How can we teach financial capability


This is a companion piece to “What’s the problem with financial capability?” There I suggested some issues with the practice of teaching financial capability.  Here I cover questions asked about how to implement the ideas, and objections to changing what is done now.


  • Values are important for motivation and happiness, but we shouldn’t impose values on people.


Don’t confuse “personal values” with “what a sub-section of society value”.  It’s not about imposing should’s (“you should work hard”, “should get a steady job”).  It’s about finding out what actually motivates the person.


There’s evidence (read anything by Martin Seligman) that working at something you value personally is more satisfying (read “Flow” by Csikszentmihalyi), it motivates you to achieve more and leads to happiness.


Try this, you’ve made a change now (gone to university, started your business, got your new job, quit your old job).  Imagine you’re ten or fifteen years older and are looking back, having had fantastic success, achieved what you wanted. You’re interviewed by your favourite interviewer on TV.  What do you tell them you’re proudest of, what achievements do you think made it worthwhile – what is it you’ve achieved? (there are several more exercises on this in Taming the Pound).  That’s your personal value.


Somebody may find they “value” being wealthy, that’s fine if it’s true. They will work hard and learn whatever they need to get there, so there’s no problem with motivation.  What will happen in fact is that, when the money motive is taken away, they’ll start to think about what really matters to them.  They might want to start a charity to help with a problem a relative or friend has suffered, establish a business, become an ambassador of goodwill – the point is that it’s something that’s an internal value to them.  If they (with your help) tie what they’re learning to that objective, they’ll be working for something that makes them happy, that really motivates them to learn and that will give them immense satisfaction in the journey, rather than only in the arrival.


  • But people do want money, we’ve tried the “you don’t really want money itself, it’s only a tool” line and it doesn’t work.


If you say it, it’s not true; if they say it, it is. So get them to say it.


Try this.  Imagine you win the lottery and you’ve got £50 million. What would you do?  No self-editing— no matter how crazy it sounds. Write down the first 15 things that come to mind. Be as specific as you can.


After 20 minutes, look at the list and see where the desire for it has come from: “someone else has one,” “this is what I should want,” “I always said ‘when I grow up I want. . . . ’ ” Now separate the list into three “buckets”: things you feel you should want if you have £50M, things someone else (family, friends, and so on) thinks you would want if you have £50M, and things (or activities) that you really want. For example, do you feel that if you’re a millionaire you have to have a big house like the one you’ve seen in Hello? Do you want a Ferrari because the guy up the road bought a Mercedes?


Now, count up the things that come from the media and adverts.  Look at desires driven by competition with friends and family (to prove you’re the best) or enemies (to shut them up), the stuff that “experts” have told you that you ought to want, the ones you’ve been sold, the ones that your parents want. Finally, add up the ones that could fulfil your dreams, ones that you would truly value and be happy about long term. With clients, the last list is always the shortest.


Money is a tool and most people do realise it when they stop focussing on the money itself and move to what the money is a tool for them to achieve (there’s more detail on this and other exercises in Finance is Personal)  If they still just want the money, great, they know exactly how much they need and exactly what they’ll buy with it when they get it – so they’ve got a definite goal.


  • Teaching better decision making is too complex, we have to focus on particular financial issues.


Since I’ve taught decision making in universities, with public and private sector organisations and professional organisations, I know it is possible.


And it’s needed, even judges and experts who have to make impartial decisions don’t actually know what influences them, like blood sugar and their own biases 


It isn’t simple to know how to counter that.  But that’s why I’m a qualified psychologist who teaches this material.  Notice that the Research Briefing points out both that “As most people are unaware of their cognitive biases, they are hard to control, but their effect may be mitigated by a variety of targeted strategies” and “training judges and educating jurors may reduce the influence of cognitive biases in court.”


That indicates that you can target those problems with strategies (i.e. there are methods to help people make better decisions) and that training can help – so you can train them.


I tend to use a lot of the literature on decision making in my work, and I’d recommend reading Risk Savvy (Gigerenzer), The Power of Intuition (Klein), The Power of Habit (Duhigg) and Influence (Cialdini) if you are interested.


  • We already teach skills like budgeting, that’s what people need, so general decision making can be learned from that.


There are hundreds of ways to budget suited to different situations. Who says the one you teach (or the one they remember, if they remember) is going to work for them in their situation in ten years’ time? If you do it that way, the people you teach:


  • don’t know which one to use in a given situation (like learning statistical formulae and not knowing which one to use for real work, because all the practice in learning them was a series of questions on a particular formula).


  • can’t remember it, because at the time it didn’t seem relevant, there’s not enough motive to remember


  • it’s out of date, since 10 years after you teach kids about finding the best mobile phone the technology is different, nobody wants a phone (they have implants or wearables), there have been 3 changes of Government and 13 budgets and all the laws, taxes, protection and everything they can remember (if anything) is irrelevant.


  • could apply principles to specifics for themselves if they’re motivated and you’ve taught principles, but can’t derive general principles from specific examples without some help at the time.


  • We already work on real world decision making, like doing things around mobile phones so this is nothing new.


As above, picking examples like phones sounds real world, but it goes out of date quickly and it’s actually narrow, it’s tactical. Problem solving in the real world is strategic.


For example, how does being able to work out a good interest rate help with making decisions about what course to follow at university, or what house you actually want to live in?  It’s too specific a skill.


If you teach prioritisation skills, people can work out what they really want (from a phone, a degree or a house) and separate wants from needs for their own unique personality.


If you teach judgment, they can understand how they, personally, tend to make decision errors – are they too emotional, jump to conclusions and ignore evidence or do they try to be too scientific, make up complicated formulae that are actually meaningless but give them a false sense of accuracy (what happened to LTCM, look it up; also true of the basic investment theory used in markets, MPT). Or do they make different sorts of error in different situations?


If you teach about values, they can work out what they really want, and what their real goals are.


And if you teach about the brain and thinking, they can work out the best way to make different types of decision, given the situation they’re in – not simply following a rule they’ve been given irrespective of reality.


  • But you can’t teach this stuff, it comes with experience.


One reason 70% of people are in debt is that they haven’t learned from experience how to make decisions well.  And reflection, one of the methods I use, is the standard method of professional development using experience in many areas, and increasingly an assessment method at undergraduate level and beyond.


It’s also well suited to learning for adolescence onwards, I’m currently using it in a project helping young offenders not repeat offending and there’s interest in extending it to ex-prisoners so that they have the skills to integrate into society effectively and be productive community members.


Shouldn’t the next generation of kids get the same opportunity?



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