[Senate Hearing 113-737]
[From the U.S. Government Publishing Office]
S. Hrg. 113-737
THE ECONOMIC IMPORTANCE OF FINANCIAL LITERACY EDUCATION FOR STUDENTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CHILDREN AND FAMILIES
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING THE ECONOMIC IMPORTANCE OF FINANCIAL LITERACY EDUCATION FOR
STUDENTS
__________
APRIL 24, 2013
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
TOM HARKIN, Iowa, Chairman
BARBARA A. MIKULSKI, Maryland LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington MICHAEL B. ENZI, Wyoming
BERNARD SANDERS (I), Vermont RICHARD BURR, North Carolina
ROBERT P. CASEY, JR., Pennsylvania JOHNNY ISAKSON, Georgia
KAY R. HAGAN, North Carolina RAND PAUL, Kentucky
AL FRANKEN, Minnesota ORRIN G. HATCH, Utah
MICHAEL F. BENNET, Colorado PAT ROBERTS, Kansas
SHELDON WHITEHOUSE, Rhode Island LISA MURKOWSKI, Alaska
TAMMY BALDWIN, Wisconsin MARK KIRK, Illinois
CHRISTOPHER S. MURPHY, Connecticut TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts
Pamela Smith, Staff Director
Lauren McFerran, Deputy Staff Director and Chief Counsel
David P. Cleary, Republican Staff Director
__________
Subcommittee on Children and Families
KAY R. HAGAN, North Carolina, Chairman
BARBARA A. MIKULSKI, Maryland MICHAEL B. ENZI, Wyoming
PATTY MURRAY, Washington MARK KIRK, Illinois
BERNARD SANDERS, (I) Vermont RICHARD BURR, North Carolina
ROBERT P. CASEY, JR. Pennsylvania JOHNNY ISAKSON, Georgia
AL FRANKEN, Minnesota RAND PAUL, Kentucky
MICHAEL F. BENNET, Colorado ORRIN G. HATCH, Utah
CHRISTOPHER S. MURPHY, Connecticut PAT ROBERTS, Kansas
ELIZABETH WARREN, Massachusetts LAMAR ALEXANDER, Tennessee (ex
TOM HARKIN, Iowa (ex officio) officio)
Josh Teitelbaum, Staff Director
(ii)
C O N T E N T S
__________
STATEMENTS
WEDNESDAY, APRIL 24, 2013
Page
Committee Members
Hagan, Hon. Kay, Chairman, Subcommittee on Children and Families,
Committee on Health, Education, Labor, and Pensions, opening
statement...................................................... 1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming,
opening statement.............................................. 2
Franken, Hon. Al, a U.S. Senator from the State of Minnesota..... 26
Murray, Hon. Patty, a U.S. Senator from the State of Washington.. 29
Murphy, Hon. Christopher S., a U.S. Senator from the State of
Connecticut.................................................... 31
Witnesses
Biggs, Curtis, Vice President, Wyoming Chapter, Jump$tart
Coalition for Personal Financial Literacy, Sheridan, WY........ 4
Prepared statement........................................... 6
Lipp, Nicole, Social Studies Teacher, Garinger High School,
Charlotte, NC.................................................. 8
Prepared statement........................................... 9
Lusardi, Annamaria, Ph.D., Academic Director for the Global
Center for Financial Literacy at The George Washington
University, Washington, DC..................................... 12
Prepared statement........................................... 13
Pace, Cathy, President of the Credit Union Division, Allegacy
Federal Credit Union, Winston-Salem, NC........................ 16
Prepared statement........................................... 17
Richardson, Cy, Vice President, Housing and Community
Development, National Urban League, New York, NY............... 19
Prepared statement........................................... 21
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
The Financial Services Roundtable............................ 39
National Association of Federal Credit Unions (NAFCU)........ 40
Credit Union National Association (CUNA) and National Credit
Union Foundation (NCUF).................................... 41
(iii)
THE ECONOMIC IMPORTANCE OF FINANCIAL LITERACY EDUCATION FOR STUDENTS
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WEDNESDAY, APRIL 24, 2013
U.S. Senate,
Subcommittee on Children and Families,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:31 p.m., in
room SD-430, Dirksen Senate Office Building, Hon. Kay Hagan,
chairman of the subcommittee, presiding.
Present: Senators Hagan, Enzi, Murray, Franken, and Murphy.
