Christian Life Applications

During a time of daunting economic uncertainty, the National Endowment for Financial Education ® (NEFE®) convened a symposium that brought together for the first time the individual and institutional leaders involved in the disparate national effort to increase the financial literacy of Americans. The State of Financial Literacy in America—Evolutions and Revolutions, held in October 2002, approached the topic through sessions that examined current financial education programs, compared various educational approaches, analyzed related research, and considered possible future actions in the development of a national financial literacy agenda. Equally important, the symposium enabled participants to share information and insights, and to lay the groundwork for future partnerships that will combine resources toward the realization of a shared goal. Following is the full text of a white paper report, “Financial Literacy in America: Individual Choices, National Consequences,” which reflects the full scope and dimension of the issues presented and discussed.
FINANCIAL LITERACY IN AMERICA: INDIVIDUAL CHOICES, NATIONAL CONSEQUENCES
The State of Financial Literacy in America: Evolutions and Revolutions Sponsored by the National Endowment for Financial Education
Denver, Colorado—October 9-11, 2002 Perspectives on Financial Literacy
The visibility of financial literacy as a major national issue has increased significantly during the last decade. Television and radio programs, as well as Web sites, books, magazines, and newspaper columns, are devoted to it. In addition to being the subject of extensive congressional testimony, financial literacy has been mentioned in both state and federal legislation. For example, it was addressed in the Savings are Vital to Everyone’s Retirement (SAVER) Act of 1997, which mandated a series of national summits (the latest in 2002) on the topic, and the No Child Left Behind Act of 2001, which formally recognized the importance of financial education in schools. In addition, financial literacy is the object of
© 2002, National Endowment for Financial Education. All rights reserved.
countless programs, projects, meetings, classes, and seminars, some of them dating back 50 years or more. And yet, consider these facts:
• From 1990 to 2000, the rate of personal bankruptcy in the United States rose by 69 percent.2 It appears this trend will continue, supported by recent statistics showing a 19.2 percent increase between 2000 and 2001.3
• High school seniors taking part in a 2002 national survey of financial knowledge, sponsored by the Jump$tart Coalition for Personal Finance, scored an average of 50.2 percent—a failing grade. Scores have been declining since the first survey was administered in 1997.4
• The United States reportedly has the lowest individual savings rate in the industrialized world.5
• In 2001, an AARP survey of older baby boomers (age 51-59) showed that nearly 40 percent were not confident about a secure retirement.6
Reasons behind the disheartening statistics, as well as the best approaches for addressing them, are varied and subject to debate. Participants at the symposium represented the full range of viewpoints, complementary as well as contradictory. An ongoing and spirited exchange of ideas commenced in the first session—facilitated by Arthur Miller, Harvard Law School professor and author—and continued throughout the gathering as participants pooled their energy, opinions, and knowledge in pursuit of the common goal of national financial literacy.
The opening session, featuring a panel of 14 prominent representatives from media, financial education, financial services, business, and government, was essentially a microcosm of the symposium. It served as a forum for a discussion on the status of financial literacy and the various ways to provide individual Americans with the knowledge and skills they need to make the right financial choices for their own futures—and, by extension, for the future of the nation. To open the discourse, Miller played the role of a financial illiterate. “I haven’t balanced my checkbook in 20 years,” he told the panel dramatically. “I don’t know what bills I’m paying. Everybody says I should refinance my house, but I don’t have a clue ... Are there other people like me?”
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“A lot,” responded a panelist. “You ignore your financial life ... The assessment is that it’s time to take responsibility for your future and get back your sense of independence.” Said another, “The concept of personal accountability has been diluted; therefore, people don’t focus on adjusting their behavior ... They have to have accountability to understand how to make the right choices, and if they default that accountability to somebody else, then they’re going to be in trouble.” Still another spoke of a shift in attitudes among Americans. “We need to make people aware that they are empowered consumers and through knowledge, through education, they can make those choices for themselves. I think that’s where Americans are right now. They’re realizing, ‘You know, I should have taken more responsibility for my own well being.’”
Financial illiteracy has deep roots, one panelist claimed. “Government and industry created a social environment where people became dependent on them. They became dependent on government for Social Security, and many people think that’s all they need. They became dependent on employers to provide them with pension programs and health care, and companies benefited from those policies for many years ... so I’d like to see society take responsibility and not just blame individuals.”
Other participants focused on the extent and significance of the problem. “Surveys vividly show that about 40 percent say they’re very comfortable financially,” said one. “About 30 percent say they’re doing OK. And about 30 percent say they’re struggling—and those folks who are struggling tend to be poor, tend to be minority, tend to be younger, and those are the folks we need to concentrate on.” Another suggested that the problem is even more widespread. “Look at all the CEOs who blew it [in the recent economic downturn]. Look at all the media people who blew it. Look at all the analysts who blew it. So, they may be extremely sophisticated in finance, they may be extremely sophisticated in business—but they are not sophisticated in managing the quality of their lives or in becoming financially independent. That’s a global problem, not a poor person’s problem or a middle-class problem.” A representative of a major international company agreed, saying, “I think it covers the whole spectrum. I don’t think you can pinpoint any one group that is more
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illiterate than another group. I would say about 30 percent of the workers in our company have a plan and have figured out how finances fit into their life plan.”
Reflecting the various perspectives represented at the symposium and laying the groundwork for discussions in later sessions, the panel covered several other fundamental issues that shaped subsequent dialogue and debate. Issues included understanding the importance of financial literacy, outlining the topics for financial education, identifying key audiences, determining how to reach target audiences, considering the importance of timing, and deciding who is responsible for financial education.
• The importance of financial literacy. “I think the most powerful thing to know about money is that it has the power to make your dreams come true,” explained one symposium participant. Others concurred, stressing that individuals can only make their money work for them if they understand basic personal financial management. But financial literacy has broader implications. Participants agreed that the health of the nation’s financial system depends on the ability of its people to effectively manage their own finances. From young people learning how to save for their first bike to baby boomers planning for a secure retirement, all Americans have a strong vested interest in financial literacy.
• Topics for financial education. Panelists repeatedly mentioned budgeting, saving, reducing debt, and investing as important subjects. From a broader perspective, planning was strongly emphasized. “You do have to have a plan,” one explained. “You have to understand where you are, where you want to go, and then you’ve got to be disciplined about sticking to it.”
• Key audiences. The variety of programs presented by participants illustrated the ubiquitous need for financial literacy. Most agreed that youth is the most critical audience for financial education, but circumstances at any stage of life may reveal the need for financial knowledge to address a problem or opportunity. For example, working adults present a formidable group of individuals in need of financial information in order to effectively utilize employee benefits. In addition, current retirees and those close to retirement must be able to manage their finances effectively in order to avoid falling into poverty or returning to the
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workforce. Further, minorities and other underserved groups, who are often overlooked by the financial services mainstream, require clear and relevant information to help them achieve stability.
• Reaching target audiences. While participants identified many opportunities for outreach, each option featured its own challenges. Schools, most participants agreed, offer the greatest opportunity and the greatest challenge for financial education. While it’s easy to reach children through the education system, there are substantial barriers. The workplace is an option for providing financial education to adults—and some companies are already doing so—but many firms are hesitant to risk the threat of liability. Underserved groups often face additional obstacles, such as language in the case of immigrants, in accessing information. The media provide a wide reach, but there is no way to track the extent of their impact.
• The importance of timing. Different factors motivate people at different points in life. Panelists agreed that teachable moments—the points at which an individual is motivated to learn—are determined by circumstances. “It’s event driven,” said one. “People don’t care until there’s a crisis,” said another. Still another participant suggested that the current high level of credit card debt is a teachable moment that may inspire people to seek financial information to gain control over their circumstances.
• Responsibility for financial education. Panelists suggested various options for who might provide financial education: schools, journalists, government, parents, employers, financial planners, peer educators, community organizations, and volunteers. “Everybody says it’s someone else’s job,” commented Arthur Miller during the opening panel. Many panelists emphasized the need for partnership and cooperation among the various sectors in order to effectively reach as many population segments as possible with practical, relevant information.
Despite the massive scope of the problem and the differences in perspective that characterized the symposium, discussions were permeated by a sense of optimism. At no point did participants discuss giving up on their goals or diminishing their efforts. Many of
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them, however, expressed undeniable frustration. For example, one researcher commented on the nation’s failure to respond to the evidence of a need for action. “I remember back when the Russians launched Sputnik, and within 10 years we had invested hundreds of billions of dollars and were close to putting somebody on the moon,” he said, adding that no such response has occurred with respect to the need for financial literacy. In examining the issues surrounding national financial literacy, the group reinforced a unanimous commitment to their cause. Society is off track financially, said a panelist, “and we, all of us, need to work together to get it back on track.” But to work together, our society as a whole needs to recognize the impending crisis.
