Our Essay Question
- How has the pandemic informed your outlook on your financial future, and what money lessons have you learned from such a high-impact event?
Essay Response from B.G.
I’ve learned a lot about money in my past 10 years. One of the most important lessons is that what you hear when you are younger doesn’t apply to you. In fact, when it comes to saving money, the best lessons you learn are the ones you learn for yourself. But it’s difficult for many people to learn those lessons when there is little access to money. Of Course, the mistakes can be much more costly for some than for others.
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For a small amount of people, access to money is not the issue. Instead, it’s understanding what makes access to money more difficult for others. For these people, usually born into moderate or better wealth, they learn a different set of lessons than many others. It can be much easier for them to make mistakes in managing their money. Usually they will have access to money and educated professionals who can influence them.
Relatively wealthy young adults may be weak where they may not fully appreciate the weight of money. So, when trying to share knowledge with their peers, they focus on very different lessons. They often don’t even realize how much the difference is in every aspect of their life.
In the case of the majority of young people, the major hurdle is having any access at all to money to make those valuable mistakes with in the first place. Investments and savings are an abstract concept for someone who is barely able pay for gas and repairs for the vehicle that they need to get to their part-time job to while also keeping up with their studies. It’s a difficult task to learn the most effective way to manage your money while also managing it, and yet there’s very not really any other way to learn.
The information and lessons you learn from others often either don’t apply to you, or focus on the wrong things. It’s an easy mis-step for one to make when you can’t afford a coffee-maker, but you can afford a $2 coffee almost every day, and to not realize that the coffee you buy is part of the reason you can’t afford your own coffee-maker that would save you money in the long run. The instant gratification aspect is also a strong enough incentive that it’s easy to overlook what should be obvious.
On the flip side, there are many ways to accidentally be too frugal, and not spend time and money on self-care. Often times this will lead to burn out, or less healthy ways to self-medicate (like drinking, or escapist activities such as video games). This also comes to the detriment of your ability to learn money manage, by simply not spending at all without a real plan.
Another thing that stifles word-of-mouth knowledge on personal finance is the way the monetary environment is constantly changing. Given the past year of pandemic restrictions and turbulent stock markets, this could not be more evident. But even before covid19, it has been happening for decades as many products and services move out of the physical realm and into digital avenues of business. For some business types, almost exclusively so. The lessons learned by our parents and older friends before the Internet no longer apply, and the money management strategies that once worked no longer make sense. Confirmation bias also plays a role, when people are using strategies that were once considered too risky as a matter of course. This leads to confusing information that can either hinder young people or prevent them from learning on their own if and when they have the opportunity to.
So, it’s clear that there is not, and maybe never will be a one-size-fits-all solution to the problem. It’s easy to present the incentives of good financial planning. But without the details of financial planning, those incentives may inspire efforts that fall short. Secondary schools can do more to help set up young people for success by focusing on the fundamentals. For example, it can help them prepare for the little things like monthly budgets, and long-term savings. There is a lot one can learn if there is opportunity. However, those opportunities are rare and difficult to recognize, regardless of one’s access to money. Secondary schools to do is to teach the basics of planning without treating anything like a gospel.