The 3 Es of Personal Finance & The “Smart” Money

I’ve read a handful of academic studies that show personal finance education doesn’t work.

They show financial literacy doesn’t actually help people making better financial choices and in some cases, it can make them worse off because a little knowledge is often a bad thing in terms of making people overconfident.

I agree with the conclusions of these studies.

My contention is personal finance is just not taught in the right way or by the right people.

It’s not just about teaching people what compound interest is or answering a 5 question test about your financial acumen.

Many people think personal finance is too boring. Or they don’t have the right role models when it comes to passing along solid financial habits. Or the whole thing looks too overwhelming to even try so people simply ignore their financial issues.

This can be a huge problem because personal finance is one of the most important life skills there is. Your spending, saving, budgeting, and investing habits touch so many different parts of your life that ignoring them is sure to bring about pain and stress in other areas of your life.

We have to do better about educating people on this stuff and it should start from the finance industry itself.

That’s why I was so interested to learn my friend Tyrone Ross is starting a new program called Learn to Money, which is an educational series about personal finance that looks to help those most in need get their financial lives in order.

So I asked Tyrone to come on The Compound to talk about his ideas behind this program and personal finance education in general.

We discuss:

  • Breaking some of the narratives behind personal finance
  • Moving people from survival to prosperity
  • The 3 Es of personal finance: exposure, education and empowerment
  • Why doesn’t personal finance education work?
  • Why the educator often matters more than the subject matter
  • What is money?
  • The biggest blind spots in the finance industry
  • How to learn about money
  • Raising producers as opposed to consumers
  • How to change financial behaviors
  • The power of small wins


 
Tyrone set up a Go Fund Me for Learn to Money to help make this dream a reality. Check it out. It’s a worthy cause and I can’t wait to see what he does with this platform.

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One of the phrases people in the finance industry use that annoys me is “the smart money.” It’s lost all meaning.

I know plenty of intelligent people who are awful investors. The same applies to institutional investors who have gobs of money.

Alternatively, there are people who are fantastic investors who don’t put a lot of thought into their strategy or don’t have a ton of money.

Michael and I discussed why this phrase needs to be retired along with the rise in trading of fractional shares, the coming boom in alternative assets and more:
 


 
Now here’s what I’ve been reading lately:

 
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