When I was a lad – a good start for any commentary – we didn’t know anything about money. I got pocket money from my dad. But if I begged hard enough and long enough, my dad would relent and buy me that Batman car I had been hankering after.
When I was at school, they taught maths, English, sciences and history. All important subjects. However, I don’t remember a single lesson about how to manage a bank account.
Despite this lack of formal tutelage, I loved playing Monopoly, which, in retrospect, should have taught me to become a property magnate. Actually, the idea did come to me while playing the board game, but I never had the acumen or assets to make it a reality.
Years later, I look back and think: what did I miss? The basics. At school, they should have taught the basics of profit and loss, balancing the books.
As Charles Dickens’s character Wilkins Micawber in David Copperfield explained: “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty-pound ought and six, result misery.”
Why are we not taught this from day one?
The future of money
The next generation are also not being taught the basics in school and have little idea about money. Yet, some argue (in my view, somewhat naively) that we should be teaching kids about cryptocurrencies in class. Surely it would be better to teach children the basics of money first, but I take the point.
Once they get to college, students might be taught some basic concepts like budgeting, saving and investing in traditional assets. The question is whether we should educate teenagers to understand the unique attributes of digital currencies, blockchain technology and decentralised finance.
Most of the traditional economic system views cryptocurrencies as illicit, illegitimate, destabilising and potentially treacherous. Why would any school, therefore, teach such concepts?
The next generation are also not being taught the basics in school and have little idea about money
But on the other hand, if schools ignore new developments in the evolution of money, are they performing their stated role of educating children to understand the real world?
While many regulators are grappling with the legitimacy of cryptocurrencies and their role in the financial system, a key consideration here also has to be that the decentralised financial system has grown to be worth trillions of dollars over the past decade. Can or should we ignore it?
These are debates I am having regularly as the friction between centralisation and decentralisation intensifies. Put simply, should we encourage a view of the world that rejects the system in its totality, or should we educate our children to understand the system and why it works?
Education is key
My view is that I want my children to see both sides of the equation and let them make up their own minds. They should understand banking, finance and money; how they work and how they are structured; the reason we developed these centralised systems, their pros and cons; and so on.
We all know the current financial system is flawed, as exemplified by JPMorgan CEO Jamie Dimon’s reply to his daughter when she asked him what a systemic failure in the financial system is and he answered: something that happens about every seven years. Our system is imperfect, but we do our best to make it workable and equitable.
That’s the reason why we have thousands of regulations that operate at both macro and micro levels. While we may argue for there to be fewer regulations, they exist for a reason: to ensure markets work. They are there to protect investors, to ensure that markets are fair, efficient and transparent, and to reduce systemic risk.
When I look at cryptocurrencies and the failure of the crypto firms that didn’t work – FTX, TerraUSD, Three Arrows Capital and many more – I am less convinced that we should be teaching the next generation about these new types of assets rather than real finance.
But I am in two minds about it. If we do not teach our children about alternative finance, its strengths and weaknesses, will they be ill-equipped to make educated and informed decisions about their future financial health?
