A Critically Compassionate Approach to

Financial Literacy
A Critically Compassionate Approach to
Financial Literacy

Thomas A. Lucey
Illinois State University, USA

Mary Frances Agnello

Akita International University, Japan

and

James Duke Laney

University of North Texas, USA
A C.I.P. record for this book is available from the Library of Congress.

ISBN: 978-94-6300-128-1 (paperback)

ISBN: 978-94-6300-129-8 (hardback)
ISBN: 978-94-6300-130-4 (e-book)

Published by: Sense Publishers,

P.O. Box 21858,
3001 AW Rotterdam,
The Netherlands
https://www.sensepublishers.com/

Printed on acid-free paper

All Rights Reserved © 2015 Thomas A. Lucey, Mary Frances Agnello,

and James Duke Laney

No part of this work may be reproduced, stored in a retrieval system, or transmitted

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recording or otherwise, without written permission from the Authors, with the
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 TABLE OF CONTENTS

Introduction ix

Chapter 1: The Nature of Financial Literacy 1

Introduction 1
Discussion Point 2
Conceptions of Worth 2
Questions for Reflection 3
The Reasons for Our Feelings 4
The Nature of Our Emotions 7
Activity 10
Emotions and Worth 10
The Big Picture 12

Chapter 2: Income 21
Introduction 21
Income 25
Methods of Earning Money 28
Jobs and Careers 29
Activity 30
Employment and Choices 35

Chapter 3: Careers 41
Developing Employment Skills 44
Money for Business 46
Compensation 47
Employee Benefits 48
Interest Income, Dividends, and Capital Gains 49
Rental Income 52
A Compassionate Approach to Rental Income 54
Taxes 54
Government Income Support 58

Chapter 4: Planning and Money Management 65

Money Management and Financial Worth 67
Opportunity Cost 71
Budgets, Spending Plans, Needs, and Wants 72
Income and Expenses 75

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Table of Contents

Forms of Payment 76
The Big Picture 79
Spending Choices 80
Planned and Unplanned Spending 83

Chapter 5: Risk Management and Insurance 93

Premises of Conventional Approaches 93
Discussion Point 94
Threats to Financial Worth 94
Money Management Revisited 98
Risk100
Protecting from Loss 102
Dealing with Risk 103
Convenience, Risk, and Insurance 104
Adjusting Policy Terms 104
Reducing the Risk  107
Self-Insurance109
Online Activity 110
Regulation111

Chapter 6: Credit and Debt 117

Credit as a Tool 121
Credit and Debt Processes  125
Types of Credit 130
Consumer Loans 133
Discussion Point 133
Purchase Consumer Loans and Installment Loans 134
Long Term Loans  135
Education Loans 135
Mortgages136
Credit Sources 138

Chapter 7: Saving and Investing 147

Another View 150
Matters of Control 151
Saving and Inflation 152
Investing155
Compounding160

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 TABLE OF CONTENTS

Chapter 8: Living on the Margins 171

 173
174
175
176
177
Activities, Case Study 3 177
Case Study 4 178
Activity, Case Study 4 178
Conclusion 179

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 INTRODUCTION

This book concerns the teaching of financial literacy. It represents a resource for
elementary and middle level teachers and for teacher candidates.
Much research documents the poor understandings of personal finance among
children and youth (e.g., Lucey, 2002; Mandell, 2008b; 2008a; Mandell & Klein,
2009). Literature also questions whether assessment efforts properly interpret the
financial literacy of those they purport to measure (Lucey, 2005; Schmeiser &
Seligman, 2011). Studies also consider financial capability and its improvement
through by various curricular and instructional processes (Johnson & Sherraden,
2007; Sherraden, Johnson, Gho, & Elliott, 2011). While conventional wisdom holds
that educating children about tenets of wealth accumulation may change this situation,
increasing financial literacy requires more than instruction about mathematical
concepts and disciplined use of financial resources. Patterns of financial practice
present manifestations of psychological and sociological expression. Thus, the
goods and services purchased and sold provide indicators about individuals and
groups’ feelings about themselves and others. For example, an individual’s decision
whether to use a sum of money to purchase a piece of clothing versus providing fresh
fruit for a homeless individual informs about his or her social values.
A principle of this text involves the belief that wealth accumulation for its
own purpose represents a notion founded on psychologies that portend ultimately
unfulfilling outcomes. The evidence for our claim lies within the existing
consumerist environment. In this setting, individuals seek cosmetic and convenient
paths to fulfillment. Naysayers or objectors become ostracized as malcontents
that fail standards of loyalty to a community or country (Hedges, 2010). Financial
literacy becomes an individual responsibility with individual consequences, in
which those who lack money receive social judgment for their poor choices. Such
an uncompassionate view of financial status is not unique to the USA because in
other countries, similar attitudes of blaming the poor or those less fortunate may be
common. In the ever dynamic capitalist system as it exists in the USA, few people
are finding security, financial or otherwise.
This text offers a critically compassionate approach. The underlying philosophy
relates to compassion for oneself (wherein one’s sense of esteem originates from an
inner trust founded on care) representing the only approach to personal fulfillment.
This ideal holds that financial practice can only be fulfilling if it occurs in a manner
consistent with self-compassion or personal self-worth. Such an ideal stands
diametrically opposed to an approach premised on control of material resources
because it bases financial decision-making on a compassionate sense of personal
self-worth, rather than depending upon accumulation of goods and services.
This notion of stewardship discourages a system based on control and prompts a
broader social vision that is predisposed toward compassion and invites decisions

