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Teaching kids financial literacy without real money is like teaching swimming with PowerPoint slides. And we all know how that ends.
We’re making the same mistake with money that we once made with abstinence-only sex education: pretending that pure knowledge will triumph over emotion, peer pressure, and real-world temptations. Spoiler alert: it won’t.
But there’s an even more fundamental problem here.
Before we start debating how to teach kids about compound interest, maybe we should ask why only 26% of eighth-grade students in the United States are proficient in basic math. That’s right – we’ve managed to create a system where three-quarters of our students struggle with fundamental mathematics.
And our response is to add yet another layer of complexity to the curriculum.
This is a perfect example of what C. Northcote Parkinson called the “law of triviality” aka bread & circuses. Parkinson’s fictional nuclear committee obsessed over a bike shed while ignoring the reactor design.
We do the same thing all the time in education. While our students struggle with basic algebra, school boards and administrators spend countless hours debating financial literacy curricula, arguing about whether to teach the Rule of 72 to kids who can’t divide by 2. It’s like installing a fancy security system on a house with no foundation.
We’ve seen this pattern before.
Education is particularly susceptible to flavor-of-the-month initiatives that promise revolutionary changes but deliver minimal results.
Remember when iPads
30 Comments
Quinzel
Great article. I think it’s very true.
I felt I was failed by education/parents with regard to financial literacy, because the first time I ever had real money in my life was when I went to university the first time and I had no idea how to manage it, and I ended up homeless for some time.
Now I’m a parent myself, I decided I’d teach my kids about money by actually giving them money. $100 each per fortnight. I made both kids set up savings accounts that earned interest, and they had to save $50 a fortnight. The other $50 I said they could spend on whatever they liked, but that I would no longer pay for anything related to their gaming (ie, Xbox subscriptions etc), I don’t buy them toys, or nice snacks, or fancy branded clothes – that’s all stuff they now need to save for and buy themselves with the money they are given.
One kid has ADHD and the other kid is close to neurotypical. The neurotypical kid certainly learned how to manage money quicker. His savings account remained perfect, he accumulated interest as well, and can always afford his subscriptions etc. he barely ever even spends the $50 that he’s allowed to do anything with, but when he wants to use money when going out with friends etc, he just always has money, and he even keeps some cash on hand as well.
The other kid on the other hand has taken a longer time to understand but, there’s absolutely no way an ADHD kid would learn without real money to manage in my opinion and I think they benefit from having the freedom to make mistakes with money. He would spent his $50 within about 10seconds of receiving it, generally on stupid shit from Amazon. Then he never had money for his gaming subscriptions which would result in massive meltdowns when he couldn’t play his games, and then he never had money to do stuff with friends when he wanted to. He was always the “poor kid”. Then, even though he wasn’t supposed to, he withdrew cash from his savings to pay for subscriptions, losing interest etc, and then also having no savings. It took about a year, but he’s finally learned to stop buying stupid shit on Amazon. He still can’t seem to save the way his brother can, but he saves for a couple of months at a time, and then buys the next computer part he wants, and he always sets aside the money for his game subscriptions now as well. He also does sometimes put extra little bits of money in his savings when he’s particularly motivated for a more expensive piece of computer, but he still often withdraws for stupid small shit. He also compares his spending behaviour to his brothers and he realises that his brother is “rich” because he doesn’t spend money.
It’s an expensive lesson for me to teach them, but, I genuinely think that it has helped them both learn real life lessons with regard to money. I think the unfortunate thing is that the people who really need to learn money, are the ones that don’t have it. I’m very lucky that I’m in a position to be able to afford to let me kids experiment with $100 each a fortnight. There’s people out there who could probably afford more than that, but I think that in the real world, a large majority of people cannot afford to give their kids that learning opportunity. However, for me, having once been homeless, and then many years later having done an MBA which included finance, I realised the best way to help my own kids learn to manage money was to give them some money to manage.
DrNosferatu
Careful, as that can be a slippery slope: that exact expression, “financial literacy”, has been used in Europe as a way to push ideology – all economy is political.
Will they teach the fallacy that economic agents make rational choices?
Will they teach the fallacy that running a country is the same as running a household or a grocery store (in terms of supposed thrift)?
Will they teach that market growth guaranteedly means improved living standards for all?
Will they overwhelm students with technical jargon to make contestable theories seem irrefutable?
Will they present market dynamics as "natural laws" rather than human constructions?
Will they teach that widespread economic practices must be correct simply because they're common?
Will they equate market freedom with political freedom as if they're the same thing?
Finally, will they teach Keynesian Economics or Neoliberal Economics?
