investing for American workers’ retirements has occurred over the past four decades. Over this timeline, which overlaps with many of our parents’ careers, the level of financial literacy required to make equivalent financial progress has ballooned. 

When we were kids, adults were much more likely to have had access to pensions.

Pensions are workplace retirement plans where the company you work for saves money for you each year. Your balance grows consistently at a modest but stable rate of return, independent of how the stock market performs. Most importantly, your employer owns all of the investment risk, not you. 

The beauty of pensions is they require very little investing or financial knowledge on behalf of the worker. In essence, your company provides you with a retirement account, puts it on autopilot, and makes all of the prudent investing and financial decisions for you during your working years.

No researching of investment options. No temptation to reduce your 401(k) contribution so you can lease that new car. No selling your investments in a tizzy after a market drop.

Starting in the early 1980s, companies began to phase out pensions in favor of defined contribution plans, like 401(k)s and 403(b)s. Thus began the transfer of retirement investing risk onto the individual and away from the company.

In 1980, 60 percent of private sector workers’ sole retirement account was a pension. As of today, it’s only four percent.

To successfully wield the investment risk millennials now possess, we need financial skills that simply weren’t required of our parents and educators. At least, not to the same extent.

Our parents’ primary concern was balancing their family’s monthly income versus their expenses. Outside of that, the company they worked for (and the Social Security system) had their retirements on lock. I strongly believe that this is why the only financial advice the vast majority of millennials heard growing up was to, “save your money.” Unfortunately, this doesn’t cut it anymore.

In addition to making ends meet, today’s families are juggling an endless list of tax breaks, types of investment accounts, and timelines until they need to use their money.

Our stakes are higher and the decisions more complex. It’s daunting, but there’s also a silver lining.

A Silver Lining: The Millennial Opportunity

Success occurs where opportunity meets preparation, or at least that’s what my junior high basketball coach used to tell me. In all seriousness, when it comes to millennials and investing, it totally applies.

Millennials have two things on our side that make our financial opportunity even greater than older generations. Although, it might not feel like it now.

  1. We have time! Time is the most potent ingredient to investing success. Investing is much more about long you do it and less about how “good” you are at it.
  2. The second is accessibility. Younger generations have low-cost access to investment markets through our smartphones that boomers could only dream of. (You can start investing today with as little as $10. Yes, it’s that accessible, and no, you don’t need to be a market wizard to find success.)

Now, here’s where preparation comes into play.

For the reasons I highlighted above, it really isn’t fair to expect our parents or educators to have had the wherewithal to prepare us for today.

We’re operating in a financial world that’s lightyears ahead of what they faced, and in truth, I’m not sure we would have been prepared to absorb all of their teachings until later in life.

The financial landscape is still changing extremely quickly, and I’d wager that rate of change will only accelerate by the time our own children come of age. We’ll find our own new and unique ways to gloss over critical abilities our kids will need just to get by, like coding.

Finally, I’ll end with this thought, as you’re probably coming to the same realization as me. Now that we’re becoming parents ourselves, we have tremendous power to positively impact our children’s financial futures.

Think bigger than just the amount of money you’re able to hoard in their 529 plan. Bestowing your kids with financial literacy, confidence, and a positive money mindset is more powerful than any monetary gift you could ever give them. The preparation you do now can change your family’s financial trajectory and act as your children’s springboard.

Related Post: To Millennial Moms Investing for Your Children: Put Yourself First

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial advisor.


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