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INTRODUCTION

that foster communities based on care. These associations involve foundations of

trust based on principles of compassion, honesty and integrity. This perspective
represents an alternative to a system that founds financial literacy upon participation
in a system of human objectification and exploitation. This system equates self-
worth with the ability to control material objects, including other people. In other
words, conventional financial literacy supports a system that defines the socially
marginalized in terms of their economic worth to the financial elite, rather than
in terms of the life conditions and stories that they experience. Global financial
literacy efforts extend these practices to children of impoverished countries by
developing their sense of personal worth through creation of their own businesses
and establishment of their own bank deposit accounts.
This text offers a critically compassionate approach to financial literacy founded
on the following ideals: (1) Having compassion for oneself involves a sense of inner
– psychological - peace or calm that relates to a sense of security, trust and respect for
oneself such that one treats oneself well and resists temptations that harm; (2) Such
a sense of security becomes reinforced in a community with others who experience
this sense of inner compassion and in which one shares compassion for others; and
(3) This inner sense of trust occurs independently from material accumulations.
The text accomplishes this process by (1) describing technical aspects of financial
literacy as they fit into a setting of compassion and providing content knowledge
that pertains to related topics; (2) contextualizing such understandings of financial
literacy within a broader social setting; (3) inviting different ways of perceiving
financial relationships; (4) illuminating the affective components of financial
decision-making; (5) developing compassion for those with controlling dispositions;
and (6) stimulating feelings of kindness for those who experience various forms of
financial challenge.
Patterns and availability of emotional and material resources may guide individual
choices. For example, the financial development of a person who is medically
challenged may relate to the family to which she/he belongs. A person who has
medical problems and develops in an affluent, encouraging family has a stronger
possibility of realizing financial accomplishment than does a person who has the
same medical challenges and living with an encouraging family that lives in poverty.
Yet, the psychological environments in these settings also influence outcomes. A
setting that involves teasing and ridicule prompts different emotional underpinnings
to decision-making than one of patience and kindness.
Providing equitable financial literacy education processes for all democratic
citizens acknowledges that: (a) individuals do not choose the contexts in which they
enter this world; (b) individual accomplishment represents a matter of environment
as well as personal choice; (c) socioeconomic class relates to the establishment of
institutional structures and procedures that maintain a concentration of wealth. Thus,
financial literacy relates to socio-emotional perceptions that guide financial practice
and how they undergird the emotional fabric that shapes early 21st century global