Opening Statement of Senator Hagan
Senator Hagan. Welcome, everybody. Let me welcome you to
the first hearing in this Congress of the HELP Subcommittee on
Children and Families. First of all, I want to thank all of our
witnesses for being here. We are certainly looking forward to
your testimony.
I want to especially thank our Ranking Member, Senator
Enzi, for all of his work and for his staff's work on this
hearing. I sincerely look forward to working with you as we
develop a bipartisan agenda and solutions for the challenges
facing America's children and our families.
It is certainly an honor and a privilege as the chairman of
this subcommittee to be here. And we want to look at the
essential building blocks of successful and secure individuals
that start very early in life, of quality maternal and newborn
healthcare, early childhood education, and financial literacy
education, which is what we're going to be talking about today.
With April marking Financial Literacy Month, I really do
want to focus today on the economic importance of financial
literacy for all of our students. I think having a basic
understanding of financial concepts is an absolutely critical
skill for establishing economic success and security. And it's
especially true for college students who are taking out
increasingly large loans to pay for their education. In fact,
student loan debt in our country now exceeds credit card debt.
Mistakes managing your money in the early years of
adulthood can have long-term consequences on the ability to buy
a first home, the ability to buy a car, the ability to start a
family, the ability to save for retirement. It is all impacted.
And for our military service members, the risks are especially
great, since their careers may be delayed or put on hold
because security clearances are also dependent on maintaining
good credit.
The ability to properly manage money makes each of these
life milestones in building a career and family possible. But
many of our high school graduates are entering college or the
workforce almost completely unarmed with the basic knowledge,
the basic skills that they need to manage their personal
finances effectively. According to the 2008 Jump$tart Coalition
survey, the last one for which data is currently available,
only 26 percent of high school seniors received a passing
score, and just 5 percent of high school seniors got a C or
better. To me, that's depressingly low.
The only good news we now know is that teaching personal
financial literacy in grades K through 12 really does make a
difference in how students manage their money. According to
research published by the National Endowment for Financial
Education, students from States where a financial education
course was required had higher levels of financial knowledge
and were more likely to engage in positive financial behaviors
than students from States that did not have those requirements.
And compared to other students, these young adults were
more likely to save, less likely to max out their credit cards,
less likely to make late credit card payments, and more likely
to take just average financial risks. Unfortunately, the
majority of States do not require financial education to be
taught in schools at all. Only 24 States require a one semester
course in personal finance, or require personal finance to be
integrated into another course.
I'm proud to say that when I was a State senator in North
Carolina, I helped lead the effort that established North
Carolina's financial education requirement. And I'm looking
forward to hearing the testimony of a teacher from North
Carolina about how that has impacted students' lives.
Teaching financial literacy in elementary and secondary
schools is bipartisan, and it's common sense. The Presidential
Advisory Councils to both Presidents Bush and Obama recommended
it. The American Federation of Teachers, the Council for
Economic Education, the Jump$tart Coalition, the National
Education Association, the National Endowment for Financial
Education, and the National Urban League all support this
concept. Survey after survey shows that more than 80 percent of
teachers, students, parents, and the American public support
it.
I'm proud to give my Senate colleagues a chance to support
that, too. This week, I will re-introduce the Financial
Literacy For All Students Act to authorize grants to
incentivize States to integrate financial literacy education
into elementary and secondary courses and provide professional
development for teachers so that the teachers are well prepared
to improve the financial literacy of their students. That is a
critical component of this legislation.
I think this is a common sense solution, and I'm looking
forward to working with all of my Senate colleagues to help
pass this bill.
I want to now give our Ranking Member, Senator Enzi, the
opportunity to provide opening remarks.
Opening Statement of Senator Enzi
Senator Enzi. Thank you, Madam Chairman. I appreciate your
passion on this issue and look forward to working with you on
the Financial Literacy Caucus.
I want to thank all of our distinguished panel. We
appreciate you taking time out from your life to come and share
your knowledge and your experiences with us. It does make a
difference. And I think the fact that you've taken the time to
come highlights the importance of financial literacy,
especially for the youth of our Nation.
For many years, I've recognized the importance of being
involved in financial literacy issues, such as working with the
Wyoming Community Development Authority on first-time homebuyer
education or working with the Wyoming Jump$tart program on
financial literacy initiatives around the State.
I've also worked on some initiatives in Washington. I've
been a longtime sponsor of a Senate resolution designating
April as Financial Literacy Month and have been the
resolution's lead Republican sponsor since 2007. And I've got
to say that the lead Democrat co-sponsor on that was Danny
Akaka, who has now returned to Hawaii. I do miss him, but I
think he's provided an absolutely spectacular replacement.
