This has been on my mind for about a year now, and I don’t even know if a Substack post will do the topic justice, but let’s give it a try. It’s been running through my head even frequently as of lately as I’ve been reading a bunch of Ayn Rand books and book from followers of her philosophy to get a better understanding of what they believe. In short, they believe in the individual and some followers believe in a pretty extreme form of selfishness. As a recovering drug addict, I definitely understand and believe in the idea that it’s up to the individual to put in the work. But as someone who believes in a society that helps one another, there’s some more nuance that needs to come to the conversation; especially in regard to “self-made” riches.
Most recently, I’ve been reading Equal Is Unfair: America's Misguided Fight Against Income Inequality by Don Watkins and Yaron Brook, and the book promotes Ayn Rand’s philosophy. Without getting into all of the details about how our current form of capitalism has gone off the rails, I wanted to discuss one specific topic they argue throughout the book. In nearly every chapter, they argue that it’s up to the individual to save money and invest, and they argue against balancing our system even though they acknowledge the massive role of luck when it comes to success.
While I do think they bring up some compelling arguments, they’re missing something extremely important that many others miss as well. The reality is that people don’t know what they don’t know when it comes to financial literacy.
Should people work hard and save money? Of course. Should people start investing their money at a young age so they can have the rewards later in life? Absolutely. Is enrolling in your company’s 401k plan a fantastic idea? I think most of us would say that it is.
Unfortunately, common sense isn’t so common in many communities and households throughout our country.
What’s really helped me gain a more balanced view of the world and try to think of the best solutions for social and policy change is to create stories. When I’m able to create a story of a kid from a low-income community and a household that’s extremely toxic and traumatic, my entire view of a subject changes. So, for the topic of financial literacy, I’ll use myself as an example.
Financial Literacy Isn’t a Natural Human Trait
We aren’t born financially literate. There are many things we’ve evolved to do like remember where to find food and to drink water when we’re thirsty. For heterosexuals, we’ve evolved to find the opposite sex, get busy, and make babies. We’ve also evolved for cooperation. But one thing that’s not built into our DNA is how to be smart with money.
So, if we’re not born to be smart with money, it must be a learned behavior. And I can tell you from personal experience and the story of my life that this wasn’t something that was taught to me.
Growing up I had zero financial role models in my life. While I wasn’t dirt poor, I was definitely at the bottom of the middle class. My first home that I remember was literally a guest house about the size of my current living room. My dad and I lived there until I was ten years old, and it was smaller than most studio apartments. Our kitchen was a mini fridge and a microwave. I learned how to make just about everything you can imagine in that microwave, and there were many times my dad would just stock up on fast food we could reheat throughout the week.
When we moved to Las Vegas, we actually got a two-bedroom apartment. Things were a little better, but our finances were still a mess. There were many days I’d come home from school with an eviction notice on our door, but fortunately, my dad always figured out a way to pay the rent.
I don’t know how much money my dad made back then, but I do know that he didn’t do any of the “common sense” financial strategies we discussed a minute ago. My dad was always borrowing money from people and would often “borrow from Peter to pay Paul”. He had terrible credit and no savings.
Then, there was my alcoholic mom. She always had nicer things. When I’d go visit her during school breaks, it’d be at her house that usually had three or four bedrooms. She also always drove a Mercedes or BMW, but she was always broke too. She got sober when I was 20, but she’s even worse with her finances than I think my dad is. To this day, she has terrible credit and no savings account.
Again, we aren’t born financially literate, so for a kid like me, what do you think happened?
When it comes to financial literacy, there’s no nature vs nurture debate because nature doesn’t play a role. My knowledge of money came from my parents, so as you can guess, it wasn’t pretty. I did what my parents did. When I started making money, I spent recklessly, didn’t save, and investing didn’t even cross my mind. Even when I was offered a 401k, it made absolutely no sense to me, so I always opted out of it. As an 18-year-old kid, why the hell would I have them take more money out of my check for future me? Plus, I was a drug addict and alcoholic, so I didn’t expect to live that long anyway.
I’m Not Unique
What I want you, the reader, to understand about my story is that I’m not unique. I’m not this special case scenario. As bad and traumatic as my childhood was, it wasn’t half as bad as many kids in this country. Growing up in a single-parent household without a financial role model is nothing compared to what some kids are going through on top of that.
In 2020, we had a record number of overdose deaths. Rates of depression and anxiety are higher than ever. Do you have any idea how many of those people are parents? Who the hell is teaching our kids about financial literacy?