Furthermore, will they teach austerity is mathematically self-defeating and in 95% of cases, will fail?
wjholden
You can also frame this as a strong-link problem. For high-aptitude students, one might argue that it's a waste to have them drill basic financial literacy when instead they need to be learning more abstract mathematics to follow pioneers like Newton, Turing, and Pearson in creating entire new disciplines.
Now, I want to constrain my thought to just the high-aptitude students with possible futures in science and engineering. I can understand educators trying to make math useful for those who won't need algebra to do calculus, calculus to do physics, and physics to do engineering.
freddie_mercury
Financial literacy has tons of fallacies but this article really only covers one of them.
The research I've read on the subject, experts nowadays are tending towards preferring "just in time" teaching. If you learned about mortgages and 401ks in 12th grade, that's not much help if you don't get a 401k until you're 22 or a mortgage until you are 25.
And that shows another issue: what does anyone even mean by "financial literacy". Does it include lessons about individual stock picking? About claiming Social Security early? About optimising taxes? About checking for better insurance every few years? About college savings plans for children?
How much ground do we need to cover?
pembrook
Any argument against teaching financial literacy can also be applied to pretty much any topic taught in schools.
You could also write the same clever-sounding contrarian think-piece about why teaching Home Economics doesn't make sense until you have your own home to run; teaching CPR doesn't make sense unless there's someone choking right in front of you; etc.
Using the logic underpinning this article, the only things taught in school should be how to play video games, how to find the best parties and how to get laid; since those are the only things actually relevant to students at that stage of their life.
Obviously studies will show that most students don't become financial wizards after taking financial literacy classes, because that's how it is with all education. How many kids who take English class become good writers?
Doesn't mean we shouldn't offer the knowledge for those willing to take it.
tr888
Teaching physics is pointless unless you have your own particle accelerator.
lucasfcosta
Most people’s money problems would be solved if we taught them not to chase status instead of focusing on the numbers.
Financial literacy itself is quite simple: spend less than you make.
Everything else is an optimization and it’s pretty easy to learn with a few days of research.
I know this is the classical HackerNews type comment, but I honestly can’t understand why it’s so hard when there’s so much information available and so few pre-requisites (almost none) to learn about it.
trod1234
I dislike articles like this because they tend to get the details wrong, while having things that sound plausible, but still poorly defining the problem.
The article does little more than promote and repeat the same arguments that led to each one of the things mentioned as negatives, with somehow this time will be different.
I hate to be the one to say this, but if the problem has repeated itself over decades, its not the subject matter but the type of people involved.
The subject matter changes, and you get the same result. The only thing that does not change are the people involved, and when you look at who is involved specifically it comes down to the bureacratic administrators, and the NEA special interests that receive the most weight. They are the experts after all.
After a certain amount of time, the only way these things are still a problem is because it was intended to be that way by someone involved. Education is hardly rocket science.
Ask yourself why Critical Thinking and Reasoning doesn't really happen until college? Philosophy used to be included in all basic education starting around 3rd-4th grade. It has since largely been withheld, but anyone receiving this education scores significantly higher than those that don't.
Food for thought, Trivium based curricula stood the test of time for hundreds of years, it was not until people started tinkering and removing things that we started having these problems.
kome
The push for financial literacy as a panacea for systemic economic instability is a neoliberal sleight of hand. It’s a moral cop-out, allowing institutions to pathologize poverty while absolving themselves of designing systems that prey on human behavior.
Consider retirement: we dismantled pensions, replaced them with 401(k)s, and now blame individuals for not magically becoming Warren Buffett. Or student loans: we tell 18-year-olds to “shop around” for degrees as if education is a commodity, not a societal investment. Healthcare? “Just be a savvy HSA optimizer!” Meanwhile, the system is a Skinner box of late-stage capitalism—overdraft fees, algorithmic rent hikes, predatory loans—all while whispering, “You should’ve read the fine print.”
Behavioral economics has shown we’re not rational actors. Yet the system demands perfect foresight: save exactly enough, borrow exactly enough, die just before your 401(k) runs out. When people fail (and they do, because life is stochastic), we scold them for not being “literate” enough, rather than asking why basic survival requires a PhD in personal finance.
This isn’t empowerment—it’s exploitation gaslit as morality. Countries with robust social safety nets don’t obsess over teaching kids to day-trade; they structure defaults that work for humans. Financial literacy has value, but weaponizing it to justify atomizing every risk onto individuals? That’s not education. That’s a rigged game wearing a meritocratic mask.
thenoblesunfish
Since you're the one who brought up bikeshedding, why are you focusing on this instead of e.g. paying and respecting educators enough to encourage smart people like yourself to solve this and a thousand other problems of how to educate better?
snailmailstare
The article goes on to make better arguments than the comments imply, but still treats the opposition as a strawman. Showing a student how compound interest works on one loan or account is microeconomics and it was never as ineffective as teaching kids smoking public health statistics which is more like teaching macroeconomics and expecting children to be afraid they will ruin the GDP.
vjk800
> What makes financial decisions hard isn’t the math.
