Once you learn to ride a bicycle, you can always ride a bicycle. One of nature’s certainties. Well, like most of our experiences, it is true only within narrow limits. There are exceptions.
My youngest brother, Michael sent me a story with an embedded video. It was eye-opening. Destin Sandler, engineer and YouTube educator devised a bike that steers differently than a conventional bicycle.
What did he learn?
- He could not ride it at all for a while
- After 8 months he was able to ride it reasonably well
- After he could ride the new, steering reversed bike, he could not ride a regular bike.
- His 6-year-old son picked it up quickly.
That tells us things.
- Old habits die hard. Our brain develops methods and biases that it does not give up readily.
- Once it gives up old ways, it does not easily revert.
- Young people learn more easily because the algorithms that govern behaviour are not so established.
In a different context, how do you feel about saving money?
If it is an ingrained habit, it would he hard to stop doing so. I had a 91-year-old client who saved 40% of his income tell me, “I might need it when I am old.”
In the same way, it would be hard to start.
People are creatures of habit and for a reason. Most habits get us things we want. They are a shortcut to some complicated outcome. If you had to write the algorithm to ride a bicycle you would find that it was exceedingly difficult. Unconscious competence is common in humans.
Sometimes though habits become obsolete and require amendment. Amending works, but not well in the short run. The brain does not give up its hard won algorithms without a fight.
All of this is why strategic financial literacy is such an important subject.
- Learning to save when you are young is easy. Not so much later.
- Learning to spend wisely is easy.
- Discipline is never easy but easier in the beginning.
More sophisticated subjects include where money comes from, and how debt and investment are like time machines that move spending in time so that spending need not correspond exactly with the time that the money is earned. Both have additional characteristics like risk, security, and compound interest. You can learn the arithmetic nuance later.
As times change it might be necessary to learn other techniques. If inflation is very high then borrowing at fixed rates probably makes sense. If interest is very low, spending seems to be a good choice. Almost no cost to acquire money if you need it and almost no value added to keep it.
People resist, but every time they adapt they get better at changing. Neuro-plasticity improves.
There is much to teach about financial matters, and the important material is not found in the details of how mortgages and credit cards work.
For example, how do you teach a child how income taxes work? Have them buy an ice cream cone with their own money and then you, as the governing body, eat a third of it. Half if it is a three scoop cone.
They will be tax aware forever.
Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.