“Lost in Translation, What You Don’t Know Can Cost You”
Just Write a Check: I remember shopping for shoes with my mother many years ago. Like most kids, I wanted the most expensive shoes in the store. I knew my mom would say the shoes were too expensive, so I devised a plan. See in the past, when my mom told me things were too expensive, I never had a plan, but this time things would be different. I was about 10 years old, the age of sideways understanding and no filter for ridiculous comments. So when I pointed out the shoes I wanted, my mom replied, “Boy those shoes are $100.” At that time, $100 to her might as well had been $1 million. As if her exaggerated exclamation regarding the cost of the shoes was not enough and just to make sure there was not a misunderstanding, she told me I was not getting those shoes or anything similar (in cost that is). Normally, this would have been the end of the story, but this year I was 10 and I was prepared. I responded, “Just write a check for them.” I had no idea that a check was actually tied to the money that a person had in their checking account.
On Saturday, June 2, 2012 The Knowledge Bank, an organization I founded that specializes in improving the financial literacy of youth, hosted its first workshop in Nashville, TN. Our focus was on learning the core principles of sound money management; Working, Budgeting, Saving and Giving for those taking notes. During the session, the participants learned about the essential principles that lead to creating a strong value system for money management. However, the most indispensable lesson came from the insight provided by a teenage girl.
Each week I give my students the opportunity to discuss any money-related experiences they had during the previous week. I believe that young people are a lot more knowledgeable about financial matters than what adults give them credit for, so we perform this exercise to refine the financial comprehension of our young people. Many of the experiences shared by the group were related to the personal disappointment of immediately spending money received as gifts. One student received $130 as a gift that he immediately spent on a pair of Nike Airmax. Another student expressed frustration about the large sums of money she receives each Christmas that is spent in less than a month.
This was not the first time I heard stories of disappointment and frustration related to money management. While working as an investment advisor, I heard of a few stories where people either won the lottery or inherited millions of dollars, only to be broke again in less than a year. So I asked this question to the group, “Why do people value the items they buy more than seeing their money grow in a savings account?” Reasonable people prefer to be financially secure, as opposed to being poor. And since it’s the accumulation of money that makes a person financially secure and not the accumulation of “stuff,” what is the justification behind spending every dollar we earn? I thought this would be a question that no one could answer, but after a brief moment of silence, I received a response. The teenage girl said, “It’s because we want to buy the things we would not regularly be able to have.” This was powerful insight, but it sadly explained one of the saddest statistics related to expenditures in this country.
The demographic of people who make the least money in the United States are the biggest consumers. Financial experts attribute this observation to generational tendencies stemming from psychological issues such as low self- esteem, behavioral conditioning and insecurities as a result of poor education. Ultimately, it makes no sense that the people with the least amount of money spend more than the people with the most money.
Robert Frost, the great American poet, said “poetry is what gets lost in translation.” Similarly, I believe poverty is what gets lost in translation. Not only can a lack of financial education cost hundreds of thousands of dollars over a lifetime, but the bad habits that are developed can affect future generations. Just as you commit to going to college, or becoming a better dancer, stylist, friend, musician, etc, expose yourself to resources that enhance your understanding of money, because what you don’t know can cost you.