By David J. Cowen, Ph.D., President & CEO of the American Museum of Finance; Co-Chair of International Federation of Finance Museums.
When I first heard the term “financial literacy,” I didn’t know what it meant. My background was the trading floor and I incorrectly assumed it was defined as being knowledgeable about the literature of finance. I have never liked the term because in reality what it means is “financial education,” and many outside of our field are simply not familiar with that terminology.
But that is just semantics. The reality is that many Americans are financially illiterate. This epidemic is not just endemic to the United States, but rather is a global problem. Our museum is a member of the International Federation of Finance Museums (IFFM), of which I am co-chair, and we often discuss this core problem with our partners around the globe. We view ourselves – the community of finance museums – as beacons of financial literacy light in what all too often is a sea of darkness.
Coming to this field from a different angle than most, I have some observations to share. It is frustrating to us in the field of financial literacy, who are valiantly trying to bring the topic to the educational forefront, to recognize how often finance touches an individual’s daily life live versus how little time most people devote to learning the basics, either in the classroom or on their own. In many schools the topic is simply not taught. One clear example of why this is imperative is the recent financial crisis. While our nation is proud to boast that over 50% of Americans own their own homes, how many more sadly lost their homes during and since the 2008 crisis? Many of these individuals did not understand their subprime mortgage when they signed on the line. There is no question that plenty of blame lies with the brokers and banks as well, who induced homeowners with low teaser rates that subsequently skyrocketed. However, if the homeowners were just a little more financially prepared, perhaps many of them would not have taken out the mortgage in the first place and, thereby, avoided financial distress. This example demonstrates the danger of an uninformed populace on the topic of finance.
While a mortgage may be complex, even simple concepts like budgeting and saving are vital to having a healthy personal balance sheet. Another barrier to the field is that there are no uniform curriculum standards across the 50 states involved in teaching the topic. This leads to a fractured and often one-off approach. To make the issue even more difficult, many teachers themselves are not equipped or prepared to teach the topic. Lastly, there are many for-profit and non-profit organizations in the field, and they often compete for the same audience. While competition can be good, the amount of information available can often be overwhelming to educators.
Our approach at the Museum of American Finance is to dialogue and partner with any non-profit in the field, and we have done so with our friends at CEE as well other organizations. Our simple objective is to assist the students in any way we can. With that as our guidepost, we don’t care whether you call it financial literacy or financial education, for it is the result that matters. We have found success with our programs and are pleased to be a small part of the solution to this far-reaching problem.