Some of the burden for repetition and reinforcement must fall on the private sector, particularly the financial industry itself. More firms need to make a commitment to integrate financial literacy in their client-services operations. The key is keep the basic concepts of compounding, cost drag, valuations, diversification and cyclicality in front of customers, ensuring that they understand and are familiar with the terms and concepts.
No. 3. How to Think: The idea of giving students a list of facts to memorize and then testing them has been shown to be of limited use in real-life problem solving. This approach to teaching is the educational equivalent of fast food.
A complement to the real-life experiences (above) is a more Socratic method of instruction. Rather than mere lecturing, instructors should lead students on a guided hunt for information. Let the students figure out the ideas for themselves, with the instructor as the pilot. This sort of approach leads to harder-won knowledge, which tends to be more durable.
Rather than teaching a body of information to remember, education also needs to give students the skills to think critically, to puzzle through problems, to be skeptical, to ask questions. Unfortunately, this broader approach to problem solving and independent thinking is rarely on the curriculum, no matter the subject being taught.
Financial literacy is critically important, and will become more so as social programs such as Social Security and Medicaid become stressed. If we continually fail to provide Americans with the tools to become and maintain financial literacy, we are asking for more of the kind of problematic behavior that contributed so much to the last crises.
This column was provided by Bloomberg News.