The need for financial literacy among populations is not new. Former US Federal Reserve Chairman Alan Greenspan has identified it and currently Robert Kiyosaki and Donald Trump argue that it is critical to the future success of nations. The message seems not to be heard in places where government decisions are made. The continued failure to ignore the message will have an impact for two key reasons.
Reason one: the impact of reduced spending capacity
Within days of the 9/11 attacks on the World Trade Center, President Bush asked the American people to get out and continue spending to stimulate the American economy. His message was twofold. First, keep spending to stimulate the US economy and, by virtue of its size, have an effect on the world economy. The global economy is like a shark: it has to keep moving to survive and for this it needs to feed on money. However, given the current level of financial education, disposable income is something of a finite resource and we are reaching the upper limit of how elastic it can be.
Personal spending is made through existing resources, that is, salary or through credit. However, both are not unlimited. In fact, for many, the salary option has been exhausted. Many people now use credit cards and other sources of credit to maintain their spending pattern. Worse still, the signs are showing that people are now so widespread that they need more credit just to meet existing credit repayments. Some have even gotten past this extreme stage and we are beginning to see an increase in personal insolvency.
Over time, these people’s ability to spend will be severely limited and, as such, they will no longer be able to feed the never-ending appetite of the economy. Without a constant flow of money, at best, there will be a slowdown. The possibility of a recession in an economy is also a very real possibility along with its knock-on effects.
Second reason Welfare spending and its upward spiral
Welfare spending is in an upward spiral. As Robert Kiyosaki and Donald Trump point out in their book Why We Want You To Be Rich, it has been calculated that the American welfare system is beginning to accumulate debts to the American people that all the stock and bond markets of the world could not pay. if charged. They also note that this could get worse as the Baby Boomer generation begins to pull out by making a big pull on an already overloaded resource.
The problem has always been known, but governments have anticipated it like a time bomb, all hoping it won’t explode while on guard duty. Unfortunately, the ticking seems to be getting faster and faster, indicating that we are closer than ever to the explosion of this bomb.
Is there an answer? If there is, it is certainly not to repeat the same actions. Furthermore, financial education must have a greater prominence in the minds of nations. People need to know how to think more effectively about how they manage their money. One of the best ways to begin this process is to start with the youth. The way to do this is to expose them to financial education at the only institution where they spend their formative years: school. However, this will require that projects and plans be formulated to introduce financial education at this time. Not tomorrow, not in the future. Today.
The kind of political will that will be required to achieve this means that the issue will have to be on the to-do list of every man and woman who is deemed to have some political influence. You will have to be on the talking points of every major politician to create the kind of swell that makes things happen.
While this may seem like a big undertaking, politicians respond to two key things that could help get it on the agenda. The first is an overwhelming demand for action from the people who vote for them. When these people make enough noise and feel that their position is threatened, politicians respond. The second is when they understand that there is something for them – recognition as fundamental to their achievement and can create a legacy from their time in office – they respond. Once they understand what’s in store for them, this could become easier.
Well what’s in it for the political figures of our time?
If financial literacy is placed in schools, we will potentially have the ability to produce the first generation with financial literacy. The resulting impact could be more beneficial to individuals and entire social groups than vast amounts of laws and social programs have ever achieved. The combination of word and number literacy provides the foundation on which socially disadvantaged groups and individuals can lift themselves out of the various types of poverty in which they find themselves.
With such knowledge, they reduce their dependence on others, on society, and on their government. The results of this can appeal to those on both sides of the political divide. Finally, a bipartisan initiative that can be a force for good whatever your policy.
If political figures are still wondering what’s in it for them, this is it. Many speak of the need to do something worthwhile and to leave a legacy for their time in public service. Many deviate and stagnate because the cause they see so valuable is opposed throughout their political careers. This saps their willpower to do so and they become a shadow of the person they set out to be in public service. By embracing this cause that can find support on both sides, suddenly there is an opportunity to create a political legacy that can redefine the future not just of individuals and social groups, but of entire nations.
There is a brighter future with the action of our politicians and public servants. They just need to rewrite their to-do list so financial literacy is on top.
