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Updated on Monday, March 23, 2015
I heard someone relate a story about a teacher and a lesson she taught her students. The teacher randomly assigned each student a seat in the classroom. Once the students took their seats, the teacher placed the room’s trash can at the front of the room, under the blackboard.
The teacher asked each student to take a piece of paper, crumple it into a ball, and throw it into the trash can. The students who made the shot were the winners. Those who missed, lost.
The kids in the back immediately pointed out that this wasn’t a fair competition; obviously, the kids in the front rows of the class would have better odds of “winning.” They had fewer obstacles in their way, they had a better line of sight to the target, and they were much closer.
The teacher shrugged and told them it was “fair” because the seats had been assigned randomly and everyone was allowed to throw their paper ball at the trash can. Everyone was allowed a shot at winning.
Reality Check: Privilege Is Real
The classroom exercise illustrated something very real: some people are randomly assigned a better chance at succeeding than others.
The students in the front of the room were allotted the best chance because they were randomly placed closest to the trash can. The students in the middle of the room had a decent shot, but they had to work a little harder to make it. The students in the back rows faced the biggest challenge.
Were the students in the front of the room the bad guys? Not at all – but they had to acknowledge the fact that they were better set up for success than the students farther away from the target.
The point of this little story is to show us how we don’t all have an equal shot at everything, all the time.
When it comes to money and financial education, we don’t all have an equal shot at learning what we need to in order to succeed on our own in the real world. People with less money often receive fewer opportunities to learn financial principles, practice putting their knowledge into action, and build real wealth from a solid, educated foundation.
And because we tend to think of money as a taboo topic, we don’t have good conversations about finance. And because we don’t include financial literacy in our school curriculum, children from lower-income families don’t get to learn about money in the same way as their more affluent peers who may get financial lessons at home.
The list of what poor kids don’t get to learn about money is long, too long for a simple blog post. Let’s focus on these three big missing money lessons of poor kids to get you thinking about this issue.
Importance (and Know-How) of Investing Money
Poor kids – or even lower-middle class kids – don’t usually get an opportunity to learn about investing. The best a poorer family can hope for is to put away a few dollars in a savings account. There simply is not enough money in a low-income household to risk losing in a bad investment or volatile stock market.
I can vouch with a personal experience on this money lesson missing from the lives of poor kids. My parents both came from extremely low-income families, and worked hard from an early age to create a better, more affluent life together.
Over the years, they did earn more money and advanced up the socioeconomic ladder. By the time I started school, they were able to purchase a nice home in an affluent suburb with an outstanding school system. Getting a quality education set me up for success later in life; I was the first person in my family to graduate from college.
I was lucky to pick up important money lessons about saving, living within your means, and working hard to earn more money. But I never learned how to invest from my parents with poor backgrounds, because they had no actionable knowledge to give me.
In poor families, there is no knowledge of investing to pass along and share with kids in the home.
Maintaining Good Money Mindsets
Personal finance is personal, and there’s a lot of behavior and psychology involved in being “good with money.” Maintaining a good, positive mindset about money does impact financial success.
When you think positively about money, you’re more inclined to believe:
- You can work to earn more and increase your wealth.
- There is enough money to go around; you believe in abundance.
- You have options in hard times; you can find solutions to financial problems.
- Money is a tool you can use to create a better life.
But when you have no positive experiences with money, you may feel that:
- Money is evil and people who build wealth are bad, greedy, or selfish.
- Money is difficult to possess and hard to manage.
- You don’t deserve money.
- You’ll never earn more money and there’s nothing you can do about it.
See the differences here? People who develop a good relationship with finance can feel empowered to seek out answers to their questions and solutions to problems. Those who struggle to make enough money, or have experienced what it’s like to not have enough to adequately meet basic needs, may feel extremely negative towards money.
Poor kids whose families struggle to make ends meet, live paycheck-to-paycheck, or go without proper meals, housing, and clothing have no chance to form a positive relationship with money. They don’t have the privilege to learn about how mindsets and beliefs around finances hold power.
How to Leverage Assets to Build Wealth
Poor kids may think of all debt as something toxic and negative, but inevitable, if their parents regularly max out credit cards because they have no cash to pay for groceries and receive collections calls each week. They may think that debt is something you’re trapped in with no options for getting out.
Poor kids don’t have the opportunity to learn about how debt can be used to build wealth. This is usually what we think of as “good” debt – but no low-income family will have the luxury to distinguish this from the other bills they’re overloaded with.
Good debt can allow you to borrow money to access an asset you otherwise wouldn’t be able to afford. A mortgage, for example, helps you purchase real estate that you can live in for an affordable monthly cost. You can own this asset while investing cash into other areas, like the stock market. And you have the ability to sell the asset and walk away with a larger cash sum than what you put into it.
Or you could use good debt to borrow money to start a business. Once the loan is repaid, you have an income-producing asset that you own.
Kids who don’t know how to manage debt, evaluate potential assets, or develop their own income streams can’t build wealth in this way.
What We Can Do About It
Things don’t need to be this way any longer. There’s a wealth of free and accessible information on the internet, and that’s a great start. But it helps no one if poorer individuals don’t know it’s there to utilize.
We also need to support financial education and literacy in our schools. We need to foster discussions, provide real-world scenarios where kids can practice what they’ve learned and evaluate the results, and encourage people to ask questions.
This means changing how we think and talk about money on a massive scale, because most of us are taught that it’s “rude” to discuss money openly. But change can start with you, right now.
If you know a thing or two about finance, don’t brush off someone else’s financial question next time they bring up the subject – especially if someone asking you is a child or student. Keep yourself open to the conversation!
Share your favorite resources. Show others where to find personal finance blogs you read, financial podcasts that you love listening to, or books that taught you something important.
Stop thinking of money as taboo and encourage discussion, questions, and education on finances.