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society. One’s affective foundations guide the rationales of his or her money choices
informed by how one thinks about one’s state of finances and money as sources of
possibilities in life.
Psychological research recognizes mental processing as being both rational
and emotional, rather than involving two separate domains (e.g., LeDoux, 2002;
Panksepp & Biven, 2012). Conventional forms and interpretations of financial
literacy, which are founded on conceptions of merit based on individual choice, find
their roots in emotions of anger and control. Control (or ownership) of goods and
services relates to a coercive/behaviorist process of rewards and consequences that
fit the thinking of those in economic or political power.
A compassionate view of financial literacy recognizes the importance of
acknowledging how social structures reinforce patterns of classism and inequity.
One may claim that such structures derive from intentions to provide civility, calm,
and order in a potentially chaotic world, yet a vision that stands counter to these
structures provides for a system of intolerance that emphasizes compliance with
technicalities of legal positions designed to maintain a social order that maintains
power structures of the elite and privileged. It would be difficult to argue that
compassion founds such conditions. Consider a January 5, 2013, editorial opinion
in the New York Times, which disclosed rampant disregard for the United States
Supreme Court’s 1963 Brady decision, which requires prosecutors to provide
evidence to defense attorneys that may show their clients to be innocent (New York
Times, January 5, 2013). Although society provides laws to protect the less fortunate,
competition, greed, and inconvenience prevent their application and enforcement. A
view of financial literacy that focuses on wealth accumulation and control underlies
this challenge. Oftentimes, legal proceedings represent contrived experiences of
professional competitors rather than open discussion and equitable resolutions.
Court systems represent stages for civilized battles for rhetoric and strategy among
judges and lawyers, rather than realizing legitimate outcomes based on the needs of
parties to the hearing.
Another example may be observed in the corporate world of fast-food.
Contemplate the huge income gap between corporate executives and hourly wage
employees at neighborhood fast-food outlets. Reflect upon the backgrounds of the
people who occupy these positions and ponder the emotional influences of their
families and how these social influences relate to the patterns of networking and
education that they experienced (Bosshardt & Walstad, 2014). For what aspects of
their histories do they, as individual choice-makers, take credit? To what aspects of
their experiences do they attribute other factors? United States society experiences
a low rate of upward social mobility, along with patterns of increasing residential
and educational segregation between rich and poor (Chetty, Hendren, Kline, & Saez,
2013). When society does not make available the resources and opportunity for
social inquiry and dialogue available, it allows for the creation and dissemination
of myths that preserve structures of power. Compassionate education about personal

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INTRODUCTION

finance requires that learners contemplate the social contexts that shape their patterns
of decision-making and their responsibility for making choices that show care for
others.
One final illustration relates to the patterns of racism exercised by police
departments in many United States communities and the anti-immigration policies
against people of Latin American origin. Literature documents well the economic
motives associated with a history of racist policies and practices with regard to
education, law, personal finance, and other social institutions in the United States
(e.g., Alexander, 2010; Anderson, 1988; Conley, 2001; Loewen, 2007; Zinn,
2003). The U.S. Government granted wide police latitude as a result of security
intensification after the 9-11 attacks on the United States. This expansion of law
enforcement also represents a broadening of economically-justified racism that has
fostered an environment of racial profiling and incarceration that infringes upon
civil and human rights.
The orientation of chapters in this text relates to the six areas of financial literacy
(i.e. Financial Responsibility and Decision Making, Income, Insurance, Money
Management, Spending and Credit, Saving and Investments), as delineated in the
National Financial Literacy Standards (Jumpstart Coalition, 2007).1 Coverage of
income and careers spans two chapters to provide each area the reader focus that
it deserves. Admittedly there are other organizations that provide standards that
concern financial literacy and that commonalities exist among them. Because the
premises of this critically, compassionate approach to financial literacy provide for
(1) psychological foundations that are consistent with current research, (2) broader
notions of financial interactions, and (3) financial choices that express social values,
compassionate amendments to the premises and goals of these strands are presented
below in Table 1.

Table 1. Critically compassionate views of financial literacy

Standard Premise and Goal Critically Compassionate View

Financial People are rational beings. People are beings whose

Responsibility and Their goal is to apply reliable rationales are governed by
Decision Making information and systematic underlying emotions. Their goal
decision making to personal is to apply accurate information to
financial decisions. make caring and compassionate
financial decisions.
Income and Careers People have the ability to be loyal. People have the ability to be
Loyalty to an employer or type of loyal or disloyal as determined
profession will result in a financial by how they are treated. The goal
fulfillment. The goal is to use a is to maintain a sense of personal
career plan to develop personal self-worth by earning income in a
income potential. manner of social integrity

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Table 1. (Continued)
Standard Premise and Goal Critically Compassionate View
Risk Management Dealing with other people The first step towards managing
and Insurance involves various forms of risk is by exercising a safe
financial risk. People can use lifestyle. People can experience
appropriate and cost-effective risk safe lifestyles to reduce their
management strategies to manage exposure to various forms of
various forms of financial risk. financial risk.
Planning People have a certain amount Emotions affect one’s financial
and Money of income to manage to realize experiences and money
Management financial fulfillment. The goal is management decisions. Emotional
to organize personal finances and patterns and a sense of personal
use a budget to manage cash flow. self-worth affect one’s financial
experiences and money
management decisions. The goal
is to examine the social integrity
of one’s financial sources and to
respect one’s community.
Credit and Debt People who need money may People who need money may
borrow and repay from people or borrow and repay from people
institutions that have more money who have more money than
than needed. The borrower’s goal needed. The borrower’s goal is
is to maintain creditworthiness, to resist unnecessary credit and
borrow at favorable terms, and avoid being subject to others’
manage debt. financial control.
Saving and People put money aside for future The amount of money that people
Investing use. The tools used for saving or have available to save depends on
investment have various risks and the wealth that people inherit, the
returns. income that they earn, and their
self- discipline to save. Savings
and investing tools have various
financial and social risks and
rewards.
Culturally None People have different patterns
Responsive Matters of financial needs as guided by
combinations of gender, race/
ethnicity, religion, and other
beliefs or traits. The culturally
responsive goal is to have
compassion for all people and the
stories that they are.

