The central concept behind new policy recommendations to boost Americans' financial literacy seems to be this: We're not stupid; we just haven't been taught properly.
With just days left in the Bush administration, the nonpartisan President's Advisory Council on Financial Literacy, chaired by Charles Schwab, has made its recommendations for boosting our financial IQ. President Bush created the council a year ago in response to the fact that many Americans struggle with such basic concepts as calculating interest rates and developing a budget. Because the council serves through 2010, members plan to work with the Obama administration to promote financial literacy.
The financial crisis has only escalated the enthusiasm for increased financial literacy, says Ted Beck, a member of the council and president of the National Endowment for Financial Education. "It's one of the greatest teachable moments that's ever happened," he says.
The recommendations are not without controversy: Some financial experts say that rather than emphasizing financial education in schools, the government should focus on simplifying the financial world so that it's not so difficult to navigate.
Here are five of the council's recommendations for improving financial literacy:
Schools should be required to teach financial education from kindergarten through 12th grade.
While research on the impact of financial education has been mixed, the council says schools should adopt money-related curricula. Research by the Charles Schwab brokerage firm has found that many parents don't talk to their kids about money, and only 1 in 3 had taught their teens how to balance a checkbook, for example. "Standards-based financial education in the classroom helps to level the playing field for students whose parents may have faced financial challenges themselves or who may be among the unbanked or under-banked populations," the council says. Currently, only a handful of states require students to take personal finance courses.
In middle school and high school, students should learn the basic concept behind a budget, developing a savings plan, and wants versus needs, says Beck. But he adds that personal finance classes need not replace other coursework. Instead, Beck says, money lessons can be built into existing classes, such as the social sciences and math.
College students should be required to take a course in financial literacy in order to receive federal student loans.
Because college students often build up credit-card debt and take out other types of loans, schools should use the opportunity to teach them about money, the council says. Beck says that students at this level should learn how to buy a home, develop a savings plan, and manage loans.
Employers should receive tax incentives to teach workers about money.
"Financial education is a continuous process," says Beck. "The playing field changes, so you need a continual flow of information that's relevant at that time." That's why workplace programs that can teach employees about saving for retirement, for example, can make a significant difference.
The council says that such programs could boost productivity by reducing stress. "When employees are worried about debt and other personal finance issues, they have more difficulty focusing on their jobs," says the council, adding that one group estimates that employee financial stress costs businesses about $300 billion a year.
The government should create a resource center on its financial literacy website, www.mymoney.gov, for human resources professionals and employers.
With all of the information circulating on the Internet and available in the personal finance sections of bookstores, one might think that people have more than enough resources at their fingertips. But the council says that the government is uniquely position to provide employers with a "one-stop" shop for financial education resources. Other websites can be so numerous that they're "intimidating," the council says, and some may be sponsored by fraudsters.
Financial institutions should be required to provide every adult American with access to a debit-card-accessible bank account.
The council wants the 28 million Americans without bank accounts to get one, largely to protect them from high-interest payday lenders and other risks. "Many people have a history where they're not sure they'd be welcomed by banks," says Beck, so this recommendation is about making sure all consumers have access to a regulated, insured bank account.