A Looming National Crisis
After a day-and-a-half of sessions and impromptu conversations, the group responded to an electronic poll on the question, “Are we really dealing with a financial literacy crisis in America?” Seventy percent of the respondents answered “yes.” During previous sessions, however, participants struggled to reconcile the obvious importance of the issue with the relatively low levels of awareness among Americans. Early in the gathering, for example, one attendee compared the potential impact of financial illiteracy to that of terrorism. “We’ve seen how we can mobilize a nation in the name of Homeland Security,” he said. “I don’t know why we can’t have that same national commitment in terms of economic security. The consequences of failure, to me, are just as serious. Take the boomer generation—75 million. The latest reports are that two-thirds of them are on a road to failing to meet the goal of financial independence ... Imagine the consequences to the whole country.”
In attempting to explain the situation, others reminded the group that the ultimate costs of financial illiteracy are not immediately obvious to many people. “We are fundamentally a very affluent society,” one explained. “The surveys show that most of us think we’re doing OK ... Still, if you look at 30 to 40 percent [who are dissatisfied], that’s tens of millions of Americans.”
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While subtle, the signs of an impending crisis are pervasive. Increased personal debt. Decreased levels of savings. Confused, disillusioned investors. Further complicating the situation is the public’s widespread ambivalence. Even more significant, many agreed, is the emotional aspect of personal finance. “I’d like to point out,” said a session panelist, “that we have more taboos about money in this culture than we do about sex.” Another took the point further: “I know that in my home, when I was growing up, money was a hot issue.” Statistics show that most married couples argue about money, the panelist continued. “It seems to me that we have to look at it as more than facts ... You know the knowledge isn’t enough because there is such emotional baggage attached to the issue.”
The bottom line is that despite the publicity, the legislation, and the programs, the American public at large still does not recognize financial literacy as a major—much less a critical—issue. “I don’t think folks are ever going to rise up and demand a financial education movement in our country,” commented one of the symposium’s panelists. “I think it’s going to depend on us and the institutions that we represent to take the leadership.”
The Roots of Financial Literacy
Many people assume that financial literacy is a modern issue, grounded in the fast-paced, ever-increasing demands of a technological society. But financial education was more common in many American schools in the early 20th century than it is today. To illustrate the point, a symposium participant referenced a textbook called Hamilton’s Essentials of Mathematics, published in 1917 and 1920. The book, written for students in grades two through eight, explain simple financial concepts such as earning money, paying bills, establishing cash and savings accounts, paying taxes, purchasing insurance, and understanding the federal budget.7
Over the years, these topics vanished from school curricula as the nation became increasingly focused on consuming rather than saving. Long-term planning evolved into the tradition of the three-legged stool for retirement: Social Security, pensions, and personal savings. With two of those legs getting more unsteady by the year in the new century, the
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third—savings—has assumed a growing, critical significance. With the overall rate of savings dropping to dangerously low levels in recent years, this metaphorical stool is in jeopardy of collapsing entirely.8
A Generation Unprepared for Retirement
At the core of the imminent crisis are fundamental changes in the economic system, most notably in retirement funding. In just two decades, the norm has shifted from defined benefit plans (pensions), provided and managed by employers, to defined contribution plans—401(k) and 403(b) accounts—managed and funded primarily by individual employees. Individual Retirement Accounts (IRAs) enable Americans to independently set aside money for retirement, tax free, every year and invest it as they see fit within the terms of the law. The same freedoms—and the same responsibilities—apply to other new retirement options. However, according to the latest Retirement Confidence Survey (RCS), Americans are not handling the responsibility well. The 2002 survey results showed the continuation of a trend that started in 2001: fewer workers are planning and saving for retirement than in the past. In addition, the number of people who said they had calculated the amount of money they need to save for retirement dropped from 39 percent in 2001 to 32 percent in 2002.9
The RCS also shows younger American workers, those between 20 and 39, are more likely than older workers to believe private savings and investments will provide the largest share of their retirement income. Meanwhile, adults between 40 and 60 years of age still largely expect to rely strongly on Social Security.10 Although the statistics bode well for the standards of young American workers, they reinforce the need for financial education to ensure wise investment choices.
The aging of America is also a major factor in the nation’s current economic situation. With an increase in the average life span comes a corresponding need for an extended income stream—at a time when the traditional sources of retirement support (Social Security, pensions, and personal savings) are dangerously wobbly. “The meaning of retirement is changing,” in both a personal and a financial sense, concluded a roundtable discussion during
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the symposium. For one thing, research shows that Americans now devote fewer years to accumulating wealth and more years to spending it. The latest version of the Wealth Span Model, presented at the symposium, compares life-long saving and spending patterns of Americans in 1930 with the patterns of 2000. The model shows that in 1930, Americans began accumulating wealth at about age 20 and continued to do so until their late 60s. In 2000, wealth accumulation began after the age of 25 and ceased before age 65. In the 1930 scenario, Americans spent a maximum of 20 years in retirement; in 2000, retirement was expected to last up to 35 years.11
With the increase in life span comes a corresponding increase in children’s responsibility to care for their aging parents. Recent statistics show that an unprecedented number of middle- age Americans are simultaneously raising children and supporting their own parents. The fact that people are living longer is illustrated by some simple statistics. For instance, in 1900, 7 percent of 60-year-old Americans had at least one living parent. In 2000, the percentage had risen to 44.12
The Specter of Debt
Over the last three decades, the massive growth in debt has been a major element of the changing financial environment. While the largest single source of indebtedness is represented by home mortgages, misuse of credit is actually the primary cause of the rising rate of bankruptcy.
• Sixty percent of American households carry over some portion of their credit card debt every month. The average balance is more than $4,000.13
• Twenty percent of families with an annual income below $50,000 spend close to half of their net income on debt payments.14
• In 1999-2000, 1.27 million American households declared bankruptcy. The number was expected to climb to nearly 1.5 million in 2002.15
• More than three-fourths of college undergraduate students have credit cards; most have multiple cards with an average total balance of $2,748. Ninety-five percent
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of college graduate students have cards; each has an average of four cards with an
average total balance of $4,776.16 • Between 1990 and 1999, there was a 51 percent increase in annual bankruptcy
filings among adults 25 years of age and younger.17
The massive debt incurred by customers of subprime lenders is also significant. Such financial institutions aggressively target low-income neighborhoods with offers of easy credit. Many customers become enmeshed in a cycle of borrowing. They pay exorbitant interest rates—sometimes more than 100 percent—and also sacrifice home equity to cover payments. According to a 2000 study by the Woodstock Institute, “Most lower-income people understand their economic situation and struggle hard to get by ... Even those families living in abject poverty need help to avoid financial and credit traps.”18 Regardless, the subprime lending industry grew almost 1,000 percent in the 1990s.19
Lessons from an Economic Downturn
“We see the results of being financially illiterate,” a media representative told the symposium audience. Perhaps the most vivid example comes from the rapid business decline in the first years of the 21st century, when millions of Americans lost their retirement savings along with their jobs. “The ’90s suspended reality,” one participant claimed. Paradoxically, as stock prices went up, financial literacy went down. Buoyed by confidence in an inflated stock market and a seemingly endless cycle of growth, investors eschewed financial wisdom in favor of corporate America’s predictions of perpetually expanding wealth. And the nation paid—and is still paying—the price.
The impact of large-scale business misconduct, coupled with the economic fallout from the terrorist attacks of September 2001, was virtually impossible to predict. Nonetheless, a financially literate population could, at least theoretically, have taken some basic precautions to mitigate the severity of individual loss. For example, many survivors of 9/11 victims discovered that their loved ones had not made adequate financial arrangements: insurance
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was insufficient, beneficiaries were not designated, and contingency plans for spouses and children were incomplete or nonexistent. Further, many who incurred financial losses due to the economic downturn could have better protected their assets by employing a couple of basic financial principles: diversify your investments and maintain a reserve account.