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INTRODUCTION

This text contains eight chapters. The first chapter provides an overview of
financial literacy, manners of its conception, and illustrations of its competitive and
compassionate applications. Chapters two through seven consider the areas identified
within the national financial literacy standards. With two exceptions, each of these
six chapters explores its respective topic by addressing the respective standards with
a critically compassionate outlook. The strand that relates to income and careers has
been organized in two chapters (Chapters 2 and 3). Chapter eight offers a broader
discussion of critically compassionate approaches to financial literacy and employs
several case studies to centerpiece the challenges associated with its application.
The end content of each chapter includes classroom activities for use in grades
K-8. These activities involve several themes (1) development of an awareness of
social and societal relationships to personal finance; (2) development of practical
skills that relate to one’s financial skills; and (3) development of compassion for
those with whom one interacts with financially, and who may be impacted by one’s
financial decisions.
Finally, we address the possible claim that this book may represent an effort of
advocacy, rather than of financial education. It is acknowledged that the information
contained in this text provides for a perspective of financial literacy that counters
conventional reasoning. As such, some may characterize it as “anti-economics”
(Morton, 2005).
This response begins with consideration of the purpose of conventional financial
education approaches. The United States Consumer Financial Protection Bureau
(USCFPB) (2015) interprets the goal of financial education as relating to four
concepts: control, capacity, monitoring, and freedom. Consider these areas and their
nature: control and monitoring represent principles of management and limit setting.
To control one’s resources means to manipulate them in a way that benefits him
or her. Capacity relates to potential of managing social processes based on control
of economics, goods, and services. Freedom concerns the ability to access social
resources based on the extent to which one controls economic resources without
social restriction.
In essence, conventional approaches to financial education rely upon a rationality
guided by possession of material resources. In this line of thinking, happiness relates
to the acquisition of more resources, which includes other people.
We respond that the basis for patterns of rationality and justification relate to
the motives that found their development. In other words, the patterns of reasoning
within a theoretical argument relate to the context and motives of the persons who
create them. At the core of these processes lie the psycho-emotional structures that
forge their meanings. Ledoux’s (2002) pioneering work recognized that emotions
undergird the cognitive processes. We offer the notion that other affects, such as
peace and compassion, may also guide thinking about personal finance. Alternative
approaches to controlling money may invite pro-social behaviors that involve
principles founded on human values, rather than accumulation and profit.

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Recent studies by Lucey and Bates (2010; 2014) which find support for financial
education processes that relate to tenets of moral education, provide credibility to the
emerging notion of compassionate approaches. We invite the reader to let go of his
or her sense of control as he or she begins the journey through this text.
Second, we argue that scholarship supports the framework described in this text.
Studies find children who learn in environments that advocate for control of material
resources do not necessarily develop a strong sense of self security (Narvaez &
Gleason, 2013), that educators agree with moral principles in financial education
(Lucey, Giannangelo, Hawkins, Heath, & Grant, 2007), and that such principles may
be taught (Lucey, in press). A critically compassionate approach to financial literacy
rests upon principles of care.
While we recognize the perspective that this text may represent a work of advocacy,
we would suggest that, in a sense, research in the social sciences inherently involves
some element of advocacy. Scholarship represents a sharing of ideas to clarify and
refine such notions. This work presents a counter-account of financial literacy than
directing items for one’s own vision. The problem with this approach lies within
the focus on oneself, rather than a holistic social vision of capacity and freedom to
interpret the volume of resources in one’s control and how these amounts shape one’s
social autonomy. The difficulty with this approach relates to the need for resources to
guide one’s freedom. A conventional approach to financial education advocates for
self-promotion and objectification. A critically compassionate approach represents
one of humility that respects another for the person that he or she is, not what others
would have him or her be.

Note
1
The Jump$tart Coalition released the 4th edition of the standards in early November of 2014. This new
edition includes standards for kindergarten-preschool classrooms.

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