A nation of financial dunderheads needs formal instruction

AS 2008 limps toward the exit, the nation is acknowledging a shocking degree of ignorance about personal finances and managing money. A little classroom instruction would do wonders.

Recognition of the need for education goes beyond epic tales of people being duped or feeling cheated and straight to a wholesale lack of basic information. Financial illiteracy has cost the nation trillions of dollars in hard-earned savings, investments and mortgage payments.

"One lesson of this year is that these days, no one, even the most financially secure, can afford to be stupid," wrote Peter Applebome in a Sunday New York Times commentary headlined "Contemplating the Boobs We Were."

School teachers and principals will wince at the suggestion of another social problem layered on the academic agenda, but they are the place where future generations are clustered together. That is why schools end up teaching reading, writing and arithmetic and dispensing vaccinations, conducting hearing tests and offering driving lessons.

Applebome is gracious enough to allow that this financial crisis cuts so deeply because in recent years Americans have been presented with an astounding range of financial choices, and they are having to make decisions previous generations never faced.

Financial literacy ought to be broadly defined. Basic economic principles are taught in more schools, but the elements of personal finance ought to be included. America went nuts in a real-estate boom without understanding how mortgages work. Consumer credit is not now nor has it ever been free money.

All the basics — the vocabulary — of car loans, health insurance and life insurance ought to be put before students. Albert Einstein supposedly marveled at the power of compound interest. Explain why.

Last summer, before various markets fully imploded, "Freakonomics" co-author Stephen J. Dubner was wondering in print about the nation's financial literacy. Dubner, who is certified smart, admitted how difficult it was for him in his personal life to stay abreast of a complex financial system. He concluded that education, the earlier the better, was vital.

The Seattle Times business pages are a good place to start. Investment advice under "Your Money" features and columns has been a good source of basic information and healthy skepticism.

In the process of rebuilding what collapsed in 2008, none of us can afford the luxury of putting investments on automatic pilot. Being better consumers will be part of finding money to invest and save. With the benefit of hindsight, it is obvious the next generations have an enormous stake in financial literacy.