Contradictory national messages added to the already murky financial waters of post-9/11 America. “Americans are in tremendous conflict,” explained a symposium attendee. “We have commerce that says, ‘spend now, spend now,’ and at the same time, we have organizations that say, ‘save now, save now.’” Others spoke to a more subtle factor. “I think there’s a deeper issue here,” said one, “and that is the tremendous loss of confidence in some of the institutions that have defined America: financial organizations, the church, the government, the media. We’ve got a credibility gap that we all have to take responsibility for ... Poll after poll shows that people don’t rank any one particular source as the ultimate in trustworthiness.” Participants agreed that pervasive uncertainty makes the task of financial educators all the more difficult—and makes the need for action all the more critical.
Target Audiences
The goal of “national financial literacy” implies the inclusion of all Americans, not just a particular group or population. As one symposium participant explained, the benefits are universal. “People who are more knowledgeable are more likely to have checking accounts, more likely to own their own home ... more likely to have an IRA or to own stock. People who are knowledgeable are more likely to engage in certain good behaviors. They’re more likely to pay their bills on time.”
While the goal is to reach everyone, throughout the gathering, attendees spoke of the many specific populations in need of financial education and the complexity of issues in reaching and working with them. A series of roundtable discussions provided additional insight. One group tackled the generic category of “underserved populations.” “Because they are targeted by [lending] predators, the decision was made that they needed financial protection literacy,
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as well as financial literacy,” the group reported. “For many of these underserved populations, group education and/or one-on-one education are the most effective ... and generally the most costly forms of delivering education. So knowing how to implement that kind of education nationwide is a gap. Partnering is absolutely critical to reach these groups.” Another participant elaborated: “People with the least money and education can least afford financial mistakes, but have the most difficulty making smart financial decisions. Those who have difficulty with finances can’t fully understand contracts and other documents. They’re vulnerable to financial abuse.”
Other roundtables focused on potential audiences with demonstrated needs, including: • Women. “They are taking charge of the spending in their households,” one
member of a roundtable discussion commented, “and, to some extent, women are also taking charge of some of the investing—and yet women are feeling inadequate about their knowledge, about their ability to handle money.” The group determined that women tend to be more afraid of financial loss than men. Others determined that despite a trend to the contrary, many women still avoid dealing with finances, defaulting to the traditional belief that men should manage the family’s money. Women need to focus on a secure future for themselves, regardless of their marital status, the roundtable participants emphasized.
• Investors. A roundtable group discussed the possible simplification of financial disclosure statements. “Investors must have access to all the information they need to make an informed decision about whether or not to purchase a security product,” one roundtable member stated. “There’s so much information overload,” said another, “that it’s practically impossible to be on top of anything you really need to make a decision. And I worry that people’s eyes are glazing over and that the shutters are coming down. I tell people, ‘You must do your homework before you purchase a financial product.’ My thought, however, is that we have our choice of either overloading everyone and knowing that they’re not going to read everything or risking insulting everyone.”
• Those planning for retirement. “The meaning of retirement is changing,” explained one group member. “It is no longer a single event. Many people desire to remain engaged throughout their lives.” The roundtable group further concluded “retirement should be viewed as a process that
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hinges importantly on life planning and goal setting.” The process should start early, the group said. “We also realized that retirement preparation is complex, so it necessitates partnering to bring together all the different types of expertise that one needs in order to contribute to informed retirement planning. Clearly, people without pension coverage are at more risk than people who have good pension coverage. People who are carrying high consumer debt are not on the way to being well prepared.”
Financial literacy is also key to a fundamental personal value: achieving life goals and dreams. According to testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs in early 2002, “Ownership, independence, and access to wealth should not be the privilege of a few. They should be the hope of every American. Financial literacy is an essential tool to make that hope a reality.”20
While Americans in virtually every category have demonstrated their lack of financial expertise, a plethora of well-intentioned programs are available to help. “In essence, it would be difficult for a U.S. consumer not to be part of a target audience for at least one financial literacy initiative,” said a recent article.21 In other words, as another symposium participant claimed, no one group is more financially illiterate than the other groups.
The most common audiences for current programs include immigrants, women, renters, the unemployed, individuals starting small businesses, and young people finishing high school and starting college, according to Personal Finance and the Rush to Competence, a 2000 study sponsored by the Fannie Mae Foundation.22 The study concluded that most of the options available are reactive. “Financial education programs were generally organized as responses to widely perceived needs based on direct experience with community members: those with poor credit, women seeking advice about divorce, immigrants needing help with the American banking system or learning how to buy a home.”23
The NEFE symposium participants seemed to agree that all audiences are important. But, opinions about which segments’ needs were most immediate and most expedient for the nation at large varied within the group—as they vary among experts across the country. The following list presents examples of the variety of viewpoints:
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• “A lack of financial knowledge is especially problematic for the most vulnerable members of our society: the poor, the elderly, and minority groups,” testified a witness before the U.S. Senate Committee on Banking, Housing, and Urban Affairs in early 2002.24
• Several symposium participants emphasized young people as the most important audience. One stressed the importance of the “millennium generation”—Americans born after 1982. The group has “huge potential,” he said, and financial educators have the opportunity to help them understand how to achieve their life goals. Another attendee pointed to programs that show children are most open to financial messages at very young ages, a view widely shared at the symposium. “We find that elementary school students are far more receptive than middle school students. And middle school students are far more receptive than high school students,” he said.
• A prominent article stated the importance of several audiences: “Aging baby boomers who will be more responsible for their own retirement income security, youth who are coming to financial independence with limited role models and experiences, and immigrants who need to learn to manage in the U.S. marketplace—all are trends that need to be addressed via financial literacy efforts.”25
• “We recommend that financial education for older Americans become a national priority,” said the Fannie Mae study, citing the need for tools to help this group avoid financial abuses.26
• A growing reliance on investment income poses a financial threat for uneducated investors, especially those in or nearing retirement, an AARP representative told the U.S. Senate Committee on Banking, Housing, and Urban Affairs, adding that one-half of American households own stock directly or through mutual funds. According to Investment Company Institute, nearly 40 million American households with incomes under $55,000 own mutual funds and more than 28 million Americans older than 65 rely to some extent on investment income.27
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• High school students, an estimated 50 percent of whom will go directly into the workplace after they finish school, have a critical need to understand personal financial management. Many already face credit issues and risk assuming a level of debt that could seriously limit their futures.
• The workplace is the best place to reach people, a symposium participant emphasized. In addition, workers with financial savvy are more productive employees. According to a study at Virginia Tech, workers who received financial education were absent from their jobs less, increased their rates of savings, and spent less work time dealing with financial problems.28
• “We can’t focus just on the affluent,” stressed another participant, emphasizing the impact of financial illiteracy on all members of society.
• From Federal Reserve Board Chairman Alan Greenspan: “In many respects, improving financial education at the elementary and secondary school level is essential to providing a foundation for financial literacy that can help prevent younger people from making poor financial decisions that can take years to overcome.”
• A witness before the U.S. Senate Committee on Banking, Housing, and Urban Affairs listed the following key audiences for financial education: current and prospective investors, young people headed to college or their first job, young married couples beginning careers and planning to buy homes, middle-age people trying to meet retirement goals, retirees beginning to take money from their investments, and people receiving or inheriting large sums of money.29
Each audience poses specific challenges as needs vary, expectations are diverse, accessibility is more difficult for some than others, and individual motivation is unique. For example, a roundtable session at the symposium cited pessimism and low self-esteem as general barriers to financial education. Families of children with disabilities face a variety of issues—legal, financial, and educational—that affect their financial values and priorities, another roundtable determined. In the case of immigrants, language is frequently a complicating factor. Cultural values are also a major consideration. According to the Fannie Mae study, “Money usage is value laden. Budgeting decisions, daily money choices, savings behavior,
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and attitudes toward money are at least partly informed by values that stem from one’s ethnic group, educational level, class background, income status, and gender.”30
Individual audiences also imply particular venues, media, approaches, teaching techniques, instructors, promotional activities, and even sponsors. The large number of potential audiences—combined with the variations in requirements and the long list of extenuating circumstances—suggests that a comprehensive strategy could provide a logical approach for an effective effort in the name of national financial literacy. While participants in the NEFE symposium did not develop a plan or even suggest a process for prioritizing audiences, the discussions during various sessions, as well as the unstructured sharing of information and concepts, laid the groundwork for what could become a broad-based national agenda.
Outreach Efforts
While the matter of designating potential audiences for financial education is fairly straightforward, the tangential issues of what, how, where, and when to provide the information are less distinct. For instance, symposium participants agreed that financial education is a lifelong proposition—therefore, a single seminar or class cannot provide sufficient information for any audience. Needs change over time. Circumstances change. Motivations change. Even the economy itself changes, as the early 2000s illustrated all too graphically.
