Schools need to teach basic financial concepts
By Assemblyman Ted W. Lieu and John Hope Bryant
Every year we graduate millions of high school students who are financially illiterate. Nationwide financial literacy tests administered during the past decade by Jump$tart, a coalition of financial education organizations, show that the average score for a high school senior continues to hover in the low to mid-50 percent range -- a score that equates to an F-minus.
These graduates enter the workforce or go to college lacking basic financial survival skills. They do not know how to balance a checkbook, let alone understand the difference between a stock, a bond or a certificate of deposit. They will later become part of the mass of 25- to 34-year-olds who have an average credit-card debt of $4,088, with 1 in 10 owing more than $7,000, and will spend nearly a quarter of their income just on debt payments.
With the dizzying proliferation of credit and debit cards, non-traditional loans, instant credit and Internet-based financial transactions, more people make financial choices independently and at a much younger age. Most of our schools, however, have not adjusted to this new financial order. Schools teach our children about pi and the Pythagorean theorem, but not about credit scores and annual percentage rates. In today's world, knowing that a FICO score of 500 is awful and how to avoid it is an everyday necessity.
If children leave school without understanding basic financial concepts, it may be too late. Although some financial institutions and non-profits provide financial literacy education, there are precious few programs aimed at teaching financial education to adults. Financially illiterate teenagers often become financially illiterate adults. They make unwise financial decisions and become financial victims.
Financial illiteracy also has a disproportionate effect on minorities and the poor. Minorities score lower than white students on the Jump$tart financial literacy tests, and students from families earning between $40,000 and $80,000 score lower than those from families earning more than $80,000.
We fight epic battles over whether to raise the minimum wage, but fail to teach the poor the financial knowledge to help lift them out of poverty. We fail to educate lower-income working families about the Earned Income Tax Credit, a federal program that can give up to $4,536 dollars back to them in tax refunds. In California for instance, more than $1 billion in federal EITC money was left unclaimed last year by the working poor.
It is time to acknowledge the serious problem of financial illiteracy. We must incorporate a financial literacy curriculum in all our schools. We must increase the number of financial education programs for adults and seniors. We must have an aggressive education campaign about the EITC. Through a sustained collaboration between government, non-profits and industry, we can give people the financial tools to navigate our complex financial world today. Let's stop churning out generation after generation of financial victims, where more people file for bankruptcy than graduate from college.
Read the entire article here.
Loving the San Francisco Bay Area... Community development, urban ministry, trying to defeat poverty, faith, religion, politics, good music, the quest for the perfect pizza, the Yankees, motorcycles... All in a 'day's life'
Tuesday, March 06, 2007
Op Ed Piece in Merc on Financial Literacy
Here are excerpts from a piece in today's San Jose Mercury. (emphasis in article mine)