Friday, May 2, 2008

Are We Becoming a Nation of Financial Illiterates?

Because of “Tax Day,” April is a month when many people take stock of their finances. Unfortunately, it is also a grim reminder for many citizens that their personal finances are in trouble. Our personal habits for saving, borrowing and spending not only have a big impact on the well-being of our families, they affect the health of our state and national economies, and even our national security. With this in mind, many community leaders are increasingly involved in efforts to ensure that America’s students have the sound financial literacy skills they will need to be successful in life.

Sadly, America’s lack of personal financial literacy has helped to create some very serious problems in our nation, from massive borrowing and personal debt, the sub-prime mortgage crisis with resulting home foreclosures, trade deficits, our national debt, the large number of people who file for bankruptcy, and high taxes to finance the “safety net” provided for those in economic trouble.

Recognizing that the financial readiness of our youth is essential to their well-being, Governor Sanford proclaimed this past month as “Financial Literacy Month.” And 48 affiliated state groups have organized with nearly 200 major companies under The Jump$tart Coalition to teach the basics of personal finance in schools and to provide educational materials for teachers, parents, and civic groups to use in that effort. The Jump$tart Coalition has also teamed with the Federal Reserve Board to conduct a biennial national literacy survey of America’s students. Results of the most recent survey were just released, and they are disappointing. Among the findings for high school seniors:

  • A mere 48 percent correctly understood that a credit card holder who pays only the minimum amount on monthly card balances will pay more in annual finance charges than a card holder who pays the balance in full;
  • Only 17 percent correctly answered that stocks are more likely to yield higher returns than savings bonds, savings accounts, and checking accounts even though there has never been a significant period of time where this hasn’t been true; and
  • Just 36 percent correctly answered that a house financed with a fixed-rate mortgage is a good hedge during periods of inflation, down from 45 percent who understood this concept in a similar survey two years ago.

In 2005, Governor Sanford signed legislation requiring that the State Board of Education adopt curricula, materials, and guidelines for local school boards to use to implement financial literacy instruction. The legislation requires that this initiative be overseen by a “Financial Literacy Initiative Board of Trustees” that is tasked to improve the financial literacy of SC students in grades K-12. Under state curriculum standards, students are to be given basic instruction in personal finance, the structure of our economic system, an overview of our banking and financial institutions, credit management, and the stock and bond markets.

As with much that we look to our schools to teach, results are spotty at best. But this is an area where retired business leaders, local businesses, business organizations, and civic and community groups have a great opportunity to work with teachers to ensure that students have the basic personal financial tools they will eventually need to be successful in life. Schools should take advantage of the vast experienced volunteer resources that exist within their own communities. Best of all, schools can do so at no additional cost to the taxpayers.

Financial literacy is as important to the future of every student as good reading, math and language skills. Ensuring that every student graduates with basic financial literacy could not only help our economy, lower our tax burden, and result in fewer families in economic distress, it could also prepare young Americans to be more responsible and informed voters who understand the importance of property rights and free enterprise as essential underpinnings of the freedoms that Americans enjoy. Let’s make financial literacy a goal for every American family. As Governor Sanford has proclaimed, “improving financial literacy for the residents of the Palmetto State helps strengthen our families and communities and ensures our continued success in the global marketplace.”


Anonymous said...

this guy is proof that we have at least one politcian with good sense

tell it like it i$ said...

rock on

Anonymous said...

Not only does our SC Treasurer possess common sense, but moral integrity as well which is something that is severly lacking in the halls of the SC General Assembly.
Continued best wishes, Richard!
Ron Turner
Summerville, SC

Richard Eckstrom said...

Thanks, Ron. I'm glad we're on the same team. You're a great ally.

sisc said...

The General rocks!