On March 30, the Senate Governmental Affairs Subcommittee on Financial Management, the Budget, and International Security examined the effectiveness of federal financial literacy programs.
Expressing his concern that today’s young adults have access to credit at a much earlier age than their parents, Chair Peter Fitzgerald (R-IL) cited a Consumer Reports survey that found “28 percent of 12-year-olds do not know that using credit cards is synonymous with borrowing money, and 40 percent do not realize that banks charge interest on loans. Yet, more than 20 percent of students, ages 12 to 19, have their own credit cards or access to a parent’s credit card.” He stressed the importance of financial education, saying it “can empower consumers of all ages to create effective budgets, enhance strategic investment decisions, and achieve both short and long-term financial goals.”
Ranking Member Daniel Akaka (D-HI) said that his interest in financial literacy dates back to the 4th grade. “My teacher made sure that we each had a piggy bank. She made us save our pennies and count what we saved. We were made to understand how money saved, a little at a time, can grow into a large amount enough to buy things that would have been impossible to obtain without savings. My experience with a piggy bank taught me important lessons about money management that have stayed with me throughout my life. More people need to be taught these important lessons so that they are better able to manage their resources.”
Brian Roseboro of the Department of Treasury told the subcommittee that the department established the Office of Financial Education in 2002 “to promote access to financial education programs that help Americans obtain practical knowledge and skills to make informed financial choices throughout their lives.” He said that the office works to educate consumers about basic savings, credit management, homeownership, and retirement planning, and focuses its efforts on three groups whose “financial education needs are most acute.” They include young people, recent immigrants, and those nearing retirement. Mr. Roseboro explained that the office has developed and published standards for successful financial education programs and works with other federal departments and agencies to raise awareness about the needs for financial education. Finally, he said that the office supported the creation of the Financial Literacy and Education Commission whose mission is “to encourage government and private sector efforts to promote financial literacy and coordinate financial education efforts of the federal government.” Treasury Secretary John Snow chaired the first meeting of the commission on January 29, 2004.
Testifying on behalf of the Department of Education, Nina Rees highlighted the new Excellence in Economic Education program. She explained that the program “will consist of a competitive grant to a single national nonprofit educational organization to promote economic and financial literacy among students in kindergarten through grade 12. Once the grantee is selected, that organization will be responsible for national activities such as: building relationships with economic education organizations; dissemination of effective economics teaching; research on effective economics teaching; and dissemination of materials to foster economic literacy.” Ms. Rees noted that the grantee also will award “subgrants” to states and local educational agencies for teacher training, economics curriculum development, and the creation of school-based student activities to promote consumer, economic, and personal finance education.
Dara Duguay of the Jump $tart Coalition stated, “In a nation where nearly a third of high school seniors have credit cards, an even higher proportion have an ATM card, and bankruptcy filings for those in the 18 to 25 age bracket numbered 150,000 in 2000 a tenfold increase in just five years the need for personal financial literacy programs is glaringly apparent.” Ms. Duguay suggested that the Financial Literacy and Education Commission urge the inclusion of personal finance into other required disciplines such as economics and math. “It is pointless to develop the highest quality curricula if it remains on a shelf gathering dust if there is no place for financial education within our nation’s schools,” she argued. “If we don’t close the gap, I feel we will be failing our nation’s young people and ultimately hurting our nation’s economy as they make unwise decisions.”
