Money Education or Motivation: Why Financial Education Is Overrated

October 30, 2024

Planning & Saving

When discussing communal parnassah challenges, someone always pipes up about the desperate need for more financial education in yeshivos and beyond. It is indeed surprising how otherwise savvy frum men and women can miss the basics of budgeting: the power of steady investment compounding, the realities of credit cards, etc. Let’s teach this stuff, and then the problem will be solved, parnassah advocates say.

A National Issue

By the way, in my experience, financial literacy among frum Jews tends to be far better than average in the United States. Financial planning magazines and literature regularly document and lament how many Americans cannot navigate even the most basic financial questions. They, too, constantly beat the drum of the desperate need for financial literacy education in schools and beyond.

Traditional Education Is Overrated

Financial literacy is indeed, vital, and including these topics in school curricula is worthwhile. But at the same time, I am very skeptical that these isolated efforts to increase book learning would create the dramatic lift in money savviness that financial literacy proponents adamantly assume. The primary need is not more book knowledge but rather the behavioral motivation to follow through. Traditional courses, usually dry and boring, don’t help much.

Choosing Broccoli Versus Pizza

A powerful analogy is the horrific state of nutrition and weight control. Obesity is now at epidemic rates in the United States. Everyone knows they should be eating less junk food and exercising more. Books and lectures won’t spur much change. The challenge is maintaining the motivation to ignore pizza and pastrami while learning to enjoy broccoli and grilled chicken. All doctors agree that regular exercise is simple and healthy. But most of us prefer to sit on the couch instead of taking a brisk walk or lifting weights.

Requires Motivation, Not Education

The most important parts of financial literacy are simple. Typically, those with a bit of motivation can find and absorb the basics in a couple of hours of focused work. More than fixating on this curriculum or that book, we need to inspire and motivate people to want to save, invest, and build wealth. Filling this behavioral and attitudinal gap requires motivational speakers and creative media producers, not lecturers, with PowerPoints and Excel sheets. And that’s far more challenging.

Unfair Fight

Another factor impeding financial clarity is the abundance of temptation and misinformation spread by retailers and the financial industry. Again, think of the obesity challenges. Food manufacturers make their fare tasty to the point of being virtually addictive. And then they spend fortunes on marketing and distributing their sugary, fatty delights. It’s not a fair fight; veggies and lean protein don’t stand a chance.

Battling Financial Temptation and Misinformation

Similarly, companies spend billions enticing consumers to buy stuff they don’t need and invest in financial products they shouldn’t want. Brilliant, relentless marketing and sales techniques convince people to buy now, pay later, and then fill the gaping holes in their budget with pie-in-the-sky investments. Technical guidance alone won’t motivate people to overcome inertia, short-termism, and the massive misinformation pulling them in the opposite direction!

Motivation Is Exciting, Encouraging, and Interesting

So, financial literacy curricula consisting of textbooks and mathematical presentations are worth far less than their promoters imagine. The focus must be on getting audiences excited about becoming fiscally knowledgeable and following through. It’s hard, but most can get fired up about budgeting, saving, and investing once they recognize how these habits can improve their lives. Seeing how even small sums can create significant wealth when invested consistently into simple mutual funds and real estate is super motivating.

Building Wise Foresight

Assuming you’re not in the education or askanus fields, what are your tachlis takeaways? You should definitely educate yourself and your family, but, more importantly, work to build your motivational and behavioral muscles. Be “ro’eh es hanolad.” Try to maintain long-term views and goals for your financial life. It’s not easy to forgo the current to maximize the future. It can be helpful to maintain a multi-generational perspective. Remind yourself how your parents and grandparents worked and sacrificed to give their children better lives. Shouldn’t we try to do the same?

Managing Your Norms

Another huge component of managing motivation and thrifty mentalities is thinking about with whom and how you socialize. Your expectations and norms will naturally rise to meet what you regularly see and experience. If your neighbors, friends, bungalow buddies, etc., are big spenders, you are more likely to become a big spender. Remind yourself that many of them spend every nickel they earn and may even be heavily in debt. Is that what you want to emulate?

Glossy Ads Are Costly

It will rub off on you if you choose to hang out with people who spend frivolously. Conversely, if you surround yourself with people who are savers and investors, you’ll find it natural to do the same. Also, you may need to reconsider the media environment angling for your dollars. If you choose to constantly soak up glossy ads and social media posts for high-end fashion, costly home makeovers, glorious vacations, and expensive restaurants, this will decrease your motivation to build wealth over the long run.

Chabdehu v’Chadshehu

In general, it’s worth building up a healthy skepticism about the motivations of those pushing you to spend or invest your hard-earned dollars and the value of what’s being sold. Will more stuff make you better or worse off? Does spending hundreds on a meal or thousands on an excursion pay off? Are investment promoters perhaps being driven far more by their parnassah needs, i.e., commissions, than yours? Shochad, self-bias, affects even the best and brightest, as the Torah says very clearly. Let’s accept that.

Automation Solves Motivation and Temptation Issues

One final significant tip for overcoming short-term temptation is keeping things simple while automating your savings and investing. You can easily set up a system of auto-depositing some of your income into savings accounts, mutual funds, extra mortgage payments, or even cash value life insurance if that’s your thing. If you don’t see it, you probably won’t miss it, and the long-term accumulation is usually surprisingly large. With a bit of current sacrifice, you can reap tremendous future benefits.

Ulimately, these are very personal matters, and simple does not mean easy. Everyone needs some financial education. But your fiscal success is probably more determined by how you build your motivation and manage your temptation problems.