Perspective: Breaking the Cycle of Family Financial Illiteracy

Financial Literacy is Key

A parent wants a life for their child that is better than their own (a less controversial thing has never been said). This is the innate desire of parenthood — to provide your children with greater access to opportunity, witness their happiness, see them develop healthy relationships, and find success and purpose in their work… all the big, important things.

On the other side of this desire, especially for new parents, is the presence of fear, uncertainty, and doubt around how to guide them towards this kind of future. The world is complicated and unpredictable. Being comfortable with money — the idea of it, how to use it, how to grow it, how to not lose it, etc. — makes it feel less complicated and unpredictable.

That’s a great thing if you are one of those fortunate people who got a solid education in personal finance. But the majority of new parents haven’t gotten one of those yet. Why?

Where the system has failed

First off, the education system has completely dropped the ball here (only 21 states required financial literacy coursework in 2020). Second, financial institutions and service providers aren’t incentivized to create a savvier consumer (see: the Great Recession). And finally, per a TD Ameritrade study, nearly half of Americans surveyed cited “the way my parents handled money” as the primary influence on their financial habits.

By default, the responsibility for providing financial education has fallen to parents. While they may be able to handle the basics of saving, budgeting, and “always pay your credit off in full,” quite a bit of important information falls outside of those buckets. Thus, there is a gap between what parents want for their kids, and what they are equipped to provide them with.

Many parents recognize this, but solving this problem is no cakewalk — the self-education process is highly disorienting. Information about markets, macroeconomics, monetary policy, fiscal policy, and crypto spews forth in a never-ending torrent from media outlets. Further, in spite of the abundance of available online resources, SEO-optimization has made it bizarrely difficult to find quality educational content.

Learning is hard. Full stop.

Nothing quite captures the feeling that the world of personal finance (especially investing) is moving by you at 100mph more than the rise of crypto.

For starters, the terminology is just as alienating as the lingo of traditional finance. “Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a network.” Pretty inaccessible for the newcomer, I’d say.

The narrative is a hodgepodge of claims. It’s a medium of exchange (but also a long-term investment); it’s for the little guy (but requires institutional adoption); it’s decentralized (but we rely on centralized authorities like Coinbase and OpenSea to participate). Lots of threads to keep track of there.

I’m not calling these things out to criticize crypto!

But there’s a point to be made, especially in light of current events, that education needs to be better. As refugees continue to be displaced in geopolitical conflicts, as governments move to freeze the funds of protestors, and as central banks continue to pursue inflationary policies, quality education around crypto — and personal finance more generally — has never been more relevant.

So how do we pull this off?

How do you break the cycle of family financial illiteracy? And what would the world look like if we achieve this goal?

Creating a healthy culture around money at home boils down to developing confidence in the concepts. For example, it’s more important to know how marginal income tax brackets work as opposed to the exact percentages in each bracket.

The challenge is that there are a lot of concepts to cover (credit, debt, loans, saving, investing, account types, diversification, insurance, retirement planning, crypto — it’s a long list!). Fortunately, new parents have some time to get started before their child starts asking them questions about money.

Building a financial literacy experience

Any attempt to “productize” financial literacy will fail unless two conditions are met:

  1. The student has to be in the right mindset to learn (i.e. there has to be sufficient motivation — which is the case for most new parents wanting a better life for their kids)
  2. The learning experience must be well designed (i.e. it takes a lot more than a list of blog posts dumped into a “Learn” section on the company website)

A great learning experience leans on three things to deliver transformation to the student (in this case, the sleep-deprived parent).

The first is structure — that means a logically flowing curriculum, regular expectation setting, always providing context, and a little accountability doesn’t hurt.

The second is student autonomy — one challenge with educating parents is how little free time they have. An effective learning experience will address their learning style preferences (video? audio? text?), their availability (mornings? evenings?), pace, and account for their current knowledge level and interests.

And last of all: delight. It is essential, especially with a topic as bone-dry as finance, to incorporate metaphor, storytelling, great examples, and a little humor. Delivering delight is the ability to sit right at the intersection of expertise and entertainment.

Taken together, these factors create the sensation of getting great advice from a person who has done it before, and done it well. Sort of like the new parent getting some tips from the friend who just had their third kid.

What a financially literate world looks like

My vision of the future is one where talking about money at home isn’t an uncomfortable experience. It’s a future in which young adults are capable of researching and solving their own money problems because they know which questions to ask. Where they enter the workforce with a solid grasp of big picture concepts, the psychology of money, and aren’t surprised when taxes become a much bigger part of their lives.

It’s a future where vastly more young adults are prepared and sufficiently resourced to take calculated risks. And it’s thanks to the learning efforts put in by their parents today.

These are lofty goals that won’t be achieved overnight, but we recognize that providing a great financial literacy experience is necessary for breaking the cycle. If we can help families in this effort, the impact will compound for generations to come.


Will Steiner, EarlyBird’s Head of Content and Literacy, has written more than 100K words on financial topics, covering personal finance, investing and portfolio design, employee equity compensation, and crypto.

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