Teaching People Personal Finance is One Key to Helping Them Escape from Poverty

We've recently had a couple posts where it seems that if someone took the time to teach needy people about how to handle money, then they would have a MUCH better chance of pulling themselves out of poverty.

• Exhibit #1 -- Two More Extreme Makeover Home Edition Homes in Trouble

The general consensus here is that if the ABC producers would give the home recipients a simple money management course (how about instead of the trip to Disney World -- or maybe in addition to it), that they'd be in a better position to keep, manage, and maintain their home/mansion.

• Exhibit #2 -- My Issue with How Tax Money is Spent. Check out this comment:

I've had a lot of poor friends, and a lot of friends on food stamps.

For the most part, they were TOTALLY clueless as to how to shop in a frugal way -- which is often whey they were on food stamps in the first place. Every one of them spent more per person than I do on food (at the same store, so don't give me that "poor selection" garbage.) I remember shopping with one friend and convincing him to put back $50 worth of meat, and buy a big $2 bag of potatoes instead. He was astonished when he made it to the end of the month and still had food to eat.

What about just a BIT of education here? Wouldn't that go a long way to helping them manage their money as well as their government assistance? Then again, maybe people aren't interested in learning or maybe trying to get people to care about managing "free" money is simply pushing water uphill.

What's you take on these issues?

Comments

[Alanna]

There are a lot of government programs that work on this kind of education; my sister-in-law is involved with one of them, where they teach cooking and shopping to people receiving government assistance. The problem is that it takes more than just knowledge to change people's behavior. Habit and social pressure play a huge role in the decisions people make, even when they actively want to change.

[Jenny]

I think we should be careful when implicating personal money management skills as part of the "poverty problem." I agree that education in managing money and how to save at the grocery store is helpful for those living in poverty, but in the same way that those skills are helpful for me (someone not living in poverty): it can make a difference, but it probably won't significantly change one's financial position. Perhaps I'm being overly-sensitive, but your statement, "Then again, maybe people aren't interested in learning or maybe trying to get people to care about managing "free" money is simply pushing water uphill" was a tad offensive to me, and seems to be the kind of statement that only perpetuates stereotypes about the poor. If you were to have this conversation with a person actually struggling to live under the poverty line, I would imagine they would have bigger problems than saving a few bucks at the grocery store each week. (think health care, affordable housing, etc.) Not trying to be argumentative - just my opinion! Your site has been very helpful to me.

[Christopher]

On the food and frugal shopping thing:

I'm fairly convinced if you teach a person to eat really well and healthy, they just can't spend that much on food. the fact is that frozen dinners and little Debbie Snacks are expensive! And they add to the bill more when you have to buy 2 or 3 packages for each person because they're not filling.

A carton of eggs is cheaper than cereal and milk, and you'll probably get more meals out of a carton of eggs.

-CD

[FMF]

Jenny --

I don't know the answer -- I'm just looking for potential solutions. That's why I said "maybe" this and "maybe" that. If I'd said "all poor people are leeches and should be left to rot away", I can see how that could be offensive, but why are people (not just you -- others in recent posts as well) so easily offended by simple comments or the desire to find a reason?

Can everyone lighten up a bit and try to assume the BEST from something that's written rather than always looking at it from the WORST possible interpretation? Sheesh.

Ok, rant over.

BTW, Jenny, most of this wasn't directed at you, you just happened to bring up the issue -- one I've been dealing with lately from a few readers who prefer to read into pieces by taking one bit or another out, adding their own twist to them, and then finding fault/reason to be offended.

Gee, maybe I need another vacation...

Sorry - you're right. Voicing sensitivity or critique isn't really adding anything to the conversation as far as finding solutions! I'll keep any future comments focused on being helpful. Saving on the grocery bill (like the person above said - eggs will go further than empty-calorie, unfilling snacks) can certainly free up money to put in savings or towards other financial needs. (As I myself have discovered in my own life). I guess my point is that I see something like saving on a grocery bill (and other similar money-management techniques) a short-term solution, not one that could make a real difference in helping someone out of poverty.

[Tom]

You can give anyone all the education in the world, but it won't make a difference if they don't put it into action. I know a few people who have read several Investing/personal finance books. But they complain that they are not getting ahead. So I ask them, "Are you doing waht the book says?" Their answer is mostly no.

...you can lead a horse to water, but you can't make it drink.

[Shan]

Well said. It's like the old adage, give a man a fish ... you know the rest. Education is key in addressing poverty, but like Alanna said, behavioral changes have to go along with it. They have to want it bad enough.

I'm all for helping the needy, but perhaps the way we're going about it is really hurting them in the long run.

[K]

Maybe instead of food stamps they should hand out money in an equal amount. I know that goes against the concept, since they could then buy whatever they wanted with government aid. But they would still have to eat, and this would reward them for shopping smartly because they could keep what they have leftover rather than having to use it all or else have it go to waste. Or maybe it shows that they are getting too much in food stamp money if they can afford things that I can't afford on my middle class salary.

[LotharBot]

"it can make a difference, but it probably won't significantly change one's financial position.... they would have bigger problems than saving a few bucks at the grocery store each week."

That's exactly the kind of wrong thinking my friend had.

The guy I talked about in the comment FMF quoted had more expensive habits than I did, on a much lower income (about $600/mo SSDI and $150/mo EBT.) He spent more on food, he had a more expensive cell phone plan, he had premium cable, he bought more toys (GI Joe figurines), he smoked, and so on. Teaching him how to save a few bucks at the grocery store each week didn't get him out of poverty, but it did ease the pressure on him, and it took him from "not eating" poverty to "eating potatoes" poverty, which is a step up. Teaching him how to save a bit more in other areas eased the pressure on him again. Getting him to pay attention to the "little" spending mistakes has put him in a position where the "big" problems are much more manageable.

