Financial Literacy Month

Nothing is More Powerful than Teaching Financial Literacy

Darren Gurney Nothing is More Powerful than Teaching Financial Literacy By Darren Gurney, Economics Teacher, New Rochelle High School, New Rochelle, NY, 2014 Alfred P. Sloan Foundation Teaching Champion Awardee.

As an educator, nothing is more powerful than teaching financial literacy. Having taught a variety of social studies topics during the past 18 years as a teacher, I know that financial literacy is as valuable as any topic that students are exposed to in their schooling. Moreover, other than health education no subject is as “real world” applicable as exposing adolescents to personal financial issues.

DGURN 300x167 Nothing is More Powerful than Teaching Financial Literacy When students enter my classroom for the first time, it astonishes me how little they know about basic financial concepts. Balancing a checkbook, using credit cards, understanding mortgage rates, contributing to retirement accounts, stock/bond investing, using debit cards, opening savings accounts, applying for car loans, and other day-to-day financial areas are topics which students are not exposed to in their primary education. These are activities that all adults face in their daily lives. Why are children taught trigonometry, chemistry, and other concepts that are irrelevant to their existence? Perhaps our schools’ inability to evolve past our “liberal arts” educational goals or a dependence on our countries’ long standing subject areas, the content provided to our students and future citizens is nonsensical.

Why not create educational curriculums that focus on material which students of all educational abilities will utilize later in their lives? Schools should be focused on teaching skills, such as critical thinking, analytical, public speaking, writing, arithmetic, and communicating effectively with others (socialization). The content used to foster these skills is largely insignificant. But, in learning these skills it serves our nation best by introducing financial literacy concepts that our youth will deal with daily as they age and move through college and into their careers.

Most of all, students enjoy learning about financial literacy. Stock market investing competitions, studying entrepreneurs and small business topics, completing tax returns, studying mortgage rates and real estate prices, and analyzing state/federal taxation policies ultimately motivates students a great deal. Why should we force our children to battle through William Shakespeare’s writing or memorize terms like mitochondria or pi, when most Americans are financially illiterate? Maybe if we channel our energies in these areas, the typical US household will not be saddled with so much debt. In turn, our nation’s leaders may be able to do a better job of not growing our $17 trillion national debt.

POSTED: April 16, 2015 | BY: Jonathan Burch | TAGS: , , , ,

It’s All About Implementation: Promising Results for State Financial Education Mandates

J. Michael Collins Its All About Implementation: Promising Results for State Financial Education MandatesBy J. Michael Collins, Ph.D., Center for Financial Security, University of Wisconsin-Madison

The growing complexity of financial decisions facing American consumers has prompted an increased emphasis by policymakers on promoting financial education at all stages of life. One group of specific concern is young adults, as they have been shown to have particularly low levels of financial literacy (Lusardi et al., 2010 http://www.nber.org/papers/w15352.pdf ).

The 2008 financial crisis further demonstrated the need for broad-based financial education. However, the existing body of research on the effectiveness of financial literacy education has yielded limited evidence that it improves financial outcomes and behaviors according to research (Fernandes et al., 2014 http://pubsonline.informs.org/doi/pdf/10.1287/mnsc.2013.1849 and Willis, 2011 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1869323).

Policymakers have promoted financial education in schools as a means of combating negative financial behaviors and low levels of financial knowledge. However, research on the effectiveness of financial education has found, at best, mixed evidence in terms of education resulting in changes in financial behaviors. Even in the absence of evidence on the effectiveness of financial education, policymakers at the state level have expanded and strengthened personal finance and economic education requirements for K–12 students, a topic which has been taught in K–12 public schools in the U.S. since the 1950s. Determining which particular financial education programs yield the greatest benefits would allow states to design an effective curriculum.

Yet, we have natural “experiments” in states all the time, where school systems implement new mandates for courses that must be taught–and tested–before a student can graduate. At least 2 states, Georgia and Texas, did so in 2007. Thanks to data from the Federal reserve, my CFS [http://www.cfs.wisc.edu/] colleagues Carly Urban [http://www.montana.edu/urban/ ] and Max Schmeiser [http://www.federalreserve.gov/econresdata/maximilian-schmeiser.htm ] were able to obtain a sample of credit records for people in these states and nearby states (New Mexico and Florida–both states with no change in financial education mandates for high school graduation).

We then compared the changes in credit scores and loan delinquencies in states after implementation of the mandate to the changes in comparable states that did not pass mandates. Both GA and TX implemented well-documented requirements and testing, so we are confident students who graduated after 2007 were exposed, at least on average, to more financial education. Overall, we find that if a rigorous financial education program is carefully implemented in schools, it can improve the credit scores and lower the probability of delinquency for young adults. In Georgia, graduates after the new education mandates have credit scores 11 points higher and 30 day delinquencies are lower by 4.2 percent. In Texas, graduates after the mandate have credit scores over 31.7 points higher and lower 90-day delinquency rates by 6 percent, a relative decrease in delinquency rate of 33 percent (view full report: http://www.finra.org/sites/default/files/investoreducationfoundation.pdf ).