I've been heavily involved in this issue, and I'm here to
tell you that I feel a new urgency about the importance of
educating people about issues related to finances and from a
young age. I have four grandkids in Wyoming. I want their
futures and the futures of children across the country to be
successful. A part of ensuring their futures is teaching them
principles early on that will plant the seed of sound
decisionmaking that they can put into practice when they're old
enough to start making their own financial decisions.
Make no mistake. The economic environment they're growing
up in is rife with challenges that will require this knowledge.
With the increasing cost of higher education and the fiscal
uncertainty surrounding programs like social security, future
generations will need a more informed understanding of finances
to have the opportunities they deserve and to appropriately
save for retirement.
Here are some numbers that illustrate the challenges we're
facing as a country. According to the 2012 Consumer Financial
Literacy Survey Report of the National Foundation for Credit
Counseling, almost 42 percent or nearly 98 million adults in
the United States gave themselves a grade of C, D, or F on
their knowledge of personal finance, and four out of five
adults admitted that they'd benefit from professional advice on
everyday financial questions and functions.
Additionally, two of every five adults in the United States
or more than 93 million are saving less than they did in 2011,
and almost 39 percent of adults say they have no retirement
savings at all. We have to do better than this for future
generations.
We need to do better, but we're also in a unique situation
in the country. We have a greater need than ever for financial
literacy across the country and in Congress at a time when our
country has so little money.
So what we need to do now is to let the States continue
their great work on improving financial literacy. We also need
to take a look at financial literacy programs across Federal
agencies to see what we're doing well and what we're not and
how we can eliminate duplication.
Again, I thank you, Madam Chairman, for holding the hearing
on this important topic. I look forward to hearing from our
distinguished panel, and I look forward to working with you
more extensively on financial literacy for this Congress.
Senator Hagan. Ranking Member Enzi brings a wonderful
background in dealing with financial literacy to this issue. So
I thank you also for your interest, and I look forward to
working together as we move forward.
We would now like to have the witnesses' opening remarks,
and I would like to ask you to hold it to 5 minutes, a little
less than 5 minutes, please. Our first witness is Mr. Curtis
Biggs, vice president of the Wyoming Chapter of the Jump$tart
Coalition. And I believe you're going to be introduced by your
Senator.
Senator Enzi. I'd love to. He just attended my Inventors
Conference, which is one way that we try to improve the
financial status of kids and adults where they can invent
something, make it in Wyoming, ship it all over the world, and
live wherever they want, which I know would be Wyoming, and I
appreciated his attendance at that.
He's joined us today from Sheridan, WY, which is where my
wife and I grew up, and it's about an hour and a half from our
home in Gillette, where we currently live. Curtis serves as the
director of Dual Credit Programs for Sheridan and Gillette
Colleges, where he partners with high schools to provide post-
secondary options to Wyoming students.
He also represents the colleges in the National Association
of Concurrent Enrollment Partnerships on several Perkins
Workforce Investment Act, an issue I've championed for years,
and Career Technical Education boards and committees. Curtis
serves as the Youth Council chair on the Wyoming Workforce
Development Council, supporting youth initiatives, including
career and technical student organization initiatives across
Wyoming.
He's also the current vice president and president-elect of
the Wyoming Chapter of Jump$tart. That's the primary reason we
have him here. It's a program I've worked extensively with on
financial literacy initiatives over the years. I appreciate his
presence at the hearing today and look forward to hearing his
perspective on financial literacy education in the K through 12
age group.
I'll have to apologize to all of the people, because I have
a bill that's up on the floor, and I'm going to have to go
manage amendments there. So I'll listen until my support staff
on the floor is out of time, and then I'll have to leave.
Senator Hagan. Thank you.
Mr. Biggs, if you can begin your opening statement, please.
STATEMENT OF CURTIS BIGGS, VICE PRESIDENT, WYOMING CHAPTER,
JUMP$TART COALITION FOR PERSONAL FINANCIAL LITERACY, SHERIDAN,
WY
Mr. Biggs. Thank you, Madam Chairman Hagan, Ranking Member
Senator Enzi--especially for that introduction. I appreciate
it--and all Senators present for the opportunity to discuss
both State and national level Jump$tart perspectives
contributing to the economic importance of financial literacy
for our students.
Dedication to educating our youth in financial literacy is
essential to a strong consumer and robust U.S. economy.
