According to the OECD (Organisation for Economic Co-Operation and Development), “recent developments have made financial education and awareness increasingly important for financial well-being”. On the topic of when one should start acquiring a financial education, one of the organization’s top recommendations was that “financial education should start at school, for people to be educated as early as possible.”
However, this is rarely the case…
In an interview published on the business news website CNBC, famous investor Warren Buffet declared that the biggest mistake parents make when it comes to teaching their kids about money is to “wait until their kids are in their teens before starting to talk about managing money when they could be starting when their kids are in preschool.”
For adults, one of the biggest challenges regarding their financial education is to face up to the fact that they’re not as financially literate as they think they are.
There is almost always a gap between what you think you know and what you actually know
Research conducted for the OECD showed that the global level of financial literacy is low, even amongst developed countries. The most worrying factor was that when people were asked to assess their level of financial knowledge, most marked themselves much higher than the level that they scored in the study.
This research is concerning for 2 reasons – firstly and most obviously, financial literacy across the globe is low. Secondly, as most people think they already know enough about finance, they don’t think they need to pursue further knowledge in the topic, thus keeping them locked into their poor level of financial understanding.
According to the Council for Economic Education, more than 1 in 6 students in the U.S. don’t reach the baseline level of proficiency in financial literacy, and nearly 1 in 4 millennials in the country spend more than they earn.
Financial education is thus important for financial wellbeing
Poor financial decisions can have a large and long-lasting impact – on not only your life, but the lives of people who depend on you, such as your family.
The first step to achieving financial wellbeing and financial literacy is to understand personal finances and basic economics – subjects that are admittedly dry for most people.
The first step is to understand your own money. What is your financial situation?
For instance, you should know:
- How to set a budget
- How to get your budget back on track if you do not follow it
- Where your money comes from
- What your expenses are
- How much you can save
- Where you can cut back on expenses
- If you can pay back your loans and debts
Financial education is also important for pursuing a career in Finance
Beyond improving your personal life, financial education is also necessary if you want to work within the financial services industry, or trade for a living.
Let’s look at an example.
Most traders make the same mistakes over and over again, leading them to lose money over the long run. Why is that?
Many will say that it’s because of trading psychology and the incapacity of the trader to control their emotions and learn from mistakes.
But, above all, these traders are unprepared and lack discipline, as they do not realize to what extend unpreparedness and lax discipline costs them. A well-educated trader, on the other hand, knows full-well that preparedness and discipline are the cornerstones of good trading.
Sometimes people think that just because they read a handful of books and watch a few financial documentaries, they are ready to trade. Nothing could be further from the truth.
Imagine you need surgery. Would you think that you’re ready to do it yourself because you read a book about medicine? No! You would ask an experienced surgeon to do it because he has spent years learning how to do so.
It’s exactly the same with investing! While the stacks aren’t as high as surgery, you should prepare to spend some time to delve into the subject. Take some trading courses, read books, get some experience with a demo account before starting to invest real money in the markets.
How can a summer school help you increase your financial knowledge?
Whether it’s to support your career goals, or to be more aware of what you need to know about your personal finances to make more informed decisions, a summer school is a great way to set you on the right path.
A good summer school can provide you with a variety of modules on a specific topic to enhance your knowledge of the area, as well as provide great exposure to the field of study you want to learn more about. In any case, it’s a unique learning experience!
Thomas Whale from Oxford Summer School explains: “Attending a summer school is an excellent place for entrepreneurial-minded young people who can see an opportunity to improve a skill or learn something new that will benefit them in a real-world scenario, whether for work or play.”
Whether you choose to go to summer school, or you prefer to take the self-education route via books/online courses and other means, you should make learning about finance a priority – the earlier you start, the better.