Programs Tout Financial Literacy for All Ages
Jackson, Ben, American Banker
With consumer bankruptcy filings at an all-time high, financial literacy education has emerged in recent months as a top priority for bankers, lawmakers, regulators, and consumer groups.
Money management programs are popping up all over the country -- in schools and churches, on public television, and as part of job training programs. In Chicago, for example, a local community group and the Federal Deposit Insurance Corp. are both sponsoring financial education classes for adults, while the Federal Reserve Bank there is putting the finishing touches on plans for a financial literacy week to be held later this month.
In Cleveland, the Consumer Federation of America is partnering with local banks on a Cleveland Saves initiative to help consumers become better savers. The program has been so successful that the group recently rolled out a similar one in Kansas City, Mo. Other such programs, under the "America Saves" banner, are in the planning stage for other cities, including Charlotte, N.C., Indianapolis, Seattle, Philadelphia, and Phoenix.
And at the federal level, a provision in an education bill President Bush signed in January directs public funds to states that commit to improving students' financial literacy.
Bankers and consumer advocates say increases in consumer debt, a record-low savings rate, the explosion of financial services such as payday lending, and the option of online shopping have made financial education more important than ever.
David Fynn, a senior vice president at National City Corp. in Cleveland, compared the financial literacy effort to other public awareness campaigns. "Through education, appropriate product offerings, and other assistance, the objective is to change the national psyche related to savings -- abysmal at almost every income level -- in the same way as we have addressed 'No Smoking' campaigns and awareness of child safety."
The Administrative Office of the U.S. Courts reported in February that bankruptcies reached a record high last year. Consumer filings increased 19.2% last year, to 1.45 million, and since 1990 total bankruptcy filings, including those by businesses, have increased 90.6%.
Additionally, FDIC figures show that credit card chargeoffs in the fourth quarter of last year increased 25.8% from a year earlier, to $3.5 billion.
Maintaining that bad spending habits are acquired early in life, Americans for Consumer Education and Competition lobbied to get federal funding for financial education included in the No Child Left Behind Act. The law allocates more than $3 billion over the next six years for local education programs, including financial literacy.
"The economy is changing," said Mike Canning, the president of the Washington advocacy group. "The great availability of financial products and the ease with which young people can purchase things now make it necessary that they begin at an early age to learn how to manage money properly."
Two states, Wisconsin and Delaware, last year established task forces to study the idea of adding money management classes to high school curricula.
With credit defaults on the rise, Visa U.S.A. is at the forefront of the consumer education effort. It has declared April "Financial Literacy for Youth Month," and on Thursday it released a survey that says 92% of parents believe that practical money skills should be taught in schools.
But children are not the only ones who need to be taught how to budget and balance checkbooks. To help educate adults, the FDIC created Money Smart, a 10-module program designed to teach everything from how to open a bank account to credit management and borrowing for a home.
The nationwide program was preceded by local curricula like the one created by Financial Links for Low-Income People, a Chicago coalition of banks, community groups, and government agencies whose goal is to teach financial literacy classes and help people open bank accounts. …