As with any first step toward a large, inclusive movement, the exchanges at the NEFE gathering were lively, challenging, and far from unanimous in tone or conclusions. By way of illustration, a few participant comments on approaches to the problem of financial illiteracy follow:
• “If we can alert society that there is a problem, and now it is [the individual’s] responsibility to do something ... to develop a plan, institutions may come in, to help fund those that can’t afford to develop a plan, to educate those that can and want to do their own. It is only going to be solved one person at a time, and not by government.”
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• “What really needs to take place is a great deal more local application, so we’re at your kitchen table working with you. We are in your church basement working with your community group. We are working in a housing area to help people move from where they are, to set their goals, and save for the future and make good decisions.”
• “Some of the most inspiring stories I’ve ever heard were from the African-American community in low-income areas and focus groups in the basements of churches and other faith-based organizations. Those stories should be exposed to other people because it’s not just the wealthy people or the people with means ... all people are trying.”
• “I think we have an opportunity here, while people are trying to figure out how they’re going to make their money last and achieve what they want in terms of life and their goals, to bring them to financial advisors, to the many good programs that are out there—magazines, television, the Internet—and to show that there is some really good help out there and you can take it a small step at a time. You can start by just filling out a basic one-page worksheet to try to estimate how much you’re going to need to be saving every year between now and the time you retire to have a good lifestyle.”
Appropriate Subject Matter
Although some forms of financial education were being provided more than 80 years ago, most current programs were started in the 1990s, primarily in 1995 or later. Most programs deal with the basics of budgeting, saving, credit, bank accounts, and investing. While there seemed to be consensus among participants at the NEFE symposium that Americans of all ages need to understand the fundamentals, there was no consensus on the details of topics and messages.
The clear favorite for the focus of financial education is “fundamentals.” “It’s like brushing your teeth and washing your face,” said a participant in an early session. “What we need to do is to make [financial literacy] part of the core school curriculum: understanding credit,
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understanding how to balance a checkbook, understanding the use of credit. There’s a sense of urgency here for the entire country.” Discussion covered the gamut of topics for financial education, for students of all ages.
Basic Skills
The first step in determining topics is to identify what is “fundamental.” At least one organization is circulating a set of proposed educational standards for school financial education programs across the country. Meanwhile, the U.S. Department of the Treasury proposes integrating financial education into core curricula (math and reading classes) for all grades, both to reinforce concepts year after year and to avoid the cost of separate financial education classes and materials. In October 2002, the Treasury department’s new Office of Financial Education issued a white paper entitled Integrating Financial Education Into School Curricula: Giving America’s Youth the Educational Foundation for Making Effective Financial Decisions Throughout Their Lives by Teaching Financial Concepts as Part of Math and Reading Curricula in Elementary, Middle, and High Schools. The paper recommends that states align standards, assessments, and curricula to include basic financial education concepts and real-life applications in core curricula. It emphasizes that education leaders at the state and local level need to understand the benefits of financial education and the importance of including it in a standards-based system.31
“Focusing on improving fundamental mathematical and problem-solving skills can develop knowledgeable consumers who can take full advantage of the sophisticated financial services offered in an ever-changing marketplace,” Federal Reserve Chairman Alan Greenspan told a Senate committee hearing in early 2002.32
While many participants expressed support for the concept of including financial education in core school curricula, a large percentage seemed to prefer the concept of financial education as a separate topic, rather than as an adjunct to another subject. The NEFE High School Financial Planning Program® (HSFPP®) is one example of a successful, specialized program designed for use within or in conjunction with existing courses. The effectiveness of
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the HSFPP, which has been presented to more than 2.5 million American students, was documented by research in the late 1990s citing “significant changes in knowledge, attitudes, and behavior that occurred in students as a result of participating in the program.”33
While adult financial literacy programs face different challenges, they frequently report powerful results. The Fannie Mae study, Personal Finance and the Rush to Competence, cited positive attitudes on the part of individuals who completed adult financial education programs. “Virtually all participants interviewed reported that financial education changed their view about how much time and effort must be spent in learning, and they felt that courses, seminars, and counseling, regardless of length, were ‘not long enough.’”34 Among the representative programs reviewed, the study lists the following topics (in order) as most common: budget and money management, saving and investing, credit and debt, 401(k) investing, financing higher education, and financing health care.35
Specialized Information
“You have to try to provide financial education on a ‘just in time’ basis throughout the lives of individuals,” one participant said. All Americans undoubtedly need different types of information—in varying levels of detail—in various situations and at various times in their lives. But individual customization, except for the wealthiest of us, is not generally an option. Throughout the NEFE symposium, participants discussed what specifics, beyond the fundamentals, are most important in financial education for people of all ages. The consensus on topics for each group follows:
• For young people. To offset the development of financial problems later in life, experts frequently recommend teaching young people how to reach immediate, relevant goals. Few high school students, for example, can relate to retirement planning and are more open to messages about saving for clothes, cars, or college. “We may be teaching children the wrong things,” said a symposium participant. Another commented that youngsters in grades K-3 need concrete financial examples. “The media have confused kids,” another said. “Money has no value to them.”
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• For adults beginning the process. Among participants, a common theme arose for the adult audience—get started—at any level—just get started. While many participants argued in favor of sophisticated financial planning, others encouraged a more simple, self-directed approach. “I think anyone can get started by themselves,” said an attendee on the final day of the event. Another offered this controversial insight: “It’s not as complicated as you think it is. There are complicated issues, but most are not relevant for most people.”
• For individuals nearing retirement. Participants also emphasized that retired individuals and those nearing retirement need to understand how to manage their money once they stop working. Current and potential retirees have to be prepared—they need to know how much money they will need in retirement and they need to be ready to supplement their savings as necessary. Too often, participants said, retirees are unaware of the level of expenses they face on their reduced income. The 2002 Retirement Confidence Survey (RCS) confirms that individuals’ expectations about retirement are frequently inaccurate. According to the RCS, many Americans retire sooner than they anticipate they will, many underestimate the amount of money they will need for expenses, and many return to some sort of job out of financial necessity.36
The Impact of Technology
Although a peripheral issue, knowledge of technology is increasingly relevant to financial literacy. Federal Reserve Chairman Greenspan told the Senate committee that Americans “need to accumulate the appropriate knowledge about how to use new technologies and how to make financial decisions in an informed manner.”37 At the heart of the technology issue is the Internet. According to a symposium participant, an estimated two-thirds of Americans now have access to personal computers—but access does not ensure competence in either technology or financial management. “There’s so much bad information out there,” said another attendee. “Technology has been a great blessing and has given us all kinds of information that we would never have had access to before, but a lot of it isn’t good. You
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can’t just put that in front of people and expect them to know how to use it effectively and discern what is good and what is bad. They’ve got to be educated.”
The Significance of Health Care
Although traditionally outside the realm of financial education, the increasingly relevant and significant topic of health care was mentioned repeatedly during the symposium. Participants spoke of “the growing burden of responsibility on individuals.” One attendee commented that “the government is shut down on the issue.” Another stated that health care financial issues are “tough for young people to understand.” Still another suggested that health care should be a “fourth leg” in the retirement planning stool. Participants in general agreed that health care is an increasingly important financial issue because:
• Few people, of any age, understand the financial consequences of a serious health problem, especially for the uninsured.
• Costs are escalating because of prices for drugs and utilization, as well as the higher costs of dealing with an aging population.
• There is a trend toward defined contribution health care benefits, in line with trends in retirement funding.
• Many people are vulnerable to manipulation and misinformation on health-care issues.
From fundamental topics such as math to complex subjects such as retirement planning, financial literacy has a broad scope. Many current programs focus on specific areas or interests in order to match audiences with their most immediate needs. But other elements are also important to the success of financial education, including when the information is presented.
Teachable Moments
People are most receptive to financial education when the information meets an immediate need, experts in the financial literacy field have stated consistently in related literature, as
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well as at the NEFE symposium. Timing, in other words, helps determine motivation. As one panelist put it, “I think one of the things we can do is address people at that point of life change, whether it’s when they’re getting married, when they have a child, when they get divorced, when they lose a loved one. These are things that force you to sit back and say, ‘Oh my, I have something to contend with.’...These are the times when people have the motivation to learn.”