To be fair, I've met quite a few people who also struggle with the math. To the Hacker News audience this seems unfathomable, but the very idea that you end up paying much more with the "pay only 9.99 €/month)!" deal is completely alien to many people. Or even if they understand it in principle, it never occurs to them to compare the actual numbers. Or even if they compare the actual numbers, it doesn't occur to them to add the numbers up to see how much extra they are spending on interests in total.
Many people are quite stupid when it comes to even the most basic math. Or not even math, but just thinking of or comparing numbers.
whatever1
Like everything else, without practice you cannot not really learn.
gabesullice
The article's argument is that experience is a better teacher than a person with a curriculum and a chalkboard, which I agree with, but the proposed solution: "so, let's just give them experience!" is a shallow proposition—I doubt anyone knows how to start 4 million small businesses per year, with meaningful revenue, using a workforce that hasn't (yet) graduated high school.
Experience is hard (if not impossible) to scale. And it could easily backfire: imagine the scenario where the experience is miserable and results in failure. What if the students' lesson learned is "why bother trying?"
The most effective way we have to scale experience is through simulation. And we know how to provide that pseudo-experience to young kids without a lot of investment: story telling.
Maybe we should scour the globe for compelling stories that teach lessons about delayed gratification, the value of saving, and self-confidence vs. vanity in terms of spending money, so that we could start telling them to students at an early age.
someothherguyy
This article contradicts itself on corrective measures.
As the article states, people still go into debt even when they have real world experiences with financial transactions.
Vulnerabilities will always be exploited if there is something to gain from it. Rules can be implemented to protect the vulnerable.
black_13
[dead]
bustling-noose
The article almost got it right ‘emotions, peer pressure, temptations’ and how people spend money on things they don’t need and then got it wrong by not actually saying what’s important.
Money management and financial literacy involves psychology along with math. So does sex education like the article compares it to. Having sex or spending money is not the problem. Nor is putting fear of the two in your head from a young age or the desire for it.
As Charlie munger said – psychology should be taught from a young age. Maybe the most important topic missing from education.
Spending money isn’t bad and having sex isn’t either. But saving for a future you’ve dreamt of and sex with a loved one is better. This involves less math and sex education and more psychology and mental well being.
If you are a 30 something politician looking for a change and understand psychology, you might want to visit schools and give children hope and mental well being tips. They might vote for you in 15 years.
fweimer
Isn't core financial literacy a bit more basic than that? Like how to pay your bills? I wasn't taught any of these practicalities in school, and it I suppose it could have been useful.
NanoYohaneTSU
The article uses AI art at the start.
jakubmazanec
> Education is particularly susceptible to flavor-of-the-month initiatives that promise revolutionary changes but deliver minimal results.
Then the article proposes another flavor-of-the-month solution that promise revolutionary changes – if only each student would start a business, then he would HAVE to learn math and everything will be solved.
Ignoring the issues of costs and scalability, why not try something simpler first? IMO teaching how to handle money is something that should parents start even before their kids go to school. Give them a little pocket money so they have some agency, and they will soon learn what they can buy now and how to save for a future.
TheOtherHobbes
The best way to teach financial literacy is to pay everyone more, and make economic culture participatory and cumulative – not the current bizarre and toxic zero-sum system which elevates mediocre and/or damaged people who compensate for low self-esteem with inherited status and predatory power games.
Teens should start a business? With what? Most families in the US are dirt poor, and even setting up a basic YouTube or Etsy business is going to need a couple of hundred dollars of startup investment for materials, creative software, something…
This will shock many, but tens of millions of families can't afford to take a risk like that.
And one of the things that defines millennial culture is that many millennials already have a main job, a side gig, and some kind of online hustle, and still aren't earning enough to break even.
OtherShrezzing
>Teaching kids financial literacy without real money is like teaching swimming with PowerPoint slides. And we all know how that ends.
The opening statement of this article is fundamentally flawed. I didn't learn to swim as a child, and unironically, watching presentations of "how to swim for absolute beginners" on YouTube got me over the initial challenge of getting into a pool. I can now comfortably swim in the ocean.
This isn't just anecdotal. Go to YouTube, and search "learn to swim", and you'll see videos with millions of views, full of comments describing similar learning journeys.