Like millions of other kids throughout the country, I went to public schools. I graduated in 2003, and I never had a single class that taught me about how to be smart with money. My son just turned 13, and he goes to public schools, and they haven’t taught him anything about this important topic either.
So, when people argue this individualist approach, why is this never taken into consideration?
And to add insult to injury, numerous studies show that people with financial issues make worse financial decisions due to stress. I know this to be true from experience. When you’re at a gas pump and watching the numbers like a hawk to make sure it doesn’t go passed $5 so you can get home and stop at a drive-thru for a couple $1 cheeseburgers, it uses up a lot of cognitive resources. The last thing on your mind is, “Maybe I should sit down with a spreadsheet and develop a savings and investment plan.”
What’s the Solution?
Honestly, I don’t know what the solution is, and it’s something I think about all the time. Sobriety taught me to get out of the problem and into the solution, and this is a really difficult one.
When I look at my own experience, I’m 36 years old and am finally getting my financial life in order. I got sober in 2012, and it took me years to repair my credit. The other day, I was approved for my first credit card, and it blew my mind. In early 2021, I came into a little bit of an inheritance and made the conscious decision things needed to change. I read dozens of books on saving, investing, and building credit.
It’s easy to sit back and say, “Well, kids need to take the initiative to do what you did.” And to that, I say, “Are you kidding me?” At best, a kid is bombarded with homework for a bunch of subjects they don’t need to learn while also trying to navigate their social lives, which is brutal as a kid. At worst, these kids have to do all that while also dealing with their stressed, depressed, and abusive parents.
When I look around at my friends who started saving and investing at young ages, there’s a common denominator: each one was taught by their parents and given help. I can’t think of any of my friends my age who started building credit, saving, and investing at a young age who didn’t have parents that supported the hell out of them.
When you have the runway to screw up royally with the knowledge that your parents will bail you out, your life is a lot different than most kids in this country.
So, when it comes to solutions, I think one of the best ones might be making financial literacy a standard part of public schools. And when I say this, I don’t mean some elective because not many kids will opt into that type of elective when you could do something a lot more fun. And let’s be real, electives are often throw away classes we picked as something easy we could skate through.
What if a financial literacy class was the same as math, science, or English? If it was mandatory that our kids had to take and pass these classes, maybe it’d balance the scales a bit and I’d agree with the Ayn Rand followers a bit more. Kids would have to learn about behavioral economics and the thinking flaws that lead to bad financial decisions such as instant gratification vs long-term gains. They’d have to learn about compound interest and the importance of saving even $20 a month. They’d learn about the difference between traditional stocks and index funds.
They’d also learn about how credit is the most ridiculous system ever created and what they could do to attempt to build a decent credit score. Don’t even get me started on the fact that you need credit to build credit, and when you have parents with awful credit, they can’t co-sign on anything to help you build credit.
But even with a solution like this, it’d be insanely difficult to make happen. When’s the last time a major change happened to the curriculum of public schools?
A more practical solution is the same solution I always come back to, which is that we help each other. I’ve put in the work to learn everything I can about being better with money, and now I try to teach others. And now that I’ve learned a few things, I’ve been able to teach my son, and in 2021, he made over 21% in returns on the money he invested. Not bad, right?
So, if you were lucky enough to learn about the importance of saving, investing, and smart spending, pay it forward. It’s as simple as making a Facebook or Instagram post with a tip or sending a tweet out. Or, you could try to do something in your community where you teach parents and kids what you’ve learned. Tell them about what’s worked for you as well as mistakes you’ve made. And if you’re lucky, it’ll inspire some of these people to grab some books and learn more.
Have you noticed what this solution entails? It means getting away from the ridiculous idea of rugged individualism. This book from Watkins and Brook I’m reading doesn’t even attempt to touch on this solution because that’s not what their philosophy is about. If you want to argue against social welfare programs, go for it. I’m happy to have the debate. But the idea that we shouldn’t help share our knowledge with people who wouldn’t have come across this information doesn’t help strengthen the arguments made by individualists.
Again, I learned at a young age that nobody is coming to save me. If I want to succeed, I need to put in the work. But at the same time, I don’t know where I get that motivation and drive from. I don’t know why I’m naturally curious and love to read. Even though I know it takes personal effort and hard work to succeed, the least I can do is try and share what I’ve learned with others. I don’t think that’s too much to ask from any of us to make this world a little less shitty.
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I’m currently writing a book about how we’re manipulated by the news, social media, technology, advertisers, and each other. It dives into the psychological history of manipulation, our biases, tribalism, and more.