Why We Need Financial Education: Interview with U.S. Secretary of Education Arne Duncan

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The following is an interview I conducted recently with U.S. Secretary of Education Arne Duncan about financial literacy in state and federal education (transcript follows).

Jason Moser: Hey, everybody, Jason Moser here with you, and thanks for joining us. Today we are very honored and privileged to have our ninth U.S. Secretary of Education, Mr. Arne Duncan, with us to talk today about financial literacy, the things that he sees every day in his job as the Secretary of Education, and to get a little bit more of his thoughts on how we might be able to implement financial literacy into our educational program, both on the stateside and on the federal side. Mr. Duncan, thanks so much for joining us today.

Arne Duncan: Thanks for the opportunity.

Moser: It's really a pleasure to have you here, and I tell you, in looking through just some of the things that you've done over your life, certainly Harvard grad, congratulations with that alone, but in looking back to before your time here as Secretary of Education, I understand you held a position as the CEO for Chicago Public Schools. Is that correct?

Duncan: Yes, I worked there for 10 years and was CEO for about the last seven and a half years of that 10-year span.

Moser: So here at The Motley Fool, we study companies pretty much every day, that's what we do, along with educating the world, trying to help the financial literacy cause as well. But from the CEO perspective, I just found it very fascinating to see that job title. I wonder if you could just give us a quick, in a nutshell, what that job was like and maybe what some of the challenges you found with that job were as you served your time there.

Duncan: It was an amazing opportunity. I've worked in education all my life and actually started a small public school with a financial literacy-themed curriculum. That's how I got into public education, but I was basically working on the outside running a small educational nonprofit, and ultimately decided that if you wanted to have real impact, you had to try and impact the system. You had to do it from inside. So it was an amazing opportunity.

The Chicago Public School System has many challenges. The vast majority of our children live below the poverty line. Unfortunately, devastating levels of violence in the city, but we were able to see some real progress, some real momentum. The kids are so smart and working so hard and our job was just to really give them an opportunity to fulfill their true potential.

Moser: That's terrific. So in just the few years that you've been able to serve as the Secretary of Education, you've certainly kept very busy. I know that something that you've been talking about lately -- I've read a little bit about your opinions here on financial literacy in regard to being taught in our public schools. First and foremost, I just want to know, do you feel like financial literacy is something that should be taught in our public schools?

Duncan: Absolutely, and there's so many benefits. I think making sure our young people graduate from high school financially literate is one of the biggest gifts we can give them. And if they don't understand finances, then I think they're going to really struggle. I look as a society, as a country, at the mortgage crisis and other things like that, and I really question if we had a more financially literate populace, would that have happened? And I think the answer is no.

And so the days in which young people would graduate from college or graduate from high school and go work for one company for 40 years and have their retirement taken care of, those days are gone. And across the country, but particularly in the minority community, we have to empower young people to take care of themselves, to make good choices, and these are our future innovators. These are our future entrepreneurs, but they've got to have the skill sets to make good decisions and not put themselves in a financial hold very early on in life due to a lack of understanding.

Moser: I couldn't agree with you more, and as a parent myself, I have a 7-year-old and a 6-year-old, daughters, and so for me it's a priority of making sure that they understand concepts of money and finance and how that all works. And even starting early at this age, I guess what I've found is that you can't really start too young. The reality of the situation is for most of us as Americans, public schools -- as parents, public schools will be the schools of choice for our kids as we move forward, and so I do think it is crucial to get financial literacy education in that system. And from your perspective at this point in the game, what do you feel like the biggest hurdle is in facing the implementation of financial literacy classes in our public schools today? What's the hurdle there that we need to get over?

Duncan: I'm actually encouraged. I think more and more people are understanding how important this is and they're taking it seriously, so the general trends across the country are going in the right direction. You have more and more states having sort of graduation requirements around financial literacy, so that's positive. You're seeing it starting to happen at earlier and earlier ages.

I think what's missing for me still is just the sense of urgency, can we get to scale quickly and do this in a much more hands-on engaged way. It began in a small school I helped start in Chicago in 1995, Ariel Community Academy. We start teaching financial literacy in kindergarten and the children love this. That wasn't the reason we did it. Math scores are off the charts, though; they're starting to see the importance of what they're learning and what that means to their lives.

This is in a community where it's a very high poverty area, where there isn't a lot of family background. This isn't necessarily the typical dinnertime conversation, but you have children who are actually starting to help to educate their parents. It's really, really powerful. And to see what they're accomplishing, to see what they can absorb at a very early age, it's pretty remarkable.

Moser: Yeah, I feel like that is probably one of the things that concerns me the most is that while it's something that is so needed and so necessary, it's not -- you're right, it's not dinnertime conversation. It's not something that everybody just automatically knows. We're not born with this inherent concept of American finance and credit and how it all works. So it's not the easiest solution to just say, well, parents should teach their kids, because a lot of times parents don't even know themselves.

Now I read every once in a while about the argument about financial literacy in schools and we should just leave it to the states, and it's not a federal issue, and I get that. I understand in many cases states' rights come into play for certain things, but I would make the argument here that from South Carolina to California, we all use dollars and we all focus or we all function on the same basic American system of finance and credit, and that's why to me it makes more sense, at least for financial literacy where that's concerned, where it would be you could argue to implement that on a federal level in public schools everywhere. What's your take on the states' rights versus federal issue here?

Duncan: Yeah, on this one it's a little bit of a faulty argument. It's never something we're going to impose or mandate, but it is something that we're going to encourage. And like you said, every child in this country, regardless of what state they grow up in, whether it's urban, rural, suburban, they need to know how our economy works.