You can teach people swimming in these formats.
yodsanklai
Financial education in the US is like teaching how to eat healthy to people surrounded by fast food and advertising since they're born. There are other forces at play.
ggm
Compound interest is magic. But, people obsess with rate of return which is unsustainable when the long term market rate tends to 6-7%. I appreciate tech stocks do better, I'm just observing a contradiction inherent in things.
Balancing interest earned against interest paid can be confronting for some people. Debt is not always bad. It depends.
Margaret Thatcher is responsible for a fucktonne of misunderstanding about the national economy because of trite truisms about domestic economy. She hated Keynesians and talked a lot to LSE economists who we'd now critique quite harshly. She'd have hated MMT.
Thatcher also laid the seeds of the ruin that is British housing by forcing councils to sell off public housing and refusing to allow them to reinvest the profits in more housing, and created the surge in demand for petty bourgeois share holding in the privatised former national utilities, and rentier behaviour. She utterly fucked over the state. We're living in the ashes of Thatcher destroying all the post war social uplift, and taking her asset stripping model worldwide.
I ran away to Australia in the peak of this mania to arrive into a state launching the same madness. Housing is totally awful here for young people. I'm fine, in the great Australian tradition of people my age who own their home and have huge retirement savings, it's "fuck you, I've got mine" voting here.
bsenftner
I think the problem with "financial literacy" is that it is taught too polite, it never mentions the true fact that our society is filled with professional organizations that use deception to get your money, and the investment world, the contracting world, and the employment world are filled to the gills with unethical players on both sides that are professional liars. They pose as one and deliver another, their entire careers, and get away with it because they understand how to hide their tracks with financial complexity. The majority of humanity falls prey to these predators, and they are in fact a significant proportion of every nation's economy. Every single company that is "hard to cancel" is one of these predators, entirely successfully, and that is thanks to our lack of financial literacy.
mihaic
My most terrible conclusion is that if everyone had perfect financial literacy, the world would be even worse for the younger generation, who's never get any change without some systemic reset to catch up.
So, personally I give everyone I know the standard advice (basket of S&P 500, never pick your own stocks, get some T bills for diversity, etc), I think in the long run this is creating a terrible economy for the young, and the old will eventually pay for it.
Havoc
The fallacy here is that it’s not an either or proposition.
You need practical experience but supported with theory along the way. Just like with basically anything else
pradn
> Teaching financial concepts in a classroom is like teaching swimming with PowerPoint slides. You can explain the theory of the butterfly stroke all day, but at some point you need to get in the water. And with money, the water is always cold, deep, and full of currents that weren’t in the textbook.
It is totally true that these extra-mathematical factors have a big part to play how we spend and how we save. If you’re in a certain culture that expects a certain level of spending, it’s hard to take yourself out of that.
I still don’t see even adults with a good idea of basic financial things. How much does it cost to buy a house? How does a monthly payment change with interest rates? How do you become eligible for Social Security?
You really need to keep these several-dimensional functions in your head. At the least, a good grasp of algebra is required.
hollywood_court
Many people I know need some lessons in basic financial literacy.
I’ve been living in an apartment for the past 18 while saving to build a house and I’ll be here until the home is completed in October.
It has been very alarming watching how my neighbors behave and spend money.
I myself come from an impoverished background. Single mom, multiple violent stepfathers, no money, left home at 16 to escape the abuse, etc.
I slept hard for many months and I’ve been without a home on three different occasions.
However, I firmly believe that poverty is a choice for a lot of people and it’s never been more evident until I lived in an apartment complex.
My across the hall neighbors order food delivery 10+ times per week. Last weekend, from Friday afternoon until Sunday morning, they had food delivered 5 times.
I’ve only paid for food delivery once and that was when my son and I were stuck at home with Covid.
Many of my neighbors drive new $50k+ automobiles.
Then I hear the same across the hall neighbors arguing about money. She’s a teacher (I see her ID card hanging from the rearview of her CR-V. The husband works in a kitchen.
I’m guessing their combine gross income is maybe $100k and that’s being generous.
Yet they spend money on food delivery like they were making twice that amount.
My base salary is only $130k which is decent for Alabama, but I wouldn’t dare waste money on something like that.
I drive a 25 year old Land Cruiser that I maintain myself. Growing up poor, we didn’t pay anyone to do anything. I had to learn to repair things myself. I kept that habit through adulthood.
Sorry for the rant. It’s just wild seeing how some people live while also having to hear them complain about having no money.
throwaway173738
“New math” was actually a college prep thing because it sought to teach kids how mathematics as a field worked. It’s telling that the author’s only criticism is just that it bewildered some parents. I would expect that because they were never exposed to those concepts in the first place. Kids are bewildered by anything new. They were bewildered by “old math” too. You have to work with them to get them past that. So saying it bewildered kids is like saying water is wet.