America Dependent upon Financially Literate Youth

April 27, 2007

COLUMBUS, OH – Congresswoman Deborah Pryce (R-Columbus) submitted the following editorial:

America takes seriously its charge to create an educated workforce prepared to compete in an increasingly global economy. We have reformed the federal component to public education to ensure that all children in America have the same opportunities to succeed in the classroom. Concurrently, we have placed greater emphasis on math, science and engineering to help our future workers compete on a world stage where proficiency in these fields is an imperative. While it may sound crude, a significant element to our educational system is an attempt to create the next generation of bread winners --tomorrow’s laborers, tradesmen, and business leaders fully prepared to reap economic success.

While public education dedicates more than a decade to preparing children to make money, we focus precious little effort on teaching them how to keep it. Most high school graduates do not know how to balance a checkbook, let alone tackle such more complex issues as saving, investing, and preparing for retirement. Only 16 states require any sort of personal finance course as a condition for graduation. Unless a child is born into a family that places strong emphasis on thrift, most kids are virtually unexposed to any personal financial management by the time they ship off to college or enter the workforce.

Technology, coupled with changing landscapes in the economy and consumerism, require today’s young people to be savvy money managers more so than any generation that preceded them. Yet, by the age of 18, most kids are armed with the first credit card, have little understanding of how to use it, and enter a financial world full of potential pitfalls: exotic and complex mortgages, data theft, high interest credit cards, insufficient savings, and predatory lenders.

A recent national aptitude test of high school seniors underscores teenagers’ unfamiliarity with money matters. Earlier this month, the Jump$tart Coalition for Personal Financial Literacy released scores measuring the financial literacy of 5775 students in 305 schools across the U.S., and found these students to be woefully lacking in money management skills. Some examples of their findings include: only 23% understood that savings accounts can be taxable; only 40% of students realized that they could lose their health insurance if their parents became unemployed; and more than 50% of students thought a credit card holder had no personal liability if their card was stolen and charges were made on it. The average national score for students was a paltry 52.4%.

Congress has declared April to be Financial Literacy Awareness Month, to raise public awareness about the importance of financial education in the U.S., and of the serious consequences that can result from a lack of understanding about personal finances. And, alarmingly, these consequences become more apparent every day, and emphatically suggest that adults too could benefit from a lesson or two about money management. In 2006, consumer debt totaled a staggering $2.4 trillion, of which credit card debt alone exceeded $825 billion. Meanwhile, personal savings as a percentage of income dropped to negative 1% in 2006, its lowest level since the Great Depression.

Nearly all of us have an older relative who preached to us the virtue of thrift -- a grandparent or great grandparent whose caution with money, credit and savings was formed during the Great Depression, when all three were impossibly scarce. While the economic and financial world has changed dramatically since that time, their message of prudence with the money we earn is timeless, and should be embraced by all Americans.

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