Dead Man Blogging …

Many people want to know how this country got into its current economic mess. The news this weekend that some of Wall Street’s biggest, most prestigious financial institutions (Merrill Lynch, Lehman Brothers, AIG) are failing and need to be rescued will raise many more questions.

Of course, the full story is quite complicated, but one of the main drivers behind the current problems is the housing crisis, and the fact that these institutions allowed many homeowners to take on way more debt than they could handle.

Many observers have pointed out that a lot of the blame lies with the consumers who took on that debt. While I definitely believe in personal responsibility, I also believe the vast majority of those people did not receive adequate or entirely truthful explanations about what they were signing and had little idea of what they were getting into.

And that, at least in part, is a failing of our educational system.

I mean, why don’t high schools teach personal finance? It should be a mandatory requirement for a degree. If I were a school administrator or involved in curriculum development, that would be one of the first changes I’d make.

Young people are taught how to bake cakes and sew pillows in home economics, how to build clocks in shop class, how to carry a tune in music class, how to do a layup in gym class, but for some reason they are rarely if ever taught the finer details of balancing budgets, investing in stocks and bonds, saving for retirement, managing debt, etc.

As a journalist covering the markets and now as an investment professional, I can’t begin to tell you how few people know Thing One about managing their money. These are the people who invested most or all of their savings in dot-com stocks, or bought real estate they couldn’t really afford, or signed up for and then maxxed out their limit on multiple credit cards.

Even many of the folks who aren’t facing imminent crises have very little idea of where they stand financially or how to prepare for their future.

It’s not their fault. This is not intuitive stuff. It has to be taught, and the earlier the better.

Maybe there’s hope. This week, I spent a couple of hours on the phone trying to explain a few things about the stock market to the 10-year-old son of a high school friend of mine. He was competing in an investing contest for an after-school honors program.

Those kind of contests can obviously teach some bad investing habits, but at least they get kids thinking about the subject matter while making it somewhat exciting. That’s not an easy thing to do, but it’s important to try.

In the meantime, we bend over backwards to bail out the financial institutions that failed us, while allowing the consumers who were never taught any better to suffer the full consequences of their ignorance.

That kind of cold-hearted, bottom-line thinking is – for better or worse – the nature of capitalism, and it’s perhaps one other fact of life we also ought to teach our children about. Maybe that would get them to pay attention.