In financial education, the following people are experiencing typical teachable moments: • Potential homeowners want to learn how to save. • Employees facing retirement want to know how to handle their funds. • People in serious debt generally welcome financial counseling.
• Applicants for Individual Development Accounts are ripe for financial knowledge.
• Parents with children are anxious to learn about saving for college costs. • Immigrants want to understand how to be successful in their new environment.
Participants were divided on how to motivate the American public, en masse, to pursue financial literacy, to take advantage of opportunities available to them, and to actively seek the knowledge and skills required to ensure their own economic stability. “Now, more than ever, we need to step up and help everyone who doesn’t know they’re financially illiterate,” said one.
Several individuals agreed that children in grades K-3 are more easily motivated than older students. Young children, it was pointed out, are interested in what their parents are doing and usually welcome the chance to understand the details—regardless of the subject. “At that age, they still think adults are brilliant,” one attendee commented. Another added that, with a foundation established in early grades, teaching older (high school) students more complicated concepts will be easier. And, as others pointed out, the classroom discussions may spill over into children’s homes, with benefits for both children and adults.
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Several symposium attendees emphasized the differences in individual interests, learning styles, priorities—and motivations. Circumstances such as format, language, culture, values, venue, schedule, instructor, layout, and design can have a significant impact on the success of a financial education program. “In the African-American community,” a panelist explained, “there’s an economic rights movement going on right now. African-Americans want to learn how to ‘own the pond,’ as we say. We don’t want to be renters. We want to own our own homes, own our businesses, and own a piece of America. So we’re ready, we’re open, but we need someone to give us the information we trust.”
Motivation, however, is not entirely self-generated. Individuals of all ages can be inspired by external factors. Targeted promotion and marketing efforts can generate interest and help to stimulate momentum that will lead to a teachable moment. In other words, financial educators can create teachable moments. For instance, while most Americans in the workforce are interested in preparing for their later years, many are disconcerted by the word “retirement.” Research has shown that baby boomers, who are more focused on individuality and long-term vitality than previous generations, shy away from traditional retirement planning concepts. Consequently, financial education materials that refer to “planning for your future” or “taking the next step” may inspire an audience when “retirement” information is ignored.38
All Americans experience teachable moments when financial education could help them either capitalize on good fortune or minimize the effects of a bad situation. Unfortunately, teachable moments do not often occur simultaneously for everyone, nor are Americans interested in simply preparing ahead for its own sake. “I think part of our problem right now stems from the fact that we are basically not a country or a culture that believes in the old adage of fixing the roof while the sun is shining,” one participant interjected. “We have had such an economic boom that people haven’t been worried, and because they haven’t been worried, they haven’t been planning and they haven’t been thinking about the time when, as all economies do, we go into a down cycle.”
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Another commented that the current economic climate may present a teachable moment for many. “Payday loan debt, subprime debt, second mortgage debt—and especially credit card debt. The average household carrying a dollar balance from month to month has $10,000 in credit card debt. Many of those families are either struggling at the surface or they are sinking, and they are now ready to be taught, if we do our jobs the right way, how to manage money more effectively.”
Symposium participants were unanimous in their agreement that “some great things are out there” for Americans seeking financial education. Distribution of the information, however, presents some formidable obstacles that must be overcome if the goal of national financial literacy is to be achieved. When teachable moments hit, not only does the content need to be ready, but it needs a vehicle for delivery as well.
Where and How to Deliver Information
Distribution is a key—many say the key—issue in the financial literacy effort. The problem of delivering existing financial education materials to the appropriate audiences constitutes a significant barrier to achieving the goal of national financial literacy. A closely related issue—nearly indistinguishable in some ways—is the approach. For example, if material is intended for distribution in the classroom, it will generally take the form of standard instruction; whereas, material intended for the Internet will be designed for online distribution. As reflected in the following symposium comments, there is no clear consensus on delivery or approach:
• We need to be much more creative about taking information to people where they are: where they live and where they work.
• Most adults can be reached through the workplace. • We need more than one medium to accommodate different learning styles. • Education is not enough. People’s issues are unique. There needs to be one-on-
one interaction. • Schools are the obvious place for this to be taught. • We can’t put everything on teachers.
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• There has to be a grass-roots movement.
A symposium participant suggested that professional financial planners volunteer their time to work with local nonprofit organizations and university Cooperative Extension programs to develop and deliver financial education through a variety of media, including CD-ROMs, the Internet, classes or seminars, and individual counseling. Still others recommended additional options, including classroom materials, specifically “parent-teacher-student guides” and “scripts” for elementary school teachers.
While young people have specific needs and expectations, adult learners present different challenges. Preliminary results from Financial Knowledge, Experience, and Learning Preferences, a Federal Reserve Board study presented at the NEFE symposium, showed that adults consider “personal experience” their major source of financial information. The second most-frequently cited source was “friends and family,” followed by “media.” When asked about preferred ways to receive information, respondents chose so-called “on-demand” options: media, brochures, and home videos. Further down the list were the Internet, courses, and seminars. “No one is saying, ‘I want to sit in a seminar or I want a Cooperative Extension course whenever you offer it.’ They’re saying they want information on their time and in their place,” said a presenter in describing the research.39
The Fannie Mae study Personal Finance and the Rush to Competence lists the characteristics of effective adult financial education programs as follows: unambiguous mission and purpose, targeted outreach, adequate resources, successful evaluation and follow-up, program accessibility, relevant curriculum, and dynamic partnering.40 Similarly, symposium participants recommended that education programs make information relevant and practical for the intended audiences and that information be manageable in length and scope.
Content and approach can make the difference between success and failure with audiences of all ages, another emphasized. “If I’m attempting to teach a bunch of high school seniors or college freshmen,” she said, “I may not spend an awful lot of time on retirement because that’s not an issue that’s very relevant to them. Later, when they’re in the workforce and they
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need to choose a 401(k) plan, their interests are different.” Older workers, receiving their Social Security statements, start to worry about what they’ll live on, continued the participant, prompting “new motivation to learn what they need to know.”
The packaging, content, and context of financial education undoubtedly help to determine both its reach and impact. But these factors are also affected by another element: the medium or venue in which the material is presented. Three of the most common alternatives—schools, the workplace, and community organizations—are covered in the following sections.
Schools as a Venue
While symposium participants consistently mentioned schools as a major venue for financial education, others explained the difficulties in working with education systems. “The doors are shut,” one participant stated. Another added context: “There are 25,000 different school districts that make decisions on whether or not to include financial education in their curricula. There is no core constituency that is promoting financial education in the schools. Plus, we are starting to get crowded out in some districts by the back-to-the-basics movement, which is being reinforced by standardized tests. Financial literacy questions are not part of those tests. I think it’s very important to have financial knowledge incorporated.”
Several participants questioned the capability of teachers to present specialized financial information. “Teachers must be confident about what they’re teaching,” said one. “I think it’s unrealistic to say that you’re going to train a mathematics teacher, an English teacher, or someone to teach what is indeed a very complex issue.” Conversely, another participant argued that basic financial issues are straightforward. “A lot of this isn’t rocket science,” he said. “It is simple addition, subtraction, multiplication, and division. You don’t have to understand the rules of accounting to be able to teach a third grader how to balance a checkbook or to teach a high schooler what it means when you revolve your credit card debt.”
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When a panelist in an early session pointed out that many teachers have their own financial problems, some attendees commented that such problems might make teachers more effective with students. “They have a story to tell,” one said. In addition, teachers have access to specially designed online training to help them familiarize themselves with basic financial material. For instance, the NEFE Web site features a program for educators that includes fundamental financial information, as well as suggested exercises and teaching approaches for the NEFE High School Financial Planning Program.41
Workplace Advantages
The Fannie Mae study concluded, “Workplace financial education is the venue for reaching most people.”42 “There’s no silver bullet,” said one participant, “but the workplace is still a very powerful place to get information to employees.” Another suggested that small employers work with educators and volunteers from the financial planning profession to provide financial education to their workers.
The U.S. military and a large number of federal agencies and departments make financial information available to personnel and have done so for many years. In addition, some private-sector employers routinely provide financial education to their employees; unfortunately, they are in the minority. The workplace is undeniably a convenient venue and offers unsurpassed accessibility for working adults, but its disadvantages—including widespread concerns about employer liability—have so far limited its potential for national impact in the field of financial literacy.
Nonprofit and Community Groups
Underserved populations, often considered the most in need of financial education, generally receive information from nonprofit and community organizations, from which they receive services and information attuned to their specific needs. “Commercial interests have little incentive to work with underserved groups,” one participant explained.