Years later, he's still in poverty, but he's not in the same sort of poverty as before. He and his new wife and their kids don't have to skip meals. They're clothed, fed, and sheltered, and are able to do some inexpensive fun things. And as he's taken responsibility in small ways and as I've challenged him when he's tried to duck responsibility, he's started to grow out of his immature entitlement mentality. Last time I talked to him, he had a job -- not a high-paying job, but a job that would bring in some extra income and allow him to do some nice things for himself and his kids.

Teaching him to save a few bucks on food didn't, by itself, significantly change his financial situation... but, combined with other bits of education and the maturity that came from it, it's put him in a much better position. He's about 90% of the way to being a success story, in large part due to the bits of education I gave him and the expectations of responsibility I put on him... both things our current government system doesn't do.

[Meg]

I agree that education on money matters and personal finance is strongly lacking in America today -- but not just with the poor. In general we have become a very wasteful society, spending way more than we need on everything. The middle class in America does not need 3 new cars in the driveway or a house that has 3000 square feet for a family of 3 or 4. There are many "middle class" folks who from the outside live like they have excess money, but everything the have is contributing to their high debt load.

Whether rich or at poverty level an understanding of money and compound interest and budgeting would help no matter what the situation. It is astonishing to me that there are as many folks with really decent professions and incomes that are just as "poor" as the lower class because they do not know how to manage their money!

[Kevin]

Why not restrict food stamps to fresh foods - meat, dairy, vegetables, fruit, etc. No chips, soda, beer, or Ding Dongs. It won't take long to figure out how to make meals instead of throwing something in the mircrowave and hitting "start".

[Jim]

Teaching people personal finance is a good idea in general. It certainly can't hurt and it should help many. But like Meg said this is true in general and not specific to the poor.

Adding decent personal finance curriculum to public schools would be a good start. Requiring a mandatory personal finance course for anyone obtaining food stamps or other public welfare is a good idea too.

But theres really only so much that money management skills can do towards helping people escape poverty. Money management doesn't fix underlying causes of poverty like drug abuse, lack of jobs, poor education, lack of motivation etc.

Jim

[JimL]

As a country, we have spent billions and billions of dollars on various programs with respect to the poor. Despite this spending, we have really not seen much progress on reducing poverty. It seems the only answers we hear is that we should continue to throw even more money at the problem.

I think you are really on the right path. We need to start expecting the recipients to take certain steps (such as attending educational classes on finance, etc.)

[Alanna]

Food stamps are restricted, very restricted, in terms of what they can buy. See an example here: http://www.sedaliademocrat.com/news/wic_8617___article.html/changes_kellogg.html

[JimL]

Alanna,

You link is to an article about WIC and not food stamps. WIC is the Women, Infants and Children program where recipients get a check/coupon that allows them certain designated items, such as cereal and milk. Food stamps, on the other hand, are almost like cash money where recipients can buy almost all grocery items (only a few exceptions).

I do think, however, that a "WIC" type program would be a great replacement for food stamps.

[The Money Answer Guy]

Agree with Jenny - money management is not a poverty issue - however, it is an issue that can lead to poverty. It is becoming more evident by the blogs and other media coverage of a more frugal lifestyle and personal finance tips and tricks, that all people are interested in saving a buck. The cost of food, the price of gas, and the ever-increasing price tag of education have left many people of all classes feeling the pinch of the penny. Everyone should have some resource or access to free money management programs, regardless of their age or money status. Those on governement assistance programs should be required to take classes regularly. It is never to late to learn how to save AND how to spend.

[MasterPo]

While I agree that personal financial knowledge is soarly lacking in the country, what about an individual's responsibility?

Sure education can be beefed up. But if people are constantly running short on money when it comes time for buying food or paying rent, heck - even an animal learns their lesson sooner or later!

Any program MUST include a LARGE and unwavering dose of personal responsibility and accountability for their actions. Otherwise it's just more tax payer money down the drain. You can lead a horse to water but...

[Ron]

"Maybe instead of food stamps they should hand out money in an equal amount"

You cannot be serious about that statement! Correct me if I am wrong but "Education" in money management is supposed to be taught in school is it not? In fact if most would have taken their education seriously they would not be in the positions that they are currently in. Restrictions on food stamps? That's a joke alot of them sell their food stamps and use the cash for other than food. As long as people keep giving handouts there will continue to be those with their hands out. I know of 3rd generation welfare families! I cannot for the life of me understand why I should feel sorry for people that keep having kids that they cannot afford to support. What really chaps my a@@ is that I never get a fathers day card from any of the "other" kids I support!!!

[Mikhaila Clements]

I was really thankful when my credit union offered me a free personal budgeting session. I was just starting college and had all new expenses to worry about. It helped a lot and I was able to keep my head above water while so many other students struggled with finances.

[MasterPo]

"Correct me if I am wrong but "Education" in money management is supposed to be taught in school is it not?"

Ron - I'd say the PARENTS should be teaching the kids. Another problem with our society is that parents have dumped all of life's lesson on the schools and absolved themselves from any duty to teach their own kids. Then again, many parents themselves can't handle money either.

As a side note regarding foodstamps, when I was in HS I worked in a supermarket. I would see food stamp recipients put on the belt bread, milk, eggs etc. and pay with food stamps. Then immediately behind that were piles of soda, chips, dip, beer, cookies and so on that these same people paid out of a wad of cash the likes of which I still haven't held myself to this day! :-[