All young people have lower credit scores—they are learning by experience. And, according to our data, nearly a quarter of young people are 30 or more days behind on at least one account. Yet, payments have big effects on the credit score of someone with a brief credit history and therefore, avoiding missed payments can have real long run effects.

More work needs to be done to understand what forms of education best benefit young people, if starting earlier has larger effects, and if less intense requirements might result in similarly sized benefits. We still do not know how well these effects will persist into later adulthood—but formal education may jump start trial and error learning that young adults often experience in credit markets.

POSTED: April 15, 2015 | BY: Jonathan Burch | TAGS: , , , ,

Improved Financial Literacy Will Help Improve Financial Well-Being

Tim Pawlenty 214x300 Improved Financial Literacy Will Help Improve Financial Well BeingBy Tim Pawlenty, President/CEO of Financial Services Roundtable.

Americans are increasingly responsible for their own financial security after retirement. Fixed payout pensions have largely given way to 401(k)s.  This transition brings new opportunities and challenges.  It also is another reason why financial literacy and education is more important than ever.

Studies show many American workers are not well-prepared to manage their finances. One study found nearly half of the older workers interviewed didn’t understand the type of pension or retirement plan they had and a large majority knew little about basic rules relating to Social Security benefits.[1]

The need to better understand personal finances doesn’t just begin as workers approach retirement. Financial skills matter throughout life as people consider questions such as the affordability of owning a home or how to best prepare for funding their children’s education.  Financial literacy is also needed to avoid financial exploitation.

It is often said that the first step towards solving a problem is admitting the problem exists.  Americans know we need to improve financial literacy. The National Foundation for Credit Counseling Financial Literacy Survey recently revealed that 41 percent of adults gave themselves a grade of C, D or F on their knowledge of personal finance and 61 percent admitted to not having a budget.[2]

Financial literacy is one of the highest priorities for the Financial Services Roundtable and our member companies. Making progress is a shared responsibility of the private sector, government, and consumers.

FSR and our member companies work to provide financial literacy resources and support to help educate and inform consumers.

Examples of such efforts include Bank of America partnering with the nonprofit Khan Academy to offer “Better Money Habits,” an online resource that offers videos on financial literacy topics such as understanding credit, home buying, saving and budgeting. U.S. Bank has created a “Credit Wellness Center” that helps consumers take control of their credit score by highlighting  tips about how to protect and maintain good credit scores. And State Farm Insurance’s “Make It Possible Program” hosts “A Slice of L.I.F.E.™” financial education workshops for underserved young adults, covering topics including the home buying process, the importance of credit, buying a car and establishing financial goals. More information efforts to improve financial literacy by FSR member companies is available at our Corporate Social Responsibility website, or by downloading a copy of FSR’s 2014 Impact Report.

Financial literacy is an important part of avoiding financial mistakes and planning for a strong, secure financial future. FSR and our member companies continue to raise awareness and support for enhanced financial literacy during Financial Literacy Month and every month.

[1]Source:Lusardi, Annamaria (2007): Household saving behavior: The role of literacy, information and financial education programs, CFS Working Paper, No. 2007/28.

[2]http://www.nfcc.org/NewsRoom/FinancialLiteracy/files2013/NFCC_2014FinancialLiteracySurvey_datasheet_and_key_findings_031314%20FINAL.pdf

 

POSTED: April 14, 2015 | BY: Jonathan Burch | TAGS: , , , , , , , , ,

Financial Literacy Month Highlights

2014 financial literacy month Financial Literacy Month HighlightsApril is Financial Literacy Month, and it’s a great opportunity to reflect on both how far we’ve come, and what challenges remain in 2015. Over the past 12 months, four states—and counting—have adopted CEE’s National Standards for Financial Literacy. This follows a period of slow to no growth as shown in CEE’s 2014 Survey of the States, which found that a majority of states do not require that students receive education in economics or personal finance education. This increased momentum may signal that the tide has at last started to turn in the right direction.

For the next four weeks CEE and our affiliates will be conducting a full roster of events to shine a spotlight on the importance of economic and financial education.  Here are some of the highlights:

VP Financial Literacy Month HighlightsVantage Point: Real World Perspectives on the Economy
An insightful and engaging discussion with an esteemed panel of experts and leaders joined us for our second annual economic symposium. Featured speakers included Professor Greg Mankiw, who gave the keynote, and Esther George, President of the Kansas City Federal Reserve, with an Update from the Fed.

 

Higher One, Money Matters On Campus
CEO and President Nan J. Morrison participated on a panel conducted by Higher One, sharing the results of their Money Matters On Campus survey.

State Council Events
Meanwhile, our state council affiliates have been working diligently to promote financial literacy carrying out a host of activities: the Ohio Council for Economic Education welcomed Jeff Immelt, (CEO, General Electric) as keynote speaker at their 2015 Awards Luncheon; and in Rhode Island, students and guests including U.S. Congressman Jim Langevin and State Treasurer Seth Magaziner, kicked off the month with a “‘Financial Frenzy’ Forum.”

bedtime math e1428507502789 Financial Literacy Month HighlightsMoney Math Mondays
New this year we’ll be featuring Money Math Mondays throughout the month, a series of financial literacy-related math problems for parents and kids created by the founder of Bedtime Math.

