Does the education system produce poor people?

People love to talk about how the rich stay rich and the poor stay poor, and usually the conversation tends to stray in the direction of "tax loopholes" and "the poor being exploited". I'd like to take a second and break into one of my favorite rants on what I think the cause is behind the widening gap between the wealthy and not-so.

I think the cause of that gap is the fault of our educational system.

First I need to convince you that wealth isn't the result of a high salary, but rather it's the result how how you handle your salary. The Millionaire Next Door uses the example of the doctor who earns well into the 6-digits, but is deep in debt due to the vacation home and the boat, contrasted with the white-collar Joe who lives below his means and has saved and invested aggressively. Who is wealthier? The doctor who owns lots of nice things, but has to work every day to make his next payment? Or white collar Joe who has a very large investment pool that will help him stay comfortable for the rest of his life? How many pro-athletes earned millions of dollars, but blew it all on big houses and bling, only to be left with nearly nothing by the time they hit age 50?

So why is this the education system's fault?

As Americans we love to point to our school system as a very fine one. We provide free education to all children up to a high school level. Our children who graduate end up getting some nice jobs in a variety of fields. These children are obvious successes, right?

When I went to high school I was required to take classes in American history, physics, trigonometry, chemistry and literature. All in all I was required to take 28 classes. Not one of those classes was on finance. When I graduated I knew how to calculate the speed of a falling baseball at give point of time, but I didn't know how to amortize a home loan.

The skills I learned in school have helped me tremendously throughout my life. The experiences I had with raw science and literature have definitely shaped me, and in a positive way. The foundations I built have helped me to find a relatively high paying job. But that doesn't necessarily make me any richer.

The problem with the education system is that we teach a lot of fantastic skills, but we don't teach people fundamental life skills. Children are taught skills that can help them earn more money, but rarely are they taught how to handle that money. The reason is that we expect those "life lessons" to be taught by our parents and our peers. We don't need the state to teach you how to manage your money or how to build successful relationships, because that the parent's job.

Where that breaks down is when you find a child with poor role-models. What do you expect a father who blows all of his money on lottery tickets and booze to teach his children about fiscal responsibility? Why are we surprised when the daughter of a beaten and divorced single mom constantly gets into bad relationships? Look at who they learned from. And can we really blame the parents when they themselves never learned any better?

The reason the poor stay poor is because their parents teach them all the wrong financial lessons. A child from this situation will probably never learn about the very basic 401ks or mutual funds, and he will learn to spend what they have instead of saving for tomorrow. Thus the poor begat poor.

The rich will do the very opposite. A child of upper-class parents will be more likely to learn about saving money, paying mortgages and preparing for retirement. When he gets his first real job, his parents will probably tell him to put money into a 401k, and teach him about it. They'll ask him about how much he is saving. They'll encourage him to save up for a house. Even if the child is irresponsible and spends money recklessly, these lessons will be taught. Thus the rich begat the rich.

So is this really the fault of the educational system? It depends on your view of the role of the government. If you feel that the government is the great equalizer, then you should be furious and up in arms wanting change in the system. You should be writing your representatives and demanding that they make basic financial literacy courses mandatory in every high school in America. Every student should be learning about what a 25.99% interest rate on your credit card really means even if your minimum payment is only $100 a month.

So why doesn't the system change? Because the rich realize that the current system gives their children an advantage in the world. And what parents doesn't want their children to have every advantage they can find? And the poor, who should care about this, don't realize it's happening.

Next I want to examine my theory of how the education system came to be this way (which is a largely unproven theory, maybe some of you can help me back it up or prove it wrong).