Monday, April 13, 2009

April... Financial Literacy Month (1)

April 2009... this month is recognized in the United States as the Financial Literacy Month but What does it mean in terms of the efforts being currently carried out intended to provide a basic frame of reference about Financial Literacy that could help the public learn as to how to create and maintain basic financial (healthy and not risky) habits?

Let's try to analyze the sufficiency of these efforts: according to Dr. Anna Maria Lusardi, there's much to do; she argues that (see slides) a widespread illiteracy is still present in the US and affects specific demographic groups. In addition, she also argues on her blog about the need to help people save and on the other hand, create more efficient programs intended to create awareness about financial education and savings.

What are the US Congress, communities and schools doing about it? US Senator Mike Crapo wrote on the American Chronicle that "Congress has again declared April 2009, as 'Financial Literacy Month.' As we contemplate ways to balance our incomes and expenditures, we should take advantage of resources available to help. One in four American adults has never checked his or her credit score, and nearly half of American adults do not know that credit reports can be accessed for free. Nearly ten million U.S. households do not have an account at a mainstream financial institution such as a bank or a credit union. Establishing such an account gives consumers access to less expensive and more secure options for managing finances and building wealth. Increased financial and economic literacy can help people navigate around the countless pitfalls that confront working families. In 2008, there were more than one million personal bankruptcy filings in the United States, according to the Administrative Office of the United States Courts. This was the highest personal bankruptcy mark since bankruptcy laws were amended in 2005. Approximately 76 million adults say they do not have any nonretirement savings, according to the National Foundation for Credit Counseling. Recent surveys indicate that high school seniors score failing grades on tests determining knowledge of personal finance. Fortunately, Idaho is ahead of the game-it is one of a minority of states in which the public schools require a form of financial literacy for high school graduation."

Even though we could perceive that the President's Advisory Council on Financial Literacy as well as the U.S. Financial Literacy and Education Commission can be two key players in a national educational effort, Dr. Lusardi argues that there's much to do.

What seems to be (in my humble opinion) a bit contradictory is that some cities still hesitate to make decisions as to the "convenience of adding financial literacy programs to schools' curriculums".

Even though the US Government seems to be committed to spread financial literacy, on the other hand, it seems that a broader effort needs to be done; once again, last month, Dr. Lusardi has argued that there's a low debt literacy that still makes a credit card an even dangerous instrument for the public given its lack of knowledge as to how it works and very serious underlying problems such as unlawful debt collection.

In a following post, we'll continue talking about concrete and in some cases successful efforts that communities and schools are doing to spread financial literacy...

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Financial Culture / Cultura Financiera
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1 comment:

Ray Lindsley said...

I agree that financial literacy is a critical topic and that the process needs to start at an early age in public school. You would think that adults would have planty of incentive to educate themselves on such critical issues as debt management and retirement planning. there is a lot of information available to the public but like the saying goes, you can lead a horse to water...

If the education starts at an early age, I believe it would stimulate a strong cultural shift in this regard.

Keep up you excellent efforts to spread the word!