I spent a good part of the last month at a hospital bedside in Italy. It was a hard time, but it taught me several valuable lessons, including the similarities and differences between health and financial literacy.
On the surface, there are striking similarities between decisions about health and decisions about finance. Both affect important aspects of our life and both have consequences. Both require collecting information, evaluating alternatives, and taking some risk. But while financial decisions and health decisions are both difficult, it seems health has received a lot more of our attention. For example, there is normally a greater sense of urgency around health-related issues. This may be because the effects of being ill are visible, often painful, and easy to identify with. But the financial crisis has had some very visible and painful effects too, so there is no reason that we shouldn't give the same level of urgency to our financial well-being.
In health as in finance, one party knows more than the other (the doctor versus the patient, the financial advisor versus the investor) and navigating this relationship requires some care. In both cases (health and finance), it is critically important to ask questions, to discuss objectives in detail, and to exercise a good deal of caution. Again, health seems to be doing much better: doctors have been relatively successful in being recognized as experts that the public can rely on, while the “doctors” of finance are hardly seen as such; reliable financial experts are considered a rare species. Yet, it is not obvious to me that the statistics support this perception; there are financial advisors who have led clients into disastrous trades but also doctors who have operated on the wrong leg or failed to notice (as in the case of my father) deep skin lacerations on a bedridden patient (something that is undoubtedly included in any Health 101 course).
There are dangers of focusing on a single aspect of one’s health or one’s finances. Tending to retirement savings without dealing first with high credit card debt is perhaps analogous to treating high blood pressure while ignoring a lung tumor. Clearly, we want to be fully healthy, financially and physically—we cannot get by with just a healthy left arm or a well-managed checking account. But while most of us are willing to undergo regular health check-ups (and, if you ask me, some of them are pretty intrusive), many people never went for a financial check-up. We seem willing to swallow bitter medicine and undergo invasive procedures such as surgery, which some research tells us might be unnecessary or overused, but we are reluctant to follow the recommendations of financial advisors.
Health issues have also been able to engage celebrities to further their cause. At the entrance of the hospital in Italy, there was a large poster of Pippo Inzaghi, a professional soccer player from A.C. Milan (Pippo is the nickname for Filippo, but in Piacenza, where he was born, we call him Super Pippo). The poster says “Help us to win against cancer.” I really wish we had a Super Pippo for financial illiteracy.