The increase in the number of young people struggling with huge debts indicates a problem in personal finance literacy at different levels of education. The education system is skewed towards meeting the job market requirements instead of teaching learners personal finance skills that can help them become financially independent.
The following factors bring about the problem:
Lack of Competent Personal Finance Teachers
The ability of teachers to deliver on this critical mandate is questionable. Teachers are trained in their areas of specialization, and they lack any financial skills that can lead to independence and stability. Interestingly, most teachers are struggling to keep their finances in order, which clearly indicates that they have no clue how to empower students with financial literacy.
Due to the lack of adequate knowledge on the subject, these teachers can only teach basic financial skills such as budget preparation and how to file tax returns. Such skills are too basic and are of little help in personal finance management.
Poor Socialization by the System
Students are exposed to loans at an early age, making them think that taking loans is the norm. Apart from helping the students achieve their academic goals, these loans negatively socialize them into thinking that being in debt is not a big deal.
Overemphasis on Employment
Modern education is designed to help learners obtain the most marketable degree, which will enable them to get a well-paying job. The idea is to enjoy the fringe benefits from their big jobs, such as a good health insurance cover.
The education system also teaches learners the traditional money management skills of saving a small portion of the earnings to retire comfortably. Even with such financial education, learners are not taught how to invest their surplus income and free themselves from debts.
Ways to Achieve Financial Independence
Using Experts to Teach Financial Literacy
What about using people who are financially independent themselves to teach the subject? Financially independent individuals who can apply the theory into practice will be an excellent example to be emulated by the learners instead of when the subject is taught by low-income teachers who are already struggling with debt.
Putting Tighter Controls on Credit Accessibility
Most young employees find themselves in the credit trap because, nowadays, it is too easy to secure a credit facility. Starting from credit cards to loans, young people with little financial literacy are enticed to take these facilities, eventually ending up in a debt trap. Proper regulations can make these facilities inaccessible to vulnerable people, saving them from the financial mess in the future.
Starting from Home
Parents can be the best teachers to educate their children on financial independence. The assumption is that they understand their children’s strengths and weaknesses and can walk with them along their financial independence journey. Such a strategy will enable the children to acquire practical lessons on managing their finances.
Self-Education
Students should take learning financial management skills as a personal initiative. Many online platforms offer investment tips that enable individuals to become financially independent. You may want to check the IXFI blog for financial literacy and guidance on how to jumpstart your financial independence.
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