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Unique needs and considerations, such as language barriers for new immigrants, require special learning environments and approaches. A symposium attendee pointed out that many cultures, including African-American and Hispanic populations, prefer to learn in group environments. Other groups respond better to programs that combine group instruction with supporting, self-paced materials. “We need to look at these situations comprehensively,” said one participant. “We have to consider lifestyles.”
The Fannie Mae study provides insights into successful training for myriad groups, citing confidence as the key. “Confidence in one’s ability to do a thing successfully increases both the likelihood of undertaking it and the probability of success.” The material lists several factors that should be included in a classroom program to build or enhance a person’s confidence, including:
• The opportunity to undertake specific action that challenges one’s sense of self- sufficiency without overwhelming it.
• The presence of supportive and reassuring individuals. • An experience of succeeding at something with confirming feedback from
others.43
Leading the Movement
“We are [a nation of] 280 million people. Getting that number of people to adjust to this level of change is like steering the Titanic and saying, ‘OK, turn right now.’ It takes a while to get that ship to turn around,” lamented a symposium panelist. The enormity of work implicit in the goal of national financial literacy is daunting indeed. However, conditions seem ripe due to current events that include:
• Broad-based support for the concept of financial literacy. • Demonstrated, ubiquitous need for financial education. • Widespread and increasing debt in the nation. • Growing awareness of the danger inherent in inadequate financial knowledge. • Significant evidence of an impending national financial crisis.
• Consensus that an extensive amount of financial education material already exists. 28
With all this evidence supporting the need for financial education, we’re left with one question: what’s missing? What element is needed to push financial literacy to what author Malcolm Gladwell calls the tipping point, “the moment of critical mass, the threshold, the boiling point?”44 In The Tipping Point, mentioned by several participants at the symposium, Gladwell explains how a seemingly small event can be the catalyst for major change. He compares the rapid expansion of a trend or a movement to the geometric growth and mutation of a virus. “How can we start and control epidemics of our own?” he asks.45
The symposium itself could be a factor in generating the tipping point for financial literacy. By bringing together representatives of all facets of the ongoing effort to provide financial education to Americans, the event enabled a blending of ideas and values that resulted in, among other things, a broad endorsement of the concept of partnering for the eventual achievement of the shared goal of national financial literacy. However, there was no consensus about which sector or organization should take responsibility for leading the charge, including how government, employers, parents, media, and schools can and should be involved.
The Role of Government
During the symposium, there were repeated suggestions for expanded government involvement in financial literacy. In the symposium’s concluding session, 85 percent of participants on hand agreed, via electronic polling, with the statement that: “The government needs to take a more aggressive role in financial literacy.” While the group was split on what specific action the government should take, the largest segment—50 percent—endorsed the idea of financial education as a “core subject” in schools.
Some participants, in earlier discussions, called for the creation of federal standards for financial literacy to guide the education process. Others favored tax incentives for employers that offer financial education for employees. Still others proposed a large, broad-based national campaign with endorsements from the President and Congress. “Wouldn’t it be great
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if the President were to stand up and say, ‘We’re planning for America’s future’” asked one participant. Another added, “Using the bully pulpit of the President and the Congress to make this point, to say, ‘Save for your future,’ would be very important, and we ought to try to work toward that.”
Both the executive and legislative branches of the federal government have consistently stressed the importance of financial education. In 2002, for example, two significant events included the Senate hearings and the creation of a new office devoted to financial education.
• The U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing on financial literacy in February 2002. Before the hearing, committee chairman Senator Paul Sarbanes called for a national strategy to be developed on financial education.
• In May 2002, the Office of Financial Education was established within the Department of the Treasury. According to the new director, the office will focus on ways to address Americans’ problems in the areas of basic savings, credit management, homeownership, and retirement planning. Rather than creating new programs, though, the office will act as a conduit between individuals and existing financial education programs. The emphasis is on helping Americans gain practical skills.46
The Bush administration, including representatives attending the symposium, have repeatedly stressed that the White House supports the concept of financial literacy and has provided guidelines and support materials for schools, posted related information on the Internet, and taken steps to encourage public access to financial education. The administration’s primary focus, however, is on encouraging individual self-reliance rather than on government leadership. Further, budgetary shortfalls at all levels of government make additional expenditures on behalf of financial literacy unlikely in the short term.
Regulatory Responsibilities
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The volatility of the nation’s markets in the first years of the 21st century brought unprecedented visibility to financial regulatory agencies, some of which were represented at the NEFE symposium. One of the attendees explained the ongoing role of regulators in protecting investors and safeguarding the economy as a whole, encompassing both enforcement of regulations and education of investors. “We have an enormous obligation to write rules that will guard against the kind of fraud we have seen in the last several years,” she said, “and we have an obligation to try to level the playing field so that individual investors have access to markets the same way institutions do ... Investors need to understand the complexity of the products that are being sold to them. The best guard against fraud, in many ways, is a highly educated group of investors who are looking out for their own interests.”
Several organizations have emphasized the ongoing importance of regulation, over and beyond financial literacy. “Our concern is that support for adult financial literacy should not be viewed as a substitute for a clear and strong oversight and enforcement of investor protection laws and regulations,” the then-president of AARP said at the Senate committee hearings in 2002.47
Employers as Educators
Several participants at the NEFE symposium mentioned the workplace as an obvious place for Americans to receive financial education. Reasons included:
• Many employers offer 401(k) or 403(b) plans, which require employees to manage their own accounts.
• Employee retirement accounts are often the largest source of retirement funding. • The workplace provides easy access. • Research shows that financial education improves worker productivity by
reducing worry and time spent away from work. • Employees would benefit from information on other financial issues, such as
insurance options, taxes, and budgeting.
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Despite the benefits of workplace financial education, many employers do not sponsor such programs because of the potential for liability. A symposium panelist explained a common employer perspective. “If employees fail [through 401(k) investments], an employee’s first reaction may be, ‘Boy, no one ever told me this could happen. I’ve got to find someone to bail me out. Maybe it’s my employer because, after all, they sponsored the plan.’ So there’s a psychology that, ‘I’m going to hold someone else accountable.’ Think of the consequences for business_the litigation costs.” Although Congress has discussed legislation that would relieve employers of liability in the presentation of financial education, no related laws are currently on the books.
Regardless, some symposium participants argued that the advantages outweigh the risks. “The biggest risk for business is doing nothing,” said one participant. “The second biggest risk is doing something poorly.” In the final symposium session, 74 percent of participants agreed with this statement: “Employers need to make financial education a funded and provided benefit for all employees.”
However, there are significant drawbacks to designating the workplace as the primary point of either leadership or distribution for financial education. The rapid stock declines and corporate scandals of 2001 and 2002, which caused many Americans to lose either all or a substantial portion of their retirement funds, created large-scale distrust among employees nationwide. As a result, employees are more hesitant to invest in company programs, especially if they consist largely or entirely of employer stock. Employees are also more likely than ever to suspect that financial information provided in the workplace is slanted to favor the employer.
Even more significant, according to symposium participants, more than half of American workers are either self-employed or work for small companies, which are unlikely to take on the responsibility for providing financial education. In short, workplace education, even if standard in all major companies, would not cover a majority of the nation’s workforce.
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Parental Values and Responsibilities
With children widely considered the most important audience for financial education, the issue of parental responsibility is noteworthy. Parents, many of whom have limited financial knowledge themselves, are often cited as the primary source of financial education for their kids. The American Savings Education Council, in a 2001 study entitled Parents, Youth, and Money, found that 94 percent of students turn to their parents for financial information.48 In the symposium’s final session, 100 percent of participants chose “home” as the “most appropriate place for financial literacy to be developed and promoted.” The other options were “public/private,” “workplace,” “marketplace,” and “nonprofit” arenas.
Relying on family members, however, suggests several limitations. “If your parents didn’t have any money, what are you going to do?” asked a panelist in an early symposium session. In addition to the fact that most adults lack knowledge of basic financial management, home- based efforts are difficult to standardize, evaluate, or monitor. Some participants pointed out that many families actively avoid talking about money, especially in cases of divorce or financial problems. While many at the symposium agreed that financial decisions should be a family matter, it was also suggested that other sources of financial education may be more appropriate. “Today’s adult consumers face challenges unknown to their parents or grandparents,” said one participant. Testimony before the Senate Committee on Banking, Housing, and Urban Affairs included this comment: “There is a bewildering array of decisions—from telephone plans to IRAs—and the proliferation of saving, investing, borrowing, and spending choices can be expected to grow.”49
The Media Potential
The most broad-based, far-reaching segment represented at the symposium was the media. In addition to acting as a conduit for messages and insight from financial education organizations, the media are a powerful provider of insight and resources in their own right. As one journalist at the symposium put it, “Everything we do is education.” Said another, “I think we’re doing a good job of getting the word out_but it’s not enough.”
