Financial literacy is useless without this

Do you remember how to find the derivative of a function?

Neither do I, but I had to learn it to pass high school calculus.

Even if we’re taught something, that doesn’t mean we’ll use it.
If we don’t use it, we’re likely to forget it.
In the same way, financial literacy is an incomplete solution on its own.

So we blame it on the school system. Now more than half of U.S. states require taking personal finance coursework to graduate high school.

While I’m a fan of this direction, researcher Lauren Willis’s analysis confirms my suspicion that simply offering more financial literacy resources doesn’t mean that people will get better with money.

“Don’t let schooling interfere with your education”
—Grant Allen

And it’s not like we lack information. There’s more high quality, free information than ever before, and yet the majority of Americans are still financially illiterate.

This is why I believe financial literacy is useless without the underlying motivation to use it.

The missing link between knowledge and action

I think back to the time when my Spanish skills most rapidly improved.

It wasn’t the 3 years of high school Spanish.
It wasn’t completing the entire Duolingo curriculum.
It was…traveling to countries where I was forced to speak Spanish.

The missing link was motivation. My motivation was highest when the distance between knowledge (learning a new phrase) and the opportunity to act on it (ordering in Spanish at a cafe) was the shortest.

People have to be ready to receive information and take action on it for it to be useful.

You can teach a 5th grader about mutual funds and ETFs…but this is even less useful than knowing how to find a derivative as an adult.

The good new is that you don’t have to wait to become 100% financially literate (for which there is no clear measure for) to make meaning money moves.

All that matters is becoming more literate for the next most important financial action you need to take.

How to increase your financial motivation

Start by identifying the #1 pain point you’re feeling in your finances:

What do you worry about the most, financially? When were you last stressed about money?

It helps to use a framework. Luckily, most people’s money problems fall within predictable buckets:

• Debt: paying off loans, managing credit, avoiding further debt
• Earn: increasing income, career change, job loss
• Spend: budgeting, conscious spending
• Save: building a buffer (emergency goals), creating savings goals
• Invest: growing your assets, retirement planning, financial freedom
• Social/Emotional: how money affects your emotions like stress, happiness and jealousy

In a way, this is aligned to Maslow’s hierarchy of needs applied to finances. The list goes from from survival to thriving. You shouldn’t focus on investing if what you need is to get a job cover your immediate expenses. You shouldn’t focus on buying a house if you haven’t saved enough of a financial buffer yet.

This approach gives you a better “just in time” learning so that when you search on Google or Youtube, the motivation gap between knowledge and action is not that big.

If this sounds like a lot of navigate on your own…

This is why I’m offering free money coaching sessions.

You can apply for your 1 complimentary session here.