Teaching Financial Competence

"Know thyself." ~ ancient Greek aphorism

In one of my professional development courses, I remember seeing the four box description of the conscience competence learning model.  Specifically, the model describes a transition from unconscious incompetence, to conscious incompetence, to conscience competence, to finally unconscious competence.  The model proposes that learning progresses from not knowing how to do something to eventually doing something entirely due to habit.  One problem with this learning model is the inherent belief that all learners can become at least consciously competent in any chose area.

Since having our daughter, who is now seven, I believe the learning model is different.   To me, everyone starts out at a stage of unconscious incompetence and unconscious competence.  For example, my daughter tells me she "knows" how to do many things she can't do.  My daughter also can do many things well, but she doesn't consciously know how.  A good example is riding a bike.  I was able to teach my daughter how to ride a bike without explaining the physics of why it works.  I just had to let her unconscious competence of balance take over.

Now that I'm in my fifties, I feel I've reached a stage of conscious incompetence and conscious competence.  I know what I'm good at doing and what I'm not good at doing.  For example, I'm sure that I won't good be at day trading.  Outside of personal finance, I know that I'm definitely not good at creating art or musing.  So I don't try be good at doing any of these.  Similarly, I know I'm pretty good in financial decisions and choices.    At my stage in life,  I choose to improve those areas which I'm good at doing.

The middle stage is one of transition from unconscious competence and incompetence to conscious competence and incompetence.  Getting through this interim stage as quickly as possible is one of the great challenges of young adulthood.  It's during this stage that many mistakes are made because unconscious incompetence may be confused with conscious competence.  For example, many people who took adjustable rate mortgages at greater than 100% of home equity may have believed they were consciously competent.  In fact, it is more likely that they were unconsciously incompetent with respect to financing a home.

For financial matters, I hope to help my daughter become unconsciously competent and then transition to conscious incompetence and competence as quickly possible.

For more on  Crossing Generations, check back every  Thursday for a new segment.

This is not financial or parenting advice. Please consult a professional advisor.

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