Kevin O'Leary on Why We're So Far Behind on Financial Literacy

The United States is behind the curve when it comes to educating our young people about financial topics. Far too many Americans become adults with little to no knowledge of how investing, taxes, interest, and other financial concepts work.

We recently had the chance to sit down with Shark Tank star and Beanstox chairman Kevin O'Leary. In this Dec. 21, 2020 Fool Live video clip, Mr. Wonderful himself talks with Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser about how the U.S. has done such a poor job when it comes to financial literacy. 

Matt Frankel: So you recently launched this new investment app called Beanstox, and it was launched during the pandemic. You told me the story a few weeks ago about it, so will you share with our listeners what led you to do this?

Kevin O'Leary: Yeah. I've been, obviously, gotten some notoriety from Shark Tank. About 100 million people see these shows each year. Overtime, we've been invited to high schools, it's very popular with young entrepreneurs. One theme keeps coming up over and over and over again, it's financial literacy. We teach our kids everything in high school; sex education, geography, math, reading, etc. We do not teach them anything about credit cards or debt or investing, and then we ask ourselves why we end up in the situation we are today, which has been highlighted by the pandemic a bit. There's a 100 million people in America that have set nothing aside for their retirement. If I'm looking for a cause, which I am, to really give back on in 2021 and beyond, it's going to be financial literacy. It freaks me right out, that so many people, including many of the people that work for me in my own companies have just two weeks of cash set aside, and that's not even investing, that's just poor financial planning. So I decided to get into this space by getting involved in providing an app that would do the kind of investing I do; share my investment philosophy and help these 100 million people get going. Just start. That's the plan.

Jason Moser: Yeah. Kevin, that's a really good point. I'm glad you brought that up, because obviously, it's very, very much in line with what we try to do here at the Motley Fool. Not only helping folks invest, but really helping folks believe that they can achieve their financial independence. But it really does start with that financial literacy. It is, obviously, a major problem. I don't understand why it's not something that is just nationally taught. It seems like half the states require it as a high school diploma, half the states don't. Understanding the financial literacy is a big focus for you right now. What are the things that you feel like within that financial literacy realm? What are the most important parts of that today? I mean, you've mentioned credit cards, I think that's certainly one of them. But what are some of the key aspects that you're focusing on?

O'Leary: The number one is to realize that saving and investing are two different things. One of the big challenges people think, "Well, I'm going to take some amount of what I make in my paycheck and put it in a savings account." That is not investing. Investing is getting exposure to the market, which for many people is complicated. We make the assumption that people know how to buy a stock, buy a bond, create a diversified portfolio, know what large-cap, mid-cap, small-cap, tech and growth are. You guys, the Motley Fool have been on this for years. Not everybody knows how to do that. In fact, the majority of people don't and so I wanted something like Beanstox to do that for you. Beanstox is a platform for people that want to build a nest egg, be exposed to the market because a savings account doesn't get you market returns. Market returns, over the last hundred years, 6-8 percent depending on the year, generally, over a long period of time. The whole idea is to invest a portion of your paycheck, I like 10 percent as the amount, at least a 100 bucks a week and just let it grow from your late 20s, the 30s, and 40s, and 50s and you end up with a million, two a million, five in the bank and that's enough to retire on. It's like a safety net. But what I found out in doing all the research, is that very few people have the time, or the desire, or the skills to read financial statements, learn about individual stocks. I prefer to use a vehicle that I've been using in my own family trust, ETFs, exchange traded funds. There are over 2,000 of them out there. So the question becomes, which ones do I invest in? Some apps are very loyal to one brand or selling their own product maybe, that's not how Beanstox works. The way I invest is looking for the very best in each category. What's the best ETF for large-cap, the best for mid-cap, the best for small-cap, the best for tech, for growth, for dividend growth? Then I put those into your portfolio, not me, the app does. It does the work, and it builds that core nest egg that you live and to grow on. It doesn't mean you don't trade stocks, but you've got to have the mother lode somewhere. That's what I keep explaining to people. Where is the real money, where are you really investing your bedrock?

Moser: How did we get to a point where financial literacy is not something that's a focus in school? I mean, given everything that we know now, and given that it's just as obvious, as plain as day, how important it is. I mean, how are we at a point where it's still not a priority?

O'Leary: Because the way our system works, and I know that because I've spent over a decade working in the educational software industry for schools. Our whole system is based on advancing reading and math scores through the testing process as you go right up to college, we care more about that than anything else. Because if you scored poorly in reading or math you don't advance through the system. All the energy from the teaching focus to all of the software develop focuses on that. That's a huge mistake because it leaves you at the age of 18 not understanding what to do financially, what to do, and not even understanding credit cards or debt, but even worse, not understanding the concept of taking a portion of what you make from that age where no matter where you get it from and putting it aside for your own personal future. That's really what Beanstox does. It says, look, even at an age of 18, you can start to put in a 100 bucks, 50 bucks, whatever it is you're putting in. That is put aside into the markets for you and starts to accrue benefits all through your life. That's the idea. Now, Florida has advanced this. They are now teaching financial literacy at the high school level. As you mentioned, other states are doing this too. But we are so far behind with a 100 million people in America with nothing set aside. I mean, anybody that's involved in financial literacy and that focus is doing a good thing. If I can use my Shark Tank platform and notoriety to get people thinking, including parents about getting their kids setup. I'm doing for me an important thing.