Learning About Money Changed My Life — But Not In The Way You’d Think

Up until a few years ago, I knew less about money than the average person. At least, that's how it felt. The extent of my financial philosophy was a) try not to spend what you don’t have and b) try to make your student debt vanish. If someone was talking about the state of the economy, I only responded with neutral, noncommittal noises, rather than voice any specific thoughts. The exchange of money in society was this impossibly intricate machine that a regular person like me could never begin to comprehend. The GDP? Sure hope it's doing great! Trickle-down economics? Sounds suspect, but if all these economic experts and politicians are saying that tax cuts for the wealthy means we all win, who am I to disagree? Would they really just lie to everyone? (Actually, don’t answer that.)

No one wants to admit that they don't know how money works. It's way easier to confess that you know nothing about cooking or cars. But, if you don't know how money works, as an adult? Well, it’s no wonder you're so behind on getting your shit together; it’s no wonder you're not rich. From admitting how little you understand about personal finance and the economy, it's a quick slide to being given the “personal responsibility” lecture, and being told you put yourself in less-than-ideal financial straits. It’s nobody’s fault but your own. 

Except, that’s just not true. A big reason why so many people don’t know about how money works is that many of us never got any formal — or informal — education on money. And not learning about money can be expensive. Plenty of smart people look at their various student loans and think intuitively that it's more beneficial to pay off the $3,000 loan in one lump sum, and then start tackling larger ones, instead of prioritizing the highest-interest loan regardless of balance. Maybe if we all had even just one compulsory high school class that introduced basic money concepts like taxes or how interest is applied to the principal, there would be less confusion around tackling debt. I learned how to find the derivative of a function at 16, but didn't learn what marginal tax rates were until my 20s — and that really doesn't seem right. But even beyond basic high school courses, the issue is that many of us also form a single perspective of money, or only one way of talking about it, thanks to our family. And if that perspective is to not talk about money, as is often the case, that means we have that much less practice in, well, talking about money — especially in a healthy manner. 

It also wasn't until I started writing about money that I realized how many financial questions we swallow because of shame, whether it's a real person shaming you or a little voice in your head. One of the most frequent comments we receive from readers of our Work & Money coverage begins with the caveat, "This is probably a stupid question, but…"

And what shame does, in part, is silence people. And silence obstructs us from realizing that the way things work now isn't equitable or sustainable or even logical, and so we think maybe we deserve to feel like we're treading water all the time. The narrative of personal failure can replenish itself endlessly, all the better to hide the ways that people are being failed.

And we are being failed. So much of what we think of as normal, or even as fair, is shaped by what the more powerful side of a financial relationship can get away with. We've long accepted the mind-blowing price of college tuition, for example, as the investment we must make for a more prosperous future. On top of it becoming an everyday occurrence in the U.S. to take out student loans in the tens of thousands of dollars, if not hundreds of thousands, it's also stunningly normal to be charged over 6% interest on federal loans, never mind the even higher rates for private loans. Meanwhile, in 2018, the New York Times reported that the interest rate for student loans in Sweden was 0.13%.

If you ask why student loan interest in the U.S. is so comparatively high, the common explanation is that it's unsecured debt — your diploma can't be taken as collateral in case you fail to pay — so the risk for lenders is greater and the interest rate is higher. But this sort of explanation doesn't really address what's being asked. People aren't asking to see the formula for interest rates; they're really asking how it can be so commonplace to make hefty profits off people who are trying to get an education — not just because they think it will help them lead a successful life, but because they’ve been told it’s the only path to a successful life.

Charging interest, and even charging extremely high interest, is considered an everyday facet of our world. If you live in a state that doesn't cap payday loan interest rates, for example, you could be paying 664% APR for the sin of not being able to cover your urgent life expenses. It really doesn't have to be this way. Perhaps surprisingly, the payday loan industry has struggled with reduced demand in the past year due to government assistance like stimulus checks and unemployment insurance — apparently, people are much less likely to rely on predatory loans when public benefits are available.

But it’s not only student loans or predatory interest rates that make young people, who are just beginning to be totally financially independent, feel overwhelmed. Take the fact that credit scores are also introduced early in adulthood as another potential plane of shame. We might be taught what is or isn't a good score — and how even breathing too hard can make it drop — but it's far less common to be taught to recognize how discriminatory and inane the system is.  For example, most people wouldn’t intuitively know not to close a credit account if they don’t think they’ll use it again. And yet,  it's commonly advised not to do that, because, in the logic of credit scores, having open credit lines but not using them shows that you're judicious about your money. You're displaying abstinence like a good little consumer — even if, at the same time, you should also make sure you're spending like a good little consumer. 

Learning about money made me realize that it isn't all that hard to understand. The basics of retirement funds, as one example of something people seem to feel a lot of trepidation about, are actually easy to grasp. Basically: Contribute regularly to it (but not in lieu of having a rainy day fund) and don’t touch it. Simple — or, you know, simple if you even have the ability to contribute to one of these funds in the first place and are making a good income at a young age. 

What's harder to grasp is the fact that a lot of personal finance advice only applies if you already have money, and if financial security is a real possibility. What never gets explained is that financial insecurity is not the same thing as being "bad" with money — but, that is one of the key money lessons any of us can learn. And it’s one that you wouldn't know intuitively, because, just by looking at society, all you’ll notice is the many ways we punish people for their lack of resources, whether it's through high interest rates or banks that charge you for falling below an arbitrary account balance.

The fact is, there aren't a lot of actionable financial tips when you just don't have enough money. If you're living hand-to-mouth because you haven't gotten a raise in years, and you have to spend more than 30% of income on rent (no matter what Chase advises) because rent is unaffordable everywhere in the U.S., being told to download a budgeting app is not helpful. Neither is being told to “get a better job.” Because, how, exactly, do you suddenly get a higher-paying job? By going back to school, that famously cheap way of getting ahead in life?

All to say, of course personal finance know-how can be useful. Keeping a budget and setting concrete goals like saving $10k in 6 months, and then starting a habit of transferring my monthly savings as soon as I got my paycheck, helped me realize that hitting certain financial milestones wasn’t as daunting and out-of-reach as I had once thought. If your problem isn't that you're living paycheck-to-paycheck, but that you never think about where your money goes, starting to keep track of spending can reveal, for example, that your snack budget is extremely high. But personal finance know-how can't save us from all that's systematically messed up about money.

What it can do, though, is make you feel a little less shitty about yourself. Learning about money means you realize that your money problems are not just your fault — the system is rigged and ridiculous. But since everything about it is stupid, that means there are no stupid financial questions. So you don’t need to carry around negative feelings about being "bad with money." You can confidently refuse to own that shame. And so in that one way alone, knowing about money can change your life. Even if it won’t automatically make your student loans disappear, you can feel certain in the knowledge that canceling student debt would be the right call for our economy.