Financial Literacy

 I've recently been thinking about the similarities between our national epidemics of obesity and financial illiteracy. Both are socio-cultural phenomena created through generations of misinformation, misunderstanding and perverse incentives.  Factors like (but not limited to) easy credit and encouraged consumerism without proper consumer disclosure and easy access to abundant, cheap astonishingly unhealthy foods has created a culture of overindulgence on so many levels. Both problems tend to fall disproportionately on poor, low and even some moderate-income households, which lack easy access to alternative options (like banks red-lining disadvantaged neighborhoods; public school cafeterias serving french fries most everyday yet not offering physical education classes). And both are believed to have huge social and economic costs that are now reaching epic proportions.  If similar forces are causing and/or driving these problems, then shouldn't efforts to tackle both childhood obesity and financial illiteracy also be similar?  Only recently has this become apparent to those fighting the battle of such rhetorical bulges.

Last Monday I attended "Financial Literacy Day on Capital Hill", an awareness-raising event convened by the Jump$tart Coalition for Personal Financial Literacy, JA Worldwide and the National Council on Economic Education. In addition to a hall of exhibits by government, not-for-profit and corporate organizations that promote financial literacy across the country, Rep. Rubén Hinojosa (D-TX), Sen. Daniel Akaka (D-HI), and Sen. Wayne Allard (R-CO) offered moving remarks to the audience of practitioners and hill staff. I was wholly impressed and heartened by the passion and sincere commitment to financial education shown by these leaders, and enjoyed seeing the variety of curricula and methods on display. Yet, I left perplexed about the absence of policy that could systemize and enforce the delivery of these valuable efforts.

Many experts have predicted that our economy is moving into a recession and as the economy declines, it will become even more important for college students to graduate with as little credit card debt as possible to enable them weather tough times. A recent article in the Washington Post stated that college students can least afford to graduate with debt these days with an unstable job market. Many college students are crippled with debt. They graduate with credit card debt as well as student loan debt and in today's economy they may not be able to find a job immediately upon graduation. In spite of these facts, research shows that college students continue to accumulate credit card debt.

A recent study by the US PIRG Education Fund showed that nearly two thirds of students reported that they had at least one credit card. Seniors reported carrying more than $2,500 of credit card debt. This debt was incurred to pay for college expenses as well as living expenses. Students reported using credit cards for "day-to-day" expenses (55%) and books (55%). The next highest categories reported were "weekends and pizza" and emergencies.

As college costs continue to soar, college students are increasingly turning to credit cards to cover costs.

Last week I had the privilege of discussing asset building for lower income Americans in three very different settings: the annual Opportunity Economics Colloquium of the Hope Street Group, held at the Lansdowne Resort outside of Washington; an Assets Forum sponsored by the New America Foundation in the State Capitol in Sacramento, California; and with a group of financial services, social service and foundation representatives brought together by the City of Seattle. While the settings and audiences varied, the theme was the same: how to empower and encourage all Americans, particularly those who do not have funds either to cushion an economic setback or to invest to achieve economic security, to take sustainable first steps toward saving. Given the current financial crisis, one wishes these discussions had started ten years ago, but that same crisis makes it all the more important that they're happening now.