They need to know how to save. They need to know what an interest rate is. They need to know, if they're buying a house, what that looks like. They need to know as they go to college, do they get a credit card and if so, what's the interest rate they're going to pay on that? There's no such thing as free money, and so these are universal needs that we have to meet.

I'd just go one more step further that again, just this school we started in Chicago, Ariel Community Academy, is not so much the kids need it. They are desperately interested in this. They are looking for this kind of information. They're engaged in their own learning. I think so often children turn off of school because they're not engaged. They don't see what's the connection or the relevance between what they were learning in class and the real world around them. Financial literacy I think is an amazing tool to cut through that and to teach kids entrepreneurship skills, to teach them how to manage their money going forward. There was a huge appetite for that, and to deny kids the opportunity simply makes no sense to me.

Moser: Yup, no sense at all. Now in regard to the recent program, The Race to the Top, I don't really want to get too far into Race to the Top, because I'm sure we could sit here and just talk about this all day long. It's a fascinating program and I'm not really concerned about its implications on the entire policy, but I do like how Race to the Top is something that really focuses on innovation and introducing new concepts and ideas into the system. And so I guess what I'm wondering is, do you feel like the financial literacy issue here, is that something that is -- is it an innovation problem, or is it something really that's more of an implementation problem? Are there more barriers to giving new ways to teach it or just getting it out there to begin with?

Duncan: That's a great question. I think both, unfortunately, are challenges. First of all, we know far too many teachers aren't comfortable with this content themselves, and so I think really it's hard to teach something that you don't have a great comfort level at a personal level. So I think working with our teachers in terms of their own knowledge, their own understanding, I think has great benefits for their own lives. But once you do that, then students will have a real chance to take it.

And again, the other thing that I always talk about, you made a point earlier, that you can't start too early. And it's great to have a high school graduation requirement, but I honestly believe that this is something you're taking for one semester, junior year or senior year, I think that's late in the game, and I'd love to see a lot more districts and a lot more local schools thinking about this in first and second and third and fourth grade and how you start to introduce these subjects and getting teachers comfortable and confident with it, building a culture where when you're teaching math skills, when you're teaching percentages, when you're teaching fractions, when you're teaching ratios, this is part of -- the language is part of your teaching technique. It's not an add-on or something going in a different direction. You actually have -- it totally reinforces what you're doing in math class, and I think we have to work on both those fronts simultaneously.

Moser: Excellent. So one of our favorite questions here at the Fool, we like to ask CEOs, leaders of businesses, we like to ask them about businesses and about leaders that they admire. Not necessarily as competitors or threats, but just programs or leaders or businesses that they admire, that they would like to emulate or use as a platform to become better. Is there a platform or a model out there today that you admire or that you would like to focus on as sort of a blueprint in helping implement this in our system?

Duncan: I think as I look across the globe, and we're in an internationally competitive marketplace, obviously, I see a number of countries -- Singapore, South Korea -- that are innovating more quickly than we are. That are investing more than we are, that are systemically bringing their best talent into the teaching profession. It's doctors, lawyers, engineers, and teachers at the same status in other countries. And again, I think our children are smart, as talented, as creative and as entrepreneurial as children anywhere on the globe. I worry that we're not leveling the playing field for them. We're not giving them a chance to be successful.

So how we attract and retain great teachers, how we think about time in very different ways, how we use technology so children don't have access to knowledge six hours a day, five days a week [but] 24/7. I think there are many lessons that we can learn from our counterparts, our colleagues across the globe.

Moser: Excellent. I have two more questions for you. I'll try to make this real quick, a little bit more fun question. But I see that you are on Twitter. You have close to 50,000 followers. I'm a big fan of Twitter myself. I love its free-flowing nature; it's a great way to get updated news hits every day. For you, and being that social media is such a growing concept here and everywhere around the world, do you feel like social media has a place in our society or in the world in regard to teaching financial literacy?

Duncan: No question, no question, and you have to meet young people where they are, so I was a little bit of a latecomer to this, but young people are very impressed by me trying to reach out to them. But I think we have to use every vehicle, social media, whatever it might be, to reach young people and to impact their lives. And if you're not talking to them where they are, obviously you're missing them.

Moser: Yup, I was a latecomer myself, so I know what you're talking about there. Last thing here, I just want to say for now, let's assume that financial literacy for the next, for the foreseeable future is not going to be something that we implement in our school systems. What is one thing -- this is from your perspective as the Secretary of Education and as a parent -- what's one thing that parents out there can do to help their kids learn more about the essentials?

Duncan: Well I'm like you; I have a 10-year-old daughter and 8-year-old son, so I always come at this first and foremost as a parent, and I think in some families there's a reluctance to talk about money. Somehow it's a bit of a taboo subject, and I think having open and honest conversations about what things cost and what we can afford and what we want and what we need and having kids have allowances and having them work hard and save some money and having the ability to spend, again, I think you can never start early enough on that.

Parents again, whether they're sophisticated or not sophisticated in this area, every parent can have those conversations and not be shy about that, not be worried about that. And children are interested in money, they're interested in what things cost and having an open dialogue, honest conversation about what you want to do, what you have to do, what you need to do, what you would like to do and what children can contribute, I think those are really, really important conversations to have. And again, those can start at 3, 4, 5, 6. If you wait until 14, 15, 16, I think it's late then.

Moser: That's excellent advice. Well, thank you very much. Folks, he'll reach out to you on Twitter. You can keep up with him @ArneDuncan. That's @ArneDuncan, keep up with the latest that's going on in the Department of Education. Mr. Duncan, thank you so much for taking the time this morning to speak with us.

Duncan: Thanks for the opportunity. Have a great day now.

Moser: You too.

The article Why We Need Financial Education: Interview with U.S. Secretary of Education Arne Duncan originally appeared on Fool.com.

Jason Moseris an analyst with Motley Fool One. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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