How can we create a “financially aware” culture? According to Susan Doty - director of UT Tyler’s Center for Economic Education and Financial Literacy - what we’re doing now isn’t working. As we mark Financial Literacy Month, she says spending money you don’t have rather than saving and investing is like signing up for a diet plan, not following the instructions, and wondering why you’re not losing any weight.
Mike Landess: For UT Tyler Radio, I’m Mike Landess.
April is tax season, and it’s a time when the realities of your financial health are in sharp focus. For some folks, the picture’s good; for others, not so much. April is National Financial Literacy Month and a great time to take a closer look at your finances and financial planning.
Joining us is UT Tyler’s Susan Doty, who’s the founding director of the Center for Economic Education and Financial Literacy, and a senior lecturer on the Economics faculty.
Susan Doty: Thank you. I’m happy to be here.
Mike Landess: Now we know that making a budget, saving more, planning for the future, we’ve all known about those things generally. What’s the first step toward achieving financial literacy?
Susan Doty: Well, I’m gonna answer it in an unusual way. I’m gonna say it’s making good financial choices. And so we’re gonna connect personal finance to economics, and we start economics with the economic way of thinking. And a lot of people will ask me, you know, how can you teach economics to a young child, to a preschooler, to a kindergartner? And I could say, how can you not? When is it too early to teach a child? You can have this or you can have that, but you can’t have both. So it starts with a choice process.
Mike Landess: And so you have the choice process as a child, but then how do you start building on that, the whole concept of financial literacy?
Susan Doty: OK, so I have something that I call the “Doty mantra.”
Mike Landess: I like it.
Susan Doty: Allow me, please.
Mike Landess: Oh, please.
Susan Doty: I have never conducted a workshop or taught a class where I haven’t started with this, and it’s this: everything we value is scarce. We can’t have it all because we can’t have it all. We have to make choices. Every choice we make means giving up something else. That most valued alternative that we give up when we make a choice is our opportunity cost. And that’s the real cost of our decisions. So when you ask, where do we go from there? We apply it. We apply it to investing in yourself to earning income. We apply it to saving and spending. We apply it to credit and debt, to protecting and insuring, to investing and to giving back.
Mike Landess: You know what’s interesting is that we live in an economy that is constantly bombarding us with information in social media, television, etc., that tells you you can have it all.
Susan Doty: Yeah.
Mike Landess: All you have to do is this. All you have to do is that. It’s not ever talking about what you have to give up to do that. It keeps telling you, “You want more, you need more.” I mean, it reminds me of the George Carlin stuff routine where you buy all of this stuff, then you have to have a place to store your stuff. You have to sell your stuff, and then you have to go back and buy some more stuff and then rent a storage unit to put it all in.
Susan Doty: Absolutely. We have to get there. One of the fun little things that I do with students, and with adults as well, is I have them play with an app. Have you ever seen those aging apps?
Mike Landess: No.
Susan Doty: You take a picture of yourself and then you project it out 30, 40 years. Well, you do, and you look considerably different in the app picture. And I say make friends with that person. How do you want that person to live? And then keep that visual in mind.
Mike Landess: That would be an eye opener, that’s for sure. And you know, I guess a lot of kids are seeing their parents struggle with, first of all taking care of their parents, or taking care of their parents while their son or daughter is living in their old room or in the basement.
Susan Doty: Sure.
Mike Landess: So the economy and the challenges of saving and building income and that sort of thing has always been hard. And, you can learn a lot from the available resources, but all the same, you still gotta live day to day. The thing I worry about, too, is that we really give kids, and I’m talking about kids. My grandson is in his 20’s, and he must get three to four credit card offers a week. I mean, if he took each and every one of them, he could be $30 grand in debt in a month.
Susan Doty: Absolutely. Absolutely. And they’re bombarded with the opportunities, but they’re also bombarded with a lot of information. And a lot of the information that’s out there about spending and saving and investing in credit and all of those topics we mentioned is how-to information. There’s a lot of how-to information out there, but if they don’t get at the internal “why”- Why they want financial security, why they want a wonderful lifestyle in retirement, why they want to invest in education for their careers, then all of the how-tos don’t matter.
Mike Landess: Because it’s like a how-to diet. Unless there’s something that inside of you says, “I really need to do this for my health.” If you’re not committed to that, it doesn’t matter how many diet books you’ve got, that’s not gonna make you skinny or healthier.
Susan Doty: That is a wonderful metaphor right there is to think about the diet metaphor, because it’s very much the same way.
Mike Landess: Binge and purge.
Susan Doty: Yeah. Uh, dig a hole and try and get out of it.
Mike Landess: Yeah. Right. Exactly. And don’t keep digging. Whatever you do. When you come across young people who are just getting started on this process, and, boy, they get hit with it awfully fast. Mom and Dad send a certain amount of money. They’ve got a car that they can use. But there’s still gas, there’s still food, there’s still utilities. There are so many different things, and ultimately they’ll end up, many of them will end up with student loans on top of that, and God forbid, but it’s very possible that they also picked up that credit card along the way because after all, you can’t get through your college years without a big screen TV in your apartment. But I mean, or pay for HBO and, and Cinemax and so forth and so on. How do you get the message across to them? What does it take to make that light bulb go off on the top of their head?
Susan Doty: Well, it’s really in great part about visioning what what they want and what they’re willing to sacrifice in order to get it. You know, the Doty Mantra that I gave you earlier, it’s really all about weighing costs and benefit. And so it’s being deliberate about decision making, all aspects of decision making. And the work I do is not only with college students or young children. It’s with families, it’s with financial advisors, it’s with other professors. It’s with anyone who is, in essence, on a mission to help people become financially (literate). So this is the time to reach out and help people find better ways, better paths.
Mike Landess: Our guest has been UT Tyler’s Susan Doty, founding Director of the Center for Economic Education and Financial Literacy. You can find a link for more information on financial literacy on our website, KVUT.org. For UT Tyler Radio, I’m Mike Landess.
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