Why Wealth Literacy is More Important than Financial Literacy, Part I

April 15, 2007 – Given the demographics of The Underground Investor readers, this next series of blogs are going to be written more for the benefit of our readers that have high-school or college aged children. One of the membership levels, the Level I Membership, of our maalamalama courses focuses on wealth literacy for young adults or older adults that are novice investors. The reason we have focused one of our key membership levels of coursework for novice investors is that we believe the traditional education system fails all students on all levels in this regard. If I were a university President, I would ensure that my business program offered the following courses:

(1) How to Leverage Money
(2) The Four Pillars of Wealth
(3) How to Invest Money
(4) Gold and Precious Metals
(5) How to Leverage Time
(6) Debunking Widespread Investment Myths; and
(7) Networking

There would be several more lessons that I would provide after this basic curriculum was completed, including:

(1) The Connection Between Politics and Investing; and
(2) Leveraging Technology to Build Wealth

With an adequate foundation of knowledge in all these courses, a young adult would be prepared to build wealth without so much trial and error, struggle, or outright failure. Instead, no level of traditional institutions of education teach such courses and instead remain mired in curriculums skewed towards theory and not applicability such as statistics, economics 101, marketing and finance. If you think about it, even at the Master level, none of the courses Master programs offer will really teach any student how to build wealth. This is precisely the reason, we at maalamalama built our own curriculum to give young adults the foundation they need to understand how to truly build wealth.

Our beliefs in this matter are often confirmed by various surveys we stumble across that assess the financial literacy of young adults. However, we still believe that these surveys are inadequately structured because they focus too much on traditional concepts such as stocks, options, real estate, and so on versus granting an assessment on whether young adults are knowledgeable about any concepts necessary to build wealth. Being “financially” literate versus being “wealth” literate are two entirely different concepts. I believe that one can be financially literate while not being wealth literate. At maalamalama, we focus on ensuring that we teach young adults and novice investors to become wealth literate.

The difference between financial literacy courses and wealth literacy courses is this. Financial literacy courses focus on topics such as budgeting, basic understanding of investing concepts, funding retirement accounts and so on — concepts that young adults rarely consider but yet not concepts that will help them build wealth. Financial literacy courses teach young adults what they need to do to build wealth but grants them none of the tools they will actually need to successfully build wealth. For example, if one was a basketball player, the comparable level of a financial literacy course would be to tell a power forward that he needs a good array of post-up moves close to the basket, a sweet outside shot to make opponents respect his range, a quick first step to create off the dribble and a solid defensive game so that opponents can not exploit him for being a one-dimensional player. But after telling the power forward that, there would be no further explanation but a wish of “good luck” and a pat on the back. A wealth literacy course would actually teach the athlete specifically what he would need to do to achieve success in each area of his game that would make him a premier athlete.

Telling young adults what they need to do will have little impact on improving their quality of life or making a successful transition from young adults into financially independent adults. Providing a toolkit for how to do so is far more important.

Next up in this series: the out-of-touch expectations of young adults today.

[tags]wealth literacy, financial literacy, investment education, gold, blue ocean investment strategies[/tags]


J.S. Kim is the Founder and Managing Director of maalamalama, a comprehensive online investment course that uses novel, proprietary advanced wealth planning techniques and the long tail of investing to identify low-risk, high-reward investment opportunities that seek to yield 25% or greater annual returns.

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