The financial crisis of 2008 is providing the ultimate teaching moment for individuals and businesses alike. While much of the Wall Street meltdown can be traced to irresponsible behavior and even incompetence at the highest, most exquisitely salaried levels on Wall Street - - as well as to deregulatory zeal on Capitol Hill - - widespread financial illiteracy and resulting consumer gullibility also played important roles. The good news is that it's now hard to find anyone who doesn't agree that far more could and should be done to educate and prepare future generations to successfully manage their own finances and to have the savvy to make informed decisions when choosing policy-makers at the voting booth.
And more is being done.
Fayette County Schools Superintendent Stu Silberman has welcomed an offer by Junior Achievement to teach Financial Literacy to middle and high school students. "We're very excited about the partnership," he said. "It's a natural fit for us. JA is already coming into our schools with volunteers, so this is an extension of that.
We already have good processes in place." Cecilia Shelton of National City Bank got things underway with a pilot course in the classroom of Jessie Clark Middle School teacher Kevin Clary on October 10.
"You would be amazed at the number of folks, as we have told them that we are going to be introducing this financial literacy curriculum, how quickly they want to jump on board," said Lynn Hudgins, president of Junior Achievement of the Bluegrass, Inc. "They see it. They see it in their own homes. They see it in their own kids. They see it all over the newspapers."
Taught by Junior Achievement volunteers drawn from the Central Kentucky business community, the new six-week course will first reach 2,600 seventh graders in Fayette County Schools. "They'll learn about the stock market. In the first week they'll actually pick some stocks and through that next six weeks they'll follow where those stocks go. They'll do some budgeting exercises, talk about how credit works, loans - - good type loans, bad type loans - - checkbooks, credit cards, debit cards, all those kinds of things," Hudgins said.
A group from the 2008 class of Leadership Lexington has offered assistance in recruiting business professionals to teach. "We're looking at a hundred-plus classes over the next six or eight months, so we're working to try to fill volunteer slots," said David Kidd, vice president, commercial public funds, 5th3rd Bank. Kidd said those interested in volunteering should contact Ron Wigglesworth, senior program manager for Junior Achievement of the Bluegrass
Implementing financial literacy education was a recommendation of Silberman's "2020 Vision" initiative of 2005. Given recent events, that now seems almost prescient. "The relevance in the classroom has just increased significantly for our kids to be able to see what's going on across the country and that we're coming in to help them deal with it before it gets to that stage for them," Silberman said. "A lot of what we're dealing with today is about people being over-extended and we hope that one of the things that our kids come out of this with is that we have to live within our means."
In a society with a financial system as complex as that of the United States, studies portray a paradox in which more than half of American adults can't handle even the basics of finance. "In a 2003 survey," states the final report of the 2020 Vision Financial Literacy work group, "the median reported value of all household retirement savings was only $40,000, and 25% of those surveyed had no retirement account at all. Yet, oddly, more than one-half of the respondents indicated they are confident they will have saved enough for retirement. This indicates a clear lack of understanding of their retirement needs and financial literacy in general."
The report cites research indicating that 83 percent of undergraduate students have at least one credit card and that "students double their average credit card debt - - and triple the number of credit cards in their wallets - - from the time they arrive on campus until graduation."
"A lot of people graduate from high school and they're not financially literate at all," said JA's Wigglesworth, a veteran educator who developed the curriculum along with Phyllis Ballard, a former teacher and principal with the Fayette County Public Schools. "One of the first things that hits you when you walk onto a college campus, you go in to buy your books and there are ten tables set up with people offering you credit cards. A lot of college kids will grab those credit cards because they think, 'hey this is free money' and then before you know it they've got thousands of dollars in debt."
Bankruptcy rates have steadily increased as credit card indebtedness mushroomed, explained Versailles attorney Todd Horstmeyer. He is working with Fayette Co. schools, the Fayette Co. Bar Foundation and the Kentucky Bar Foundation to expand to all Fayette County high schools' curriculum developed by Rochester, New York bankruptcy judge John Ninfo. "He saw a tremendous increase in young adults filing bankruptcy, primarily over credit card problems and decided that one of the things that was needed is an earlier education with high school students regarding credit, credit abuse, student loans."
Judge Ninfo developed a Credit Abuse Resistance Education program (careprogram.squarespace.com) now in use in 32 states. The program got underway in Jefferson County schools last spring with nearly 50 Louisville judges, attorneys and business professionals pitching in to teach high school students about the consequences of credit abuse. Horstmeyer said the course was also offered in a few Fayette County high schools and plans now call for expanding it into all of the county's high schools in spring.
"We're trying to bring an awareness to students at an earlier age of some of the pitfalls and problems associated with the use of credit, and how this can be very damaging to them if it's misused, with respect to future employment, future rental arrangements, purchasing an automobile, buying a home. All of this can stem from initially overextending yourself in terms of credit cards, not paying cellphone bills on time, resorting to payday loans, all of the different things that are constantly out there in the marketplace to entice particularly young people to buy things on credit, but not necessarily think of the consequences."
The distraction of the financial stressors of home foreclosures and wage garnishment is not confined to families and households, spilling into the workplace in the form of absenteeism, reduced productivity and waning organizational commitment. "Your financial stability is kind of like your spiritual health," noted State Rep. Susan Westrom, D-Lexington. "You can't expect somebody to get you to heaven and you can't expect somebody to keep you safe, financially. You've got to look out for yourself."
That philosophy was the basis of Westrom's co-sponsorship of legislation that would "allow teachers to incorporate financial literacy lessons in their general course curriculum so it wouldn't take up extra time." The measure has failed in previous sessions due in part to teacher resistance to anything additional being piled onto already demanding classroom workloads.
Westrom said she plans to reintroduce the legislation for consideration in the 2009 legislative session and believes Kentucky should do even more by adopting a policy similar to those in the nation's only three states, including Tennessee, where courses in personal finance are required in order to graduate. "Certainly financial literacy is every bit as important as any required core course," she said. "What good does it do to be able to read and not be able to balance a checkbook? What good does it do to have a broad math background and you still don't know what APR stands for?"
Wigglesworth, who spent 15 years as a teacher and another 15 as a principal or assistant principal acknowledges that these issues can be a tough sell. "You know how kids are. It doesn't matter what you tell them, sometimes they have to learn by the seat of their pants. We'd at least like to hope that some of the basic information that we provide them in this curriculum will be internalized to the point that they realize that they really need to save part of every dollar they earn and to look at the fine print."
The Financial Literacy and Education Improvement Act of 2003 created the Financial Literacy and Education Commission, comprised of 20 federal agencies. The commission's goal is to coordinate federal efforts and develop a national strategy to promote financial literacy in America. In November of 2004 the Government Accountability Office (GAO) hosted a forum of some twenty government, private sector and nonprofit organizations to study the problem of financial literacy and recommend policy initiatives to improve financial education in America. The result is summarized in the GAO report, Comptroller General's Forum: The Federal Government's Role in Improving Financial Literacy.
For a collection of dozens of web links on financial literacy, go to http://www.jumpstart.org/links.cfm