The House Education and the Workforce Subcommittee on Education Reform held an October 28 hearing to discuss the need for financial literacy education for school-age children. Noting that “teenagers spend, rather than save, 98 percent of their money,” Subcommittee Chair Michael Castle (R-DE) added that one out of every three teenagers has a credit card. “Our nation’s youth are bombarded with a multitude of financial options at an increasingly young age. Yet, many are ill-equipped to make informed decisions about financial matters,” he said.
Ranking Member Lynn Woolsey (D-CA) agreed. “Children are still in school when they form the financial habits and attitudes that will last throughout their lives, and financial literacy teaches them about basic, but important, transactions such as saving, borrowing, and investing.”
The subcommittee heard from a variety of experts, who detailed their efforts to promote financial literacy education. Testifying on behalf of the administration, Deputy Assistant Secretary for Financial Education at the Department of Treasury, Dan Iannicola, Jr., provided statistics about the state of financial knowledge among today’s youth. “Consider the following: 28 percent of 12-year-olds did not know that credit cards are a form of borrowing, 40 percent of 12-year-olds did not know that banks charge interest on loans, 28 percent of students with a credit card roll over debt each month and more than 20 percent of kids ages 12 to 19 have their own credit cards or access to parents’ credit cards.”
Last year, in an effort to remedy the situation, the Department of Treasury released a white paper, “Integrating Financial Education Into School Curricula.” Mr. Iannicola said, “When schools seamlessly integrate financial education into existing curriculum, students can better see how financial issues are integrated into their lives. Introducing a school to financial education in this way can lead to a plan that is less costly to the school, less disruptive to the curriculum and, therefore, more likely to actually happen.”
In addition to the white paper, the Treasury Department has distributed more than 150,000 copies of the “Money Math: Lessons for Life” program, which teaches math concepts to middle school children using real-life examples of personal finance. The Internal Revenue Service (IRS) has developed “Understanding Taxes,” an interactive program for high schools and community colleges designed to teach students about the U.S. tax system. The IRS also sponsors a “TAX Interactive” website that provides guidance for teenagers and young adults. Finally, the U.S. Mint promotes financial literacy through its “H.I.P. Pocket Change” website, which teaches young students about social studies, language arts, math, and science using coins.
Saying that the grim statistics led the Sesame Workshop to incorporate financial literacy into its Sesame Street programming, Gary Knell of the Sesame Workshop detailed a new financial education initiative they developed in partnership with Merrill Lynch. Talking Cents offers information and resources for parents and other caregivers to help children ages 3 to 5 learn the basics of business and finance. “A little time spent in the early years will certainly pay off down the road in helping preschoolers establish the ‘foundation’ or ‘building blocks’ that can help them succeed as financially literate citizens,” he said.
The Talking Cents program includes:
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Mr. Knell told the subcommittee that the “information and activities are meant to build on how young children typically learn about simple finance basics, mostly from merely observing adults engaging in daily activities such as using or saving money, paying for items, going to the bank, using an ATM, or making purchases.”
Robert Strong of the Securities Industry Foundation for Economic Education discussed another innovative financial education program, The Stock Market Game™, which was created by his organization more than 25 years ago. The game is a simulation in which students in grades 4 through 12 can learn the fundamentals of investing using a hypothetical $100,000 in real securities. “Since the game began in 1977 with 1,600 students selecting from around 2,400 listed companies, it has grown to more than 500,000 students a year picking stocks from more than 7,500 companies on the New York Stock Exchange, NASDAQ, and the AMEX,” he said.
Noting the need for research-based programs, Dr. Angela Lyons of the University of Illinois detailed her research on the financial education needs of college students. She stated that her research has identified certain financially at-risk groups, including students who are financially independent from their parents, receive needs-based financial assistance, borrow more in general, have acquired their first credit card before going to college, or have acquired a credit card from a campus table. “These students are also more likely to have lower grade point averages and to be working more hours. With respect to demographics, they are more likely to be female, black, and/or Hispanic,” she said.
Dr. Lyons’ studies also revealed that 87 percent of financially at-risk students believed that personal finance and budgeting were important, while only 58 percent of them felt they understood the topics. Additionally, 75 percent of college students indicated they would register for a personal finance course if it was offered, while only 25 percent of students had taken such a course.
In making recommendations to the subcommittee, Dr. Lyons said that 1) resources are needed to support the development of financial education programs, 2) there is a need for educational outreach targeting both students and parents, and 3) greater attention is needed at the national level to raise awareness that financial education is as important as math and reading.
Robert Duvall of the National Council on Economic Education (NCEE) agreed that the “need to strengthen, expand, and enhance education in economics and personal finance in our nation’s schools has never been more apparent.” To that end, the NCEE has created several initiatives aimed at equipping educators with the tools necessary to teach economic concepts. These initiatives include EconomicsAmerica, a program to integrate standards-based economic education into elementary and secondary schools; Econ and Math: Connections for Life, a comprehensive curriculum for grades 3-12; Choices and Changes, a teaching tool to encourage inner-city and at-risk youth to stay in school; and Financial Fitness for Life, a collection of interactive economic and financial literacy teaching materials for grades K through 12, as well as parents.
In addition to private sector efforts, Mr. Duvall called upon Congress to enact financial literacy legislation. In particular, he pointed to a legislative proposal (H.R. 2990) sponsored by Reps. Judy Biggert (R-IL) and Ruben Hinojosa (D-TX) that would establish a bipartisan commission to make recommendations on integrating economic and personal finance education into primary, secondary, and postsecondary curricula. The commission also would be charged with making recommendations on best practices for teaching financial literacy and ways to coordinate federal and private sector efforts. “Establishing such a commission would give us all—policymakers, advocates, and educators—a clear picture of what is being done, what works, what doesn’t, and what needs to be done to ensure that all our students are well educated in economics and enter the ‘real world’ financially literate,” he said.
Mr. Duvall also expressed support for S. 1470, sponsored by Sen. Paul Sarbanes (D-MD), and H.R. 3924, sponsored by Rep. David Dreier (R-CA). S. 1470 would establish a Financial Literacy and Education Coordinating Committee within the Department of Treasury to coordinate federal efforts, and H.R. 3924 would implement a public education campaign to promote awareness of financial literacy.
Other legislative efforts include S. 1532, sponsored by Sen. Debbie Stabenow (D-MI), which would establish a Financial Literacy Commission, and S. 1181, sponsored by Sen. Jon Corzine (D-NJ), which would authorize grants to state educational agencies to develop and integrate youth financial education programs for elementary and secondary school students. Portions of both S. 1470 and S. 1532 have been incorporated into a larger bill (S. 1753) pertaining to financial privacy that the Senate is expected to consider the week of November 2.
