"You've got to stand for something, or you will fall for anything."
- John Mellencamp
Many of my columns are about people who make bad financial decisions. People who take out payday loans and run up debts on high-interest credit cards. People who play the lottery and gamble too much at casinos.
People who just don't know how to handle their money.
I'm convinced that most of the mistakes result from lack of information and bad habits formed in childhood.
Dr. Keen Babbage of Lexington, Ky. has some answers in the second edition of his book, Extreme Economics (Rowman & Littlefield Education, Lanham, Md.).
I loved the first edition that came out in 2007. My glowing comments appear on the back cover of the newer version.
Dr. Babbage says that personal finance should be a part of the school curriculum.
I've known Dr. Babbage for 30 years, and he knows something about finance. He is frugal and has a good eye for investments.
Keen mentions that he learned from his grandfather, Keen Johnson, a former Kentucky governor.
Governor Johnson was a "saving, thrifty, frugal" governor who, instead of buying new office stationary, used the stationary of the previous governor, Happy Chandler.
Johnson simply drew a line through Governor Chandler's name and wrote in his own.
I wish Governor Johnson had been in charge of our economy instead of Hank Paulson, Timothy Geithner and Ben Bernanke. I can't see Governor Johnson giving away billions in bailout money to Wall Street.
Governor Johnson was governor at the end of the Great Depression. He knew the value of a dollar.
If you look at the saving rate of Americans, its obvious that the frugal ethic of Governor Johnson's era has not been handed down to the current generation.
We have a society where the haves are getting more and the have-nots are getting less.
There are whole segments of the business world set up for the more intelligent and cunning to prey on the less savvy. If you go back to Darwin, there is an argument that the world has always been that way.
Education is the way for have-nots to protect themselves.
Education is the equalizer in any society. It allows the poor to be on equal footing with the rich. If people are able to make informed decisions, they are less likely to make mistakes.
That is where the concept of "Extreme Economics" kicks in.
Babbage's book is aimed at teachers and educators, but any parent or student would benefit from reading it. In 2007, Babbage wrote that America was headed toward a "financial meltdown."
He called it correctly on that one.
Smart money management sounds simple: spend less than you make, and save the rest. I don't think Americans, especially young Americans, get it. Babbage has some ways to help them understand.
Until recently, today's young people haven't had to learn hard lessons from a depression, and neither have their parents. Both have societal pressure to spend on consumer goods.
It wasn't life and death for our grandparents to have the coolest cell phone or iPod. My grandmother didn't have either and seemed to do fine.
When sound fundamentals are taught at a young age, they become habits. I've read many studies that show that people's financial profiles are decided by the time they are 27. If they run through money at age 27, they will do the same at age 50.
If you don't know the basics, you will blow your money. It doesn't make any difference how much money you have. Just ask lottery winners like Jack Whitaker. Like roughly 90% of lottery winners, he went through all of his money in less than five years.
The spend-for-today mentality has to stop. Schools and society have to address the problem, and Dr. Babbage has concrete ideas, exercises and plans that will help.
All of America needs to stand up and take notice. Too many Americans are falling for anything.
Don McNay, CLU, ChFC, MSFS, CSSC is one of the world's leading authorities in helping people deal with "Big Money" issues. He is an award-winning syndicated financial columnist and Huffington Post Contributor.
You can read more about Don at www.donmcnay.com.