Can Congress Help Boost the Nation's Financial Literacy?
- In a 2008 Jump$tart Coalition survey, high school seniors (the most recent available) correctly answered less than half (48.3 percent) of the questions, an all-time low for the survey. College students fared a little better, answering 62 percent of the questions correctly.
- Nearly 70 percent of the participants outright failed a quiz on basic money knowledge in a 2010 Northwestern Mutual Life Insurance study to determine Americans' general financial knowledge.
- In the real world, Americans aren't doing much better than they are at taking money quizzes: 75 percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts, perhaps a result of their lack of financial literacy.
While most people recognize the importance of teaching personal finance, only four states require a minimum of one semester of financial literacy education and only 20 states require that the topic be taught within another subject area in order for students to earn a high school diploma.
Clearly, the state of financial education hasn't gotten much better since the recession -- a recent reminder that what we don't know can crush us.
Financial Literacy for Students Act
Sen. Kay Hagan (D-N.C.) aims to change the dismal record of educating children and teens about personal finance. Sen. Hagan, a former banker and current chair of the Subcommittee on Children and Families, recently reintroduced the Financial Literacy for Students Act.
"The Financial Literacy for Students Act was one of the first bills I sponsored after I was elected to the Senate," says Sen. Hagan. "I'm a former banker and have always believed teaching personal finance is critical. The experiences people had during the recession were a disastrous consequence of what people do when they don't understand the implications of taking out a mortgage, taking on student loan debt or credit card debt."
Are We Finally Ready To Learn Our Lessons?
The Financial Literacy for Students Act was introduced in 2009 and 2011 and died in committee both times. This time around, Sen. Hagan hopes to attach her bill to the reauthorization of the Elementary and Secondary Education Act, also known as No Child Left Behind.
"Last time around, there were a lot of other things on the agenda, so the bill stayed in committee," Sen. Hagan says. "But now I think the recent financial crisis has led a lot of people to believe that if we can do a better job educating our kids it will be easier for people to handle their finances."
Sen. Hagan says that no additional money would be required from the federal government if this bill passes because the funds would come from the existing fund for the improvement of education. States would need to apply for grants from that fund to support financial literacy education.
One change in the bill for this session of Congress is that it will encourage states to form partnerships with community-based organizations, financial institutions, and local businesses to carry out the required activities. The bill has been endorsed by Operation HOPE, Junior Achievement, the Council for Economic Education, North Carolina Council for Economic Education, and the American Bankers Association.
In a subcommittee hearing on financial literacy in April, both Republican and Democratic senators expressed support for financial literacy education. Sen. Mike Enzi (R-Wyo.), the ranking minority member and one of only two accountants in the Senate, said, "I'm here to tell you that I feel a new urgency about the importance of educating people about issues related to finances from a young age."
Sen. Hagan plans to seek bipartisan support for her bill when she returns to Washington next week. "Financial education isn't rocket science," she says. "We just haven't taught it in the past."