By Hang Nguyen
The San Diego Union-Tribune
WWR Article Summary (tl;dr) Jim Chilton, the CEO of “The Society for Financial Awareness” shares his thoughts on financial literacy and how you can best prepare your family for the future.
A marriage destroyed because a husband paid for a pool in the backyard, nice cars and frequent dinners at restaurants, money he should have been squirreling away for his son’s college tuition.
Young people who are broke but who will put thousands of dollars in tattoo purchases on credit cards.
Parents who dip into their retirement funds to pay for a daughter’s wedding.
Jim Chilton offers those stories as examples of financial illiteracy. He’s the CEO of The Society for Financial Awareness, a nonprofit he founded in 1993 and based in San Diego.
The group’s members, who include estate-planning attorneys, financial advisers and CPAs, give free finance seminars at clubs, churches and companies, which are affected when an employee under financial strain can’t focus on the job.
“We know about drug and alcohol addiction,” Chilton said. “But we don’t we talk about spending as an addiction. Spending money makes us feel good and is habit forming. Our economy thrives on spending. Not enough people understand the importance of saving until it’s too late.”
April is Financial Literacy Month. Through SOFA, which is funded mostly by membership dues, Chilton is trying to spread the word that knowing how to manage money is critical to health and happiness. Without it, it can lead to bankruptcy, divorce and even suicide, he says.
Chilton is not just giving advice. He talks from experience. He didn’t become financially savvy until he was 26. He is now 63. When he was younger, he started a business using a line of credit and racked up a lot of debt.
Chilton chats about financial illiteracy and how to solve the problem:
Q. How do you define financial illiteracy?
A. Unfamiliarity with the principles of cash management, finances. Ignorant doesn’t mean stupid. It just means most people have not been put in an environment to learn.
People spend first, consider second, whether they need it or not. For example, they say: “Honey, wouldn’t that be nice in our bedroom, kitchen or living room?” The (partner) should say: “It would, but is it necessary?” Instead if we don’t have the money, we fall back on credit cards. It’s behavior. The entire deal of money is behavior and having knowledge to gain financial wisdom to handle that.
It should belong in school and it isn’t, which is amazing to me. I go nuts about that. It’s bewildering to me that schools across the nation don’t have financial literacy as a core subject.
Q. In what grade should schools start teaching financial literacy?
A. Fifth and sixth grade. If your mom gives you an allowance, think about short- and long-term spending. Want a bicycle? The goal is to save up to $100. Mom and dad will put in $200. That’s long-term planning. Every time I get an allowance, am I going to follow the plan or spend that money with my girlfriend at the mall?
Then in high school, they can learn about car loans. In high school, it should be mandatory to take financial literacy. In college, it can be an elective.
I’m for math and science. I have five kids. But they use their phone’s calculator to do their math. They think about money 24/7.
Q. Before fifth and sixth grade, should parents be teaching their kids about financial literacy?
A. Yes. We taught our kids with questions. What do they want their money for? We always implemented long-term planning, for example, to save for spending money for vacations or big purchases. Why should I give them all the money? Why shouldn’t they learn the process?
Q. You’ve mentioned that only 3 of of every 100 Americans have a written financial plan. Why is it important to have one?
A. Like a GPS or North Star, a written financial plan helps them stay on track. The No. 1 cause of divorce is over money issues. There are mistakes constantly made by couples. Also, student loans have exceeded car debt and credit-card debt combined.
And then there’s stress. Our well-being can also crumble because of a staggering amount of debt that constricts us and sucks out our joy. You might have to move to a place with (a lower) cost of living, leaving family and friends behind. Money can absolutely ruin someone. You’ve got to build a financial plan. If you have to drive somewhere you’ve never been before, do you go without a map or GPS but only with the intention of driving?
Q. Why don’t more folks budget or plan financially?
A. They are already in the ditch. It’s embarrassing. They don’t want to look at it. Behavior of the individual must modify to get out of the ditch. We are a product of our choices.