Point in case are the numerous agencies claiming to regulate financial markets who all failed miserably in predicting and preventing financial crises or to stop criminals like Bernie Madoff and their Ponzi schemes.
Equally disappointing are websites like www.mymoney.gov which is nothing but a collection of links to yet more agencies. All this sounds confusing to me and we really can’t expect the younger generation to find any leading example in this fog of financial confusion.
When teaching the younger generation about financial literacy, we cannot look to the government for clarity and we definitely cannot expect politicians to lead by example – Democrats and Republicans have both failed miserably. Just look at the recent budget proposal by the current administration. The projected budget deficit for 2011 is $1.645 trillion, that’s $1,645,000,000,000 just for this year. Not sure if you’re ready for this, but take a look at what’s ahead in this neat chart showing the trend of projected US budget deficits (see chart).
The sad reality is that individuals, parents and a few well-meaning educators have to play the lead role and give the right examples when it comes to personal finance. The best way is to use baby steps and drive home the point that you simply cannot spend more than you have.
I like using easy rules of thumb like the 80/20 rule which works really well in business. Convert that 80/20 ratio to a simple guideline for your personal budget. In kids’ terms: If you have $10 in your pocket, try not to spend more than $8. Keep $2 in your pocket or put those $2 in your piggy bank. Imagine what that simple 80/20 rule could do to everyone’s personal finances and how easy it would be for the younger generation to learn from such a simple example…