Schools teach you about money, but they often miss the key to managing it effectively: understanding your own behavior.
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The Financial Education We Got
How much financial education did you get growing up?
When I ask people that question, most say “not enough” or “very little.”
It’s a common refrain: schools don’t teach us about money.
But it’s not for lack of interest. People universally agree that teaching kids about money is a good idea.
If memes are to be believed, though, we spend far too much time learning about parallelograms and not nearly enough about personal finance.
Here’s the strange part: nearly every province and state includes financial education in their curriculum. It’s there, somewhere, tucked neatly into curricular corners.
Everyone’s getting a financial education, but no one feels like they did.
What’s going on?
I think it’s because money is unlike any other subject we study in school.
There are no “money tests” in the classroom. Those tests come later, in real life, with far higher stakes.
Managing money, in some ways, is like driving a car.
Think about the last time you drove. How much of the “book knowledge” you learned applied in that moment? Did you calculate braking distances as you approached a stoplight? Did you measure the angle of your turn as you merged? Probably not.
Because driving a car isn’t about doing physics.
And managing money isn’t about doing math.
How Biases Derail Us
When we’re debating whether to buy a $1000 espresso machine online, we’re not crunching numbers like human calculators. Instead, we rely on mental shortcuts, what psychologists call “heuristics.”
These shortcuts simplify decision-making but are riddled with pitfalls. Those pitfalls, or cognitive biases, often derail our financial decisions.
And two biases, in particular, are critical to know: anchoring bias and present bias.
Anchoring bias skews our decisions based on the first piece of information we encounter, even if it’s irrelevant.
A famous study from the 1970s illustrates this: participants were shown two identical equations, but one started with high numbers, the other with low numbers.
Given five seconds to estimate, those with the higher numbers guessed higher results, while those with lower numbers guessed lower.
The math was the same; the answers were not. The first number acted as an “anchor,” distorting their calculations.
With money, the same happens. That $1000 espresso machine might seem like a lot of money, perhaps the same as a new laptop.
But when a Buy Now, Pay Later option reframes it as $84 per month, the comparison shifts. Suddenly, it’s no longer competing with a laptop but with monthly coffee shop expenses.
The anchor has moved, and so has the decision.
Present bias is trickier.
We tend to favor immediate gratification over future rewards. In another study, participants were asked to choose between fruit or chocolate for a dessert they’d eat next week. 74% percent opted for the healthier option of fruit.
But when offered the same choice on the day of, 70% chose chocolate.
We’re great at choosing what we should do for our future selves. But when making decisions for our present selves, we often pick what we want.
It’s why Buy Now, Pay Later schemes thrive - get what you want today, but defer the discomfort of paying for it until later.
It’s also why nearly half of participants in these programs fail to pay in full, ending up with interest-bearing loans.
Cognitive biases create behavior gaps - the distance between knowing what to do and doing what you know.
Bridging behavior gaps is far harder than addressing knowledge gaps.
Knowledge gaps - between not knowing and knowing - can be closed with information and direct instruction. Most financial education focuses here.
It’s one thing to learn that we should always spend less than we make. It’s a completely separate thing to ensure that every month we are - in fact - behaving accordingly.
It’s relatively easy to fill a knowledge gap. But behavior gaps are a different beast. They can’t be bridged with more information. Behavior gaps need something else.
We Don’t Rise to the Level of Our Financial Goals
“We don’t rise to the level of our goals; we fall to the level of our systems,” James Clear says in Atomic Habits.
In personal finance, the universal goal is to spend less than you make.
But regularly achieving that goal relies on having a system to get you there.
And this is where budgets come in. For many, setting a monthly budget is the personal finance panacea.
But research suggests otherwise. In fact, it looks like people who keep budgets do the same or marginally worse than those who do not.
Budgets are static plans, not dynamic systems. They don’t adapt to the unexpected, like a grocery bill that balloons, or a flash sale that you don’t want to miss, or an emergency fundraiser you want to donate to. Worse, they don’t address the biases that drive most financial decisions. Budgets assume you’ll follow the plan, but plans crumble under the weight of human behavior.
The Bygone Envelope System
When budgets do work, it is because they are part of a broader system.
In the 1960s, budgets were often part of a simple and resilient personal finance system called the “envelope system.”
In that system, you’d divide your cash into envelopes labeled for groceries, rent, entertainment, and so on.
If one envelope ran dry, you couldn’t overspend. Instead, you’d shuffle money between envelopes, sacrificing eating out to cover groceries, for example.
The brilliance of the envelope system was in its adaptability. You could “budget” to determine how much money should go into each envelope. But it was other parts of the system that ensured you met your goal to spend less than you made.
You were anchored to the amount of money in your envelope. And if you didn’t have enough cash in the present, you weren’t readily able to borrow for instant gratification.
It forced you to confront trade-offs in real-time.
Today, in our cashless, digital world, that system has all but disappeared. And without it, people are left to fend for themselves against the twin traps of anchoring and present bias.
When things don’t go as planned, the financial industry steps in - not to help but to profit. The credit system fills the gap between our goals and our spending with riba-based loans, credit cards, and Buy Now, Pay Later schemes. The result is a cycle of overspending, under-saving, and regret.
In the absence of a personal finance system, we don’t rise to the level of our financial goals. We fall into the traps of the credit system.
Designing Systems That Work
Teaching money isn’t about adding more math lessons and factoids about personal finance.
It’s about understanding human behavior and designing systems that work with, not against, our biases. A good financial system isn’t just a budget. It’s a framework that:
- Fights anchoring bias - with a dashboard that tracks spending against pre-determined targets.
- Fights present bias - with automations that prioritize saving and sadaqah and control impulsive spending
- Adjusts as needed - because life is unpredictable, and your system should respond accordingly.
For Muslims, this need is even more urgent.
Falling into the traps of the credit system isn’t just financially risky; it’s spiritually harmful.
The real challenge isn’t teaching knowledge. It’s closing the behavior gap.
And that requires more than information.
It demands that we teach how to build systems that don’t just tell us what to do but help us do it.
Because in the end, managing money isn’t about math. It’s about managing ourselves.
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Written by Farooq Maseehuddin
Farooq Maseehuddin (MuslimMoney Guy) is a financial educator and writer. He holds both a Bachelor of Education (BEd.) and a Master of Education (MEd.) from the University of Alberta. He's been a high school teacher and Muslim community organizer for two decades.