Many analysts have observed that the disastrous financial decisions that helped to plunge the American economy into recession were shaped more by ignorance than by malice. Now, as government and business leaders attempt to prod the economy into recovery, groups offering money management training and finance education are playing an important part.
Entrepreneur Susan Beacham recalls, "I used to say that parents in general that I work with didn't wake up in the middle of the night after keeping their kids off drugs… and making sure they did their homework… and say, 'Oh! I forgot to teach them how to manage money.' This wasn't the thing that got parents anxious."
Beacham is the founder of Money Savvy Generation, a company that creates tools for parents and educators to teach kids about money. She claims, "Now parents do wake up in a cold sweat about this issue, because the reality of not teaching children is something we are living with right now."
Interest in Beacham's company is growing as the recession brings the consequences of financial ignorance into painfully sharp focus. Beacham says the typical American approach of introducing these topics to teenage students is ineffective.
"The problem with waiting that long is, at that point, you're changing behavior, and, developmentally, children are pushing away from us," she says. "The majority of our work is done in kindergarten through fourth grade. And why? Because in that age group I'm not changing behavior, I'm molding behavior."
Teaching teens before they make life decisions
Other programs, such as the free curriculum produced by the National Endowment for Financial Education, specifically target high school kids.
Paul Golden, a spokesperson for the non-profit group, explains that it's still important to talk to teenagers because, "What happens in the early 20s is that they're making financial decisions that can impact them throughout a great portion of their economic lives. So they might be purchasing homes. They might be starting a family. They might be making big purchases."
NEFE works with high schoolers to prepare them for these upcoming decisions.
Parents need to set good examples
Golden says research funded by his organization also found that there's one thing that's more important than formal education - the parental role model.
"If you're a parent," he says, "you have the most influence on the behaviors that your children will engage in when they get financially independent."
Unfortunately, when it comes to money matters, many parents are not that knowledgeable themselves, says Leslie Linfield of the Institute for Financial Literacy.
"If it's not being taught by parents and parents themselves don't have the skill, you could see where the system is going to break down," she says.
The only federal law that requires adults to learn about money management is bankruptcy law. Thanks to a reform in 2005, every individual who files for bankruptcy must complete two hours of consumer credit counseling. Linfield claims a lot of people appreciate this training, which her nonprofit institution provides.
"Most of the folks that go through it actually are grateful that they got financial education. We have a stack of letters that we receive from the debtors that are going through thanking us," says Linfield.
Even accomplished professionals need assistance
The lack of knowledge about finance extends beyond the average consumer.
Gil Christie is an executive with 7city Learning, a company that provides training programs for quantitative finance experts or "quants" - the Wall Street specialists who use complex mathematical formulas to predict asset prices.
"A lot of supposedly very bright people, very savvy investors, were trading stuff that fundamentally… they didn't really understand," he claims.
He explains the mentality of these investors: "'Why would I want to understand it if it's making me money?' That's often the over-enthusiasm, overconfidence that the market sometimes has when things are going well."
Practical training helps quants get more complete picture
Christie says that the equations these finance experts use in their daily analyses don't give the whole picture.
"The trouble is, is that what models and mathematics can often fail to recognize is human emotion and the behavioral impact that happens when there is a market meltdown," he claims. "And so there is far, far too much emphasis on the model."
Christie says his group's Certificate in Quantitative Finance, or CQF, provides practical rather than theoretical training for students.
"What the CQF does is it focuses on building up those models, being able to criticize the models, and most importantly understanding which model you should be using depending on the circumstance of the marketplace at any one particular time."
Training programs like these are designed to dissuade professional investors from rushing blindly into the market again and playing the kind of high-risk financial games that precipitated the current economic crisis.
The programs address a central question raised by that crisis: If the professionals don't understand the financial decisions they make, what hope is there that average Americans ever will?