The purpose of studying economics, said the late Joan Robinson, is “to learn how to avoid being deceived by economists.” I was reminded of this by the Financial Times’ launch of a campaign to improve financial literacy.
Teaching people the maths of interest rates and the power of compounding should help protect them from loan sharks. It can also protect us from fund managers, because their fees compound just like interest. Even an extra half percentage point per year of charges accumulates to over £2000 over 20 years for every £10,000 you invest. Financial literacy teaches us the true cost of our choices. That’s important.