San Diego, CA - A financial
literacy commission, made up of heads of federal agencies
that now sponsor literacy programs is one aim of Senate
(bill) 1532, a new piece of legislation introduced in the
U.S. Senate on July 31st, 2003. It is titled Financial
Literacy Community Outreach Act and besides the
commission, it calls for a single web site where consumers
would find financial literacy programs from such agencies
as the Department of the Treasury, the Securities and
Exchange Commission, the Federal Deposit Insurance
Corporation, the Federal Trade Commission, the Department
of Labor and the Department of Housing and Urban
Development, said Paul Richard, a registered financial
consultant (RFC) and executive director of the nonprofit
Institute of Consumer Financial Education (ICFE), a San
Diego based nonprofit group helping people of all ages
improve their spending habits, increase their savings and
use credit more wisely.
Another overall goal is to bring all of the government's financial literacy programs under one roof. These agencies have programs and public information on savings, spending, investing, preparing for retirement, selecting a pension plan, buying a home and preventing identity theft, among numerous other topics. The financial literacy commission would ensure the federal government's programs on financial literacy are coordinated, Mr Richard pointed out.
Some of the findings cited in S 1532 as the basis for this legislation include:
(1) The financial services industries offer families in the United States many new opportunities to build wealth and security, the ready availability of credit, an overwhelming array of investment and savings options, and the shifting of responsibility for retirement savings from employer to employee has made the understanding of personal finance ever more important.
(2) Many young adults within the United States have demonstrated difficulty understanding basic financial concepts, based on surveys of high school seniors conducted by the JumpStart Coalition for Personal Financial Literacy: (A) in 1997 participants, on average, failed, and answered only 57 percent of the questions correctly; (B) in 2000, the average score fell to 51 percent; and (C) in 2002, disturbingly, on average, only 50 percent of the questions were answered correctly. In another survey of consumers 18 years and older conducted by the American Association of Retired Persons in late 1998, only 11 percent of respondents correctly answered four basic financial questions.
(3) In 2001, the total household debt exceeded total household disposable income by nearly 10 percent and less than half of all households hold stock in any form, including mutual funds and 401(k)-style pension plans; and further almost half of all workers have accumulated less than $50,000 for their retirement, and 1/3 have saved less than $10,000.
More findings as the basis for this proposed legislation include the fact that many Government agencies recognize that the people of the United States lack expertise in financial literacy and are working to help them. These include efforts by the Department of Labor and the Federal Deposit Insurance Corporation, which have joined together to create `Money Smart', a training program to help adults enhance their money-management skills;
Also, the Department of the Treasury, has formed the `Financial Services Education
Council', and has published a guide called `Helping People in Your Community Understand Basic Financial Services'. The Department of the Treasury in promoting a middle school curriculum called `Money Math: Lessons for Life'. The Federal Trade Commission, which publishes information about credit, including `Credit Matters: How to qualify for credit, keep a good credit history, and protect your credit'. The Department of Agriculture runs the `Family Economics Program' to assist educators who deliver basic consumer education and teach personal financial management skills to young people.
The Securities and Exchange Commission, has an Office of Investor Education and Assistance. The Board of Governors of the Federal Reserve System, has developed materials explaining how to use credit responsibly, obtain a mortgage, build wealth, and lease a car. The Department of Housing and Urban Development is funding housing counseling agencies nationwide that provide advice on how to save for and buy a home. And the Government Services Administration is hosting the Federal Consumer Information Center, which has an electronic catalogue of information about Federal financial literacy programs.
Another finding, which consumer finance educators and credit counselors have been aware of for many years, is the serious problem with financial illiteracy among many low-income consumers, who often (A) do not have a relationship with a mainstream financial services provider; (B) lack experience and information about personal finance; and (C) are ill-prepared to make informed financial decisions. Also, many people in the United States (A) are in a precarious financial position because they lack an understanding of economic and financial fundamentals and of financial planning; B) are forgoing opportunities to build wealth by failing to target their investments to higher yielding, yet secure savings vehicles; and (C) are failing to adequately plan and save for retirement. Finally, there is very little coordination among Federal programs, resulting in duplication of effort and a confusing array of information spread among many agencies.
For more information on S-1532 Financial Literacy Community Outreach Act visit:
For more information on the nonprofit ICFE, please visit: http://www.icfe.info.