Recently, during the winter holidays, I engaged in a profound discussion with our friends about the role of financial education in schools and its potential impact on the economy. We wondered whether promoting proper financial education inadvertently disrupts economic equilibrium. The central question is: How can we impart essential financial concepts to our children without adversely affecting consumption and the economy?

The Impact of Financial Education in Schools on Consumption

Financial education in schools has the potential to diminish consumption by teaching students about saving, investing, and avoiding debt. A financially literate society might spend less and save more, possibly leading to a general reduction in consumption. This could negatively impact businesses reliant on consumer purchases, leading to decreased profits, reduced production, and even job losses. In the long term, significantly reduced consumption may slow economic growth, given that consumer spending is a significant component of the Gross Domestic Product (GDP).

This is the primary reason schools, especially public ones, might never teach financial education or do so incorrectly, incompletely, or in a biased manner, despite our efforts to promote proper financial education in academia.

Long-term Benefits of Financial Education

Conversely, financial education can lead to more informed financial decisions, potentially creating a more stable and resilient economy in the long run. Individuals might invest more sustainably, contribute to economic growth through entrepreneurship, or avoid debt traps leading to financial crises. Therefore, financial education reduces consumption and promotes intelligent and sustainable spending.

The Role of Parents and Society

As parents and societal members, it is crucial to balance teaching children about understanding money (as a medium of exchange and a tool, not as a status symbol or a key to happiness) and being wise with money, encouraging saving and investing for the future, while also understanding the importance of consumption in stimulating economic growth. The goal should be to create a financially literate society that understands the value of money, makes informed decisions, and contributes to a stable and prosperous economy.

Although schools can provide fundamental knowledge, parents and guardians also have a significant role in shaping their children's financial behaviors and attitudes. By teaching children about the value of money and the impact of economic decisions, parents can help promote a responsible approach to personal finance that benefits both the individual and the economy.

After these discussions, I began to view financial education as a double-edged sword. On one hand, it can reduce consumption and negatively influence the economy in the short term. Conversely, it can create a more informed and responsible society with long-term benefits.

As a society, we must find a balance between promoting saving and understanding the vital role of consumption.

It is essential to encourage financial education that promotes saving and intelligent and responsible spending. In this regard, the role of parents is immense, considering that schools can never fully provide the necessary financial education to navigate a complex global economy, as underscored by Dave Ramsey in his speeches, podcasts, and books.