 

CEE Blog Features Leaders Promoting Financial Literacy
We are excited to share perspectives from some of the leading voices in economics and personal finance. Guest bloggers include Sen. Patty Murray (D-WA), Congressman Steve Stivers (R-OH), Richard Cordray (Director, CFPB), David Wessel (Director, Hutchins Center on Fiscal and Monetary Policy, Brookings), Raymond W. McDaniel, Jr. (President and CEO, Moody’s) and Kelli Grant (Consumer Reporter, CNBC.com). Be sure to tune in; we’ll be posting new articles every week!

 

 

POSTED: April 10, 2015 | BY: Annamarie Cerreta | TAGS: , , , , ,

Stop! Wait! Make a Financially Literate College Decision

Kelli Grant 150x150 Stop! Wait! Make a Financially Literate College DecisionBy Kelli Grant, Consumer Reporter, CNBC.com

It may be Financial Literacy Month, but for high school seniors, April is also Big Decision Month. College acceptance letters are landing in mailboxes and inboxes, with the clock ticking down to a May 1 acceptance deadline at many schools.

To them I say, Stop! Wait! Don’t be so quick to say “yes” to that first-choice school. Your family’s financial future depends on making a financially literate decision.

Some 40 million Americans have student loan debt, which has mounted to $1.3 trillion. The Project on Student Loan debt estimates that borrowers in the Class of 2013 owed an average $28,400 in federal and private loans. Worse, many grads are falling behind on their payments: 11 percent were 90 or more days delinquent in the last quarter of 2014, according to a report from the New York Federal Reserve.  (For perspective http://www.cnbc.com/id/102431400, during the same quarter, 7 percent of credit card balances and 3 percent of auto and mortgage loans were delinquent.)

We’ve seen some aid in expanded income-based repayment plans and refinancing options, in start-ups experimenting with low-cost funding. More could be on the horizon http://www.cnbc.com/id/102493636 under President Obama’s Student Aid Bill of Rights.

But a big part of halting the cycle of student loan debt has to come from students and families making smart decisions about whether, how and how much to borrow. As I’ve written recently, the financial aid offers http://www.cnbc.com/id/102520397 that typically come packaged with those college acceptance letters aren’t always easy to decipher. And they’re worth more than a fast look. Parents and students need to sit down and talk about what those loans will amount to come graduation time and just how achievable that monthly payment will be on the typical starting salary of a high school music teacher, engineer or journalist.

It’s not just students who need to gut check their financial responsibility. Parents need to make sure they’re not taking on too much debt or hurting their chances of retirement. A recent T. Rowe Price survey found that 53 percent of parents with kids age 15 and younger would rather tap their retirement savings than have their child take on student loan debt, while 52 percent said they were willing to take on $25,000 or more in debt to cover college costs. Nor is it unusual these days for parents to provide some financial support http://www.cnbc.com/id/102496432 to their adult children, including help with those student loan payments.

Crunching the numbers might not give you the answer you want. But it will give you the information you need, to work on a brighter financial future.

POSTED: April 10, 2015 | BY: Jonathan Burch | TAGS: , , ,

Becoming “College Savings” Literate

Treasurer Michael L. Fitzgerald e1428507423995 Becoming College Savings Literate By Treasurer Michael L. Fitzgerald, Iowa State Treasurer

When it comes to financial literacy, saving, planning and investing are valuable terms that emphasize the importance of strong financial management and well-being. These concepts are especially useful when contemplating the costs of higher education. Saving for college is made easier with 529 college savings plans, which help families invest in their children’s futures in a tax-advantaged way.

Celebrate Financial Literacy Month by looking into the benefits of a state-sponsored 529 college savings plan:

  1. Tax savings. 529 plans were designed to provide families and friends a tax-advantaged way to save for higher education expenses. Thirty-four states and the District of Columbia offer state tax deductions or credits for contributions to certain 529 plans, which could help your tax refund grow to an even larger amount for the next tax year. In addition to the potential state tax benefits, participants are also able to withdraw their investment federally tax-free to pay for qualified expenses (and many states allow this as well).
  2. Flexibility. You have the ability to save for anyone: children, grandchildren, friends or even yourself. 529 plans may also be used to pay for a variety of expenses, including tuition, books, supplies and certain room and board costs, at any eligible college, university, community college, vocational/technical schools and graduate schools.
  3. Low minimum investments. Most plans have very low minimum monthly contribution limits that make them attractive to families from many income levels. Some states will have minimum limits as low as $15.

Although there are many ways to prepare a child for a successful future, none can bring greater lifetime rewards than a quality education. As I always say when discussing college savings with families, by starting early, saving a little at a time and making smart investment choices, you can make your 529 plan work for you and get the most out of these precious years.

They grow up fast; you will be glad you planned for their tomorrow today!

POSTED: April 8, 2015 | BY: Jonathan Burch | TAGS: , ,

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