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Stories, described as one of the most effective and convincing means of providing information, are the media’s primary format. Symposium participants gave examples of magazine and broadcast features on financial problems and solutions. “I think there are a lot of good stories out there that are not being told,” a media participant said. But the information has to be appealing, another emphasized. “If we just give broccoli, nobody is going to eat what’s on the plate.”
Other participants discussed the diverse audiences reached by various media programs and publications, citing different ages, races, social status, and careers. “When I proposed a financial program for African-Americans,” one broadcaster recounted, “I was told, ‘They’ll never watch.’ Everyone is watching,” he smiled.
Media also have the advantage of objectivity. “We’re an unbiased source,” said a media participant. Conversely, others pointed out that the media lost credibility during the current stock market slump because many publications and broadcast programs advised investing in stocks and mutual funds. “We got carried away,” one media person conceded. Another pointed out that viewership for many finance-related broadcasts has dropped significantly since the stock market decline.
As an important part of the financial literacy effort, the media contribute many things, among them affordability and immediacy of information, as well as independence. They can also provide the kind of “pizzazz and entertainment” that some participants suggested as an enticement to accept financial education. “We can be your best friend,” said one media participant. “We’ll take your message and fold it in.” But the same qualities that make the media a valuable part of the effort—lack of obligation to financial education organizations and lack of focus on monitoring results—also limit their effectiveness as a leader. In the words of one participant, “It’s not our (the media’s) goal to serve financial literacy organizations. We serve our readers.”
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School Advantages and Limitations
While schools are generally considered an excellent delivery mechanism for financial education, they are not often described as potential leaders or coordinators of a large-scale effort. Although federal legislation encourages financial education in the schools—and some states even mandate that financial information be provided to students—there is no national standard or universal approach.
Many symposium participants expressed the belief that teachers in grades K-12 should incorporate financial education into classroom work, but disagreed about whether most teachers are comfortable with or interested in presenting the information. Symposium participants in more than one session discussed the potential for including financial education as part of college-level training for aspiring educators in order to gradually instill a commitment to the material as an essential part of teaching. Currently, curricula are shaped primarily at the state and district level and revolve largely around the dictates of standardized tests.
Thousands of school districts around the country have partnered to provide basic financial education material to students through a variety of packages provided by government and nonprofit organizations. While the potential for partnership may be limited in some cases, the role of schools seems most effective in the context of partnerships with financial literacy organizations. A symposium panelist with a background in public education told participants that working with schools “is absolutely essential to educate America’s young people, with financial literacy being part of the core.”
The Power of Partnering
“No one organization is capable of accomplishing all the tasks before us,” NEFE President and CEO William L. Anthes, Ph.D., told participants at the opening of a panel session devoted to partnering. Most organizations are focused on a specific audience or a particular aspect of the problem and lack either the resources or the focus to formally direct a
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comprehensive, nationwide effort. The obvious solution is partnering. As a panelist put it, “Think big. A partnership can accomplish what no single entity can accomplish alone.” Throughout the gathering, others expressed similar sentiments:
• A partnership [among] business, education, nonprofits, and government—this is our focus for the future of America.
• The new Office of Financial Education in the Department of the Treasury is predicated on partnering.
• Small employers can partner with educators and volunteers. • A “pro bono” approach, through which financial planners volunteer their time in
partnership with local nonprofit groups and university Cooperative Extension
programs. • Financial planners, product providers, educators ... can all contribute to informed
retirement planning. • Partnering helps to simplify, interpret, and evaluate the overwhelming volume of
information available. • A cooperative approach was proposed, bringing together government, private
business, and nonprofit organizations. • Workplace/research partnerships are needed to evaluate workplace interventions
that improve retirement savings and identify those that don’t. • Partnership is the only way.
As an extension of informal partnering discussions among participants throughout the symposium, the partnering session provided guidelines and insights from several perspectives. For example, to ensure a successful partnership, one panelist suggested seeking out prospective partners with solid reputations; establishing a legally binding agreement; having an understanding of potential problems such as conflicting obligations, changes in
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staff, delays, overlapping and competing partnerships; creating a defined structure; deciding on deadlines mutually; and upholding an ongoing commitment to keep partners involved.
“Take the time to listen, talk, and interact to make sure the partnership is a two-way street,” another panelist advised. “Equal responsibility, equal power, equal status—with no one partner dominant.” Panelists continued to emphasize that every alliance should be a two-way street—that there should be give-and-take, trust, and equality. Other tips include having patience as quality alliances take time to build, being flexible, avoiding rigid structures, responding to opportunities, and engaging partners in reaching goals.
Another veteran of partnering urged caution. “Partnership is not always the right choice,” she said. “To get the job done, you need to know when to enter into a partnership and when to keep your door closed and work within your own organization by yourself. ” And, she added, “There are serious turf issues and trust issues that you have to overcome. There are also varied levels of partnership,” she noted starting with the idea, moving on to a decision about what can be done, and finally sharing a vision for the outcome. She suggested some investigation to help identify potential conflicts, including:
• Look for a history of cooperation at lower levels between the organizations. • Determine if there is a common vision. • Confirm the potential for shared resources. • Ensure that open and honest communication can occur.
• Discuss the potential for changing the behavior of the target audience in a positive way.
• Find out if an adverse personal relationship or political agenda is involved.
In addition, panelists also provided insight on collaborations with two specific groups: school districts and the media. A former school superintendent advised that in dealing with schools, you need to:
• Remember that mutual goals must be agreeable to both organizations. • Go deeply into school districts to investigate curriculum creation and revision. • Understand that you (potential school partners) are considered a special interest.
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• Consider that you don’t speak the same language as schools and must demonstrate a capacity to work with the system and add value in support of their mission.
• Keep in mind that change has to be gradual. • Remember the saying, “Most failures have to do with people’s egos getting in the
way of their brains.”
A participant with extensive experience in partnering with the media suggested that organizations:
• Do your homework on the needs and role of the media. • Find common ground for discussion. • Understand up front that the situation may be difficult. • Go slowly in establishing rapport.
• Never tell them what the news is.
Creating the momentum that will transform financial literacy from an effort to a movement requires that everyone work together, participants agreed. Partnerships are critical to the achievement of national financial literacy. The symposium provided a forum for establishing, as well as talking about, collaborations to further the shared goals of the participating organizations.
The Coming Revolution
One-and-a-half days of discussion, debate, and deliberation helped to solidify the links among financial literacy organizations and identify the status and goals of an ongoing effort to help all Americans achieve financial independence. While participants did not designate a next step in the effort, their work during the symposium represented a milestone in the evolution of financial literacy. Building on the relationships, concepts, and partnerships begun during the symposium, organizations are moving toward the revolution.
Symposium participants repeatedly stressed their dedication to the goal of national financial literacy, for the benefit of individuals as well as the country. During scheduled sessions and
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impromptu exchanges, attendees expressed their general agreement on a wide range of factors and points related to financial literacy efforts, including:
• Get business, government, and nonprofits working together to confirm priorities. • Take financial education to all people. • Measure the impact of programs. • Motivate people to learn how to manage their finances.
• Help people develop practical financial skills. • Overcome the subtle barriers to financial education, such as a lack of awareness, a
sense of powerlessness, pessimism, and low self-esteem. • Develop an action plan for financial literacy.
Although participants generally agreed on what needs to happen, they expressed differences in several areas, with comments such as these:
• “Unless we [elevate] this issue to a concern on the level of a space program or something that’s equally meaningful to Americans, I don’t expect that at the end of 10 years we’re going to see a considerable improvement—or perhaps any improvement at all—in financial literacy,” said one attendee.
• Still others called for increased cooperation among financial literacy groups. “I picked up [something] since I’ve been here the last couple of days and that is a very significant undercurrent of our competitiveness and turf issues,” said one. “I think that at some point we as a community need to address that. How can we collaborate and cooperate and coordinate better—because [otherwise] all of these things that we’re talking about, these macro goals that we want to address, will be completely impossible.”
• “We may be aiming too high,” said another. “People are really hurting. Many of them don’t have much money or many options. I think we have to be reasonable in what we expect people’s goals to be.”
Undeniably, numerous barriers remain to be overcome in the effort toward national financial literacy. As participants noted, Americans are bombarded with thousands of messages daily and rarely have either the energy or the time to sift through them. Other barriers, as cited
39
throughout this paper, include attitudes, cultural differences, and lack of access. But progress is being made. Awareness is on the rise.
Despite differences in perspective, participants seemed unanimous in the belief that the symposium was both positive and significant for the national financial literacy effort. In evaluations and follow-up correspondence, many described the event’s direct impact on their future work. For example, more than one author stated that the insights gained at the symposium will influence their upcoming books. Other attendees said they are developing new project ideas and new collaborations based on their experiences at the event. In at least two cases, participants are considering projects discussed at the symposium: a national financial literacy test and a national financial literacy day. Still others emphasized the value of new contacts from the meeting and expressed enthusiasm about potential partnerships.
Partnership was, in fact, the most widely-touted concept for future projects. As a panelist in the partnership session commented, “Successful coalitions are founded on strong one-to-one personal relationships. Reports and meetings may be the bricks, but personal relationships are the mortar that holds the structure together. And I think those of us who have worked together realize that we’re going to need a lot more of both bricks and mortar in the coming years if we’re going to try to address some of the challenges identified [here].” The results of an electronic poll in the symposium’s final session implied some hesitation about large-scale collaborations. Attendees were asked to respond to the following statement: “All organizations involved in promoting financial literacy should combine funding and resources to promote a massive public relations campaign.” More than three-fourths—76 percent—said “no.”
As a nation that prides itself on its respect for the individual, it is not surprising that many issues discussed at the symposium shared a concurrent theme related to the national consequences of a population unprepared to make financial choices in its best interests. There was a general consensus and resolution among participants that each would renew their efforts to promote positive financial behavior changes among their constituents and partner
40
with one another whenever possible to leverage their resources toward the common goal of financial literacy for all Americans.
41
Endnotes
1 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
2 Paul H.O’Neill, Secretary of the U.S. Department of the Treasury, testifying before the Senate Committee on Banking, Housing, and Urban Affairs, Feb. 5, 2002.
3 American Bankruptcy Institute, “Bankruptcy Filings Set Record in 2001” press release, Feb. 19, 2002, Alexandria, Va., http://www.abiworld.org/release/4q01.html.
4 Jump$tart Coalition for Personal Financial Literacy, The 2002 Personal Financial Survey of High School Seniors.
5 Don M. Blandin, president of the American Savings Education Council, testifying before the Senate Committee on Banking, Housing, and Urban Affairs on Financial Education, Feb. 6, 2002.
6 Ipsos-NPD, Survey of Persons 50-59 on Their Preferences and Behaviors Regarding Financial Planning and Management, unpublished, presented by Esther “Tess” Canjo, president of AARP, in remarks to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Feb. 6, 2002.
7 Hamilton’s Essentials of Mathematics, 1917 and 1920, presented by Lois Vitt at The State of Financial Literacy in America: Evolutions and Revolutions, Oct. 10, 2002.
8 Elaine Chao, U.S. Secretary of Labor, in the Final Report on the 2002 National Summit on Retirement Savings, available on the Internet at www.saversummit.dol.gov.
9 2002 Retirement Confidence Survey, cosponsored by the Employee Benefit Research Institute (EBRI), the American Savings Education Council, and Mathew Greenwald & Associations, Inc., January 2002.
10 Retirement Confidence Survey, January 2002.
11 Neal E. Cutler, Ph.D., Financial Gerontology and Financial Literacy, “The Wealth Span Model,” as presented to The State of Financial Literacy in America: Evolutions and Revolutions, Oct. 10, 2002.
12 Neal E. Cutler, Ph.D., Financial Gerontology and Financial Literacy, “The Wealth Span Model,” as presented to The State of Financial Literacy in America: Evolutions and Revolutions, Oct. 10, 2002.
13 Credit Union National Association (CUNA), written statement presented to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Feb. 6, 2002.
42
14 CUNA, written statement presented to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Feb. 6, 2002.
15 CUNA, written statement presented to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Feb. 6, 2002.
16 Nellie Mae, 2000 Credit Card Usage Analysis, http://www.nelliemae.com/library/research_8.html.
17 CUNA, written statement presented to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Feb. 6, 2002.
18 Katy Jacob, Sharyl Hudson, and Malcolm Bush, Woodstock Institute, Tools for Survival: An Analysis of Financial Literacy Programs for Lower-Income Families, The Woodstock Institute, Chicago, IL, funded by the Annie E. Casey Foundation, January 2000.
19 Katy Jacob, Sharyl Hudson, and Malcolm Bush, Woodstock Institute, Tools for Survival: An Analysis of Financial Literacy Programs for Lower-Income Families, The Woodstock Institute, Chicago, IL, funded by the Annie E. Casey Foundation, January 2000.
20 Paul H. O’Neill, in testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs, Feb. 6, 2002.
21 Jean M. Hogarth, Financial Literacy and Family & Consumer Sciences, Journal of Family and Consumer Sciences, January 2002.
22 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
23 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
24 Paul H.O’Neill, Secretary of the U.S. Department of the Treasury, testifying before the Senate Committee on Banking, Housing, and Urban Affairs, Feb. 5, 2002.
25 Jean M. Hogarth, Financial Literacy and Family & Consumer Sciences, Journal of Family and Consumer Sciences, January 2002.
26 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
43
27 Esther “Tess” Canja, president of AARP, in remarks to the U.S. Senate Committee on Banking, Housing and Urban Affairs, Feb. 6, 2002.
28 The Facts on Saving and Investing: Excerpts from Recent Polls and Studies Highlighting the Need for Financial Education, Office of Investor Education and Assistance, Securities and Exchange Commission, revised April 1999.
29 O’Neill, in testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Feb. 6, 2002.
30 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
31 Integrating Financial Education Into School Curricula: Giving America’s Youth the Educational Foundation for Making Effective Financial Decisions Throughout Their Lives by Teaching Financial Concepts as Part of Math and Reading Curricula in Elementary, Middle, and High Schools, a white paper issued by the U.S. Department of the Treasury, Office of Financial Education, October 2002, available online at http://www.treas.gov/offices/domestic-finance/financial-institution/fin_ed_links.html.
32 Alan Greenspan, Chairman of the U.S. Federal Reserve Board, in remarks before the Senate Banking, Housing, and Urban Affairs Committee, Feb. 6, 2002.
33 Credit Union National Association, written statement presented to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Feb. 6, 2002.
34 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
35 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
36 Retirement Confidence Survey, January 2002.
37 Alan Greenspan, Chairman of the U.S. Federal Reserve Board, in remarks before the Senate Banking, Housing, and Urban Affairs Committee, Feb. 6, 2002.
38 You First, A Guide for Baby Boomers, provided by the National Endowment for Financial Education, available online at http://www.nefe.org/youfirst/index.html.
39 Financial Knowledge, Experience, and Learning Preferences, a preliminary report, produced by the Federal Reserve Board, described by Jean Hogarth in a presentation to The State of Financial Literacy: Evolutions and Revolutions, October 2002.
44
40 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
41 National Endowment for Financial Education online education program, available at http://www.nefe.org/pages/educational.html.
42 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
43 Lois Vitt, Project Director, et al., Personal Finance and the Rush to Competence: Financial Literacy in the U.S., A National Field Study Commissioned and Supported by The Fannie Mae Foundation, Institute for Socio-Financial Studies, Middleburg, VA, 2000.
44 Malcolm Gladwell, The Tipping Point, Little, Brown and Company, 2002. 45 Malcolm Gladwell, The Tipping Point, Little, Brown and Company, 2002.
46 U.S. Department of the Treasury, Office of Financial Education Web site, available at http://www.treas.gov/offices/domestic-finance/financial-institution/fin_ed.html.
47 Esther “Tess” Canja, president of AARP, in remarks to the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Feb. 6, 2002.
48 Employee Benefit Research Institute and MGA, Parents, Youth and Money, as presented by Don M. Blandin, president of the American Savings Education Council, testifying before the Senate Committee on Banking, Housing, and Urban Affairs on Financial Education, Feb. 6, 2002.
49 Stephen Brobeck, executive director of the Consumer Federation of America, in testimony before the Senate Committee on Banking, Housing and Urban Affairs on Financial Education, Feb. 6, 2002.
45

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