Americans now owe more than they make, and financial literacy
statistics for both youth and adult populations gravely reflect
the need to integrate personal finance into the lives of our
students at an early age, as pointed out by Senator Hagan.
Dedication along with the national mission of Jump$tart
Coalition for Personal Financial Literacy is to focus on this
next generation of consumers. Striving to prepare youth for
lifelong successful financial decisionmaking, Jump$tart is the
voice of youth financial literacy. We believe that all
consumers must increase their levels of financial literacy
through effective education and information. Financial
principals are basically the same for all ages, but how we
reach and teach children, much different, how we frame the
lessons, and how we evaluate our effectiveness is necessarily
different when dealing with kids.
As vice president of Wyoming's State coalition, I offer the
support and perspective of the local as well as the national
perspective for Jump$tart. I witness the seventh grade Mini
Bank teller processing savings deposits for classmates while
also sharing best practices with my cohorts and my colleagues
from the other coalitions around the country.
Collaboration is a critical component of Jump$tart.
Jump$tart is not just a financial literacy organization. We're
the organization that brings together those organizations that
conduct and support financial literacy. An example of this
collaboration in Wyoming is the Mini Bank Program, a
partnership between Jump$tart partner First InterState Banks,
community schools, and First InterState BancSystem Foundation,
and Jump$tart.
Serving hundreds of kindergarten through ninth grade
students each year, there are now 23 Mini Banks throughout
Wyoming and Montana, with a collected total account balance of
$1.2 million. Through this program, students gain exposure to
banking and behaviors that promote good savings habits and
experience hands-on math and economic concepts.
Dedicated partners and individuals from North Carolina to
Colorado to our strong West Coast coalitions continue to
provide similar dynamic programs through our Jump$tart.
Jump$tart has about 150 national partners and a network of 49
affiliated State coalitions, each one independently operated
almost exclusively by volunteers.
Jump$tart believes that educators are a huge factor in the
effectiveness equation. As you mentioned, there is a distinct
need for professional development amongst our professors.
Jump$tart offers a great curriculum, but without the curriculum
and the instructor, teachers won't necessarily have the same
results.
The National Education Conference, the Teacher Training
Alliance, and the Jump$tart Clearinghouse provide the training,
resources, and partner access to teachers that they need. Over
900 have attended the conference to date. The Jump$tart
National Educator Conference was launched in 2009 with seed
money from Experian helping to get resources into the hands of
those who need them. From State to State, coalitions also
provide local financial literacy training.
Jump$tart is publisher of the National Standards in K
through 12 personal finance education, now in its third
edition. Like many national subject matter standards, use of
these standards is voluntary. Many States have used these
standards as a starting point to build their own State
standards.
A flagship of Wyoming financial literacy programs is the
annual Jump$tart Financial Literacy Conference for Youth.
Another example of collaboration, Wyoming has partnered with
Money Savvy Generation, implementing their curriculum into the
1-day conference covering asset building, including budgeting,
compound interest concepts, and various investment options. Now
in its fifth year, the conference has served over 850 Wyoming
youth.
I close with Federal Reserve Chair Bernanke's thoughts.
Education and teachers are on the front line of preventing the
next financial meltdown. Jump$tart Coalition for Personal
Financial Literacy is a committed stakeholder in the effort to
implement the financial literacy boost our students need.
HELP Committee interest in enhancing financial literacy
opportunity for students is greatly appreciated. I thank you
for your time and look forward to your questions.
[The prepared statement of Mr. Biggs follows:]
Prepared Statement of Curtis Biggs
Thank you Madam Chairman Hagan, Ranking Member Senator Enzi and
fellow Senators for the opportunity to discuss both State- and
national-level perspectives of Jump$tart contributions to ``The
Economic Importance of Financial Literacy for Students.''
Dedication to educating our youth in financial literacy is
essential to a strong consumer and robust U.S. economy. Americans now
owe more than they make (Bennett, 2006). Financial literacy statistics
for both youth and adult populations gravely reflect the need to
integrate personal finance into the lives of our students at an early
age.
The national mission of Jump$tart Coalition for Personal Financial
Literacy is to focus on this next generation of consumers (i.e.,
students PreK-college.) Striving to prepare youth for life-long
successful financial decisionmaking, Jump$tart is the voice of ``youth
financial literacy.'' We believe that all consumers must increase their
levels of financial literacy through effective education and
information; financial principals are basically the same for all ages;
but how we reach and teach children, how we frame the lessons, and how
we evaluate our effectiveness is necessarily different when dealing
with kids.
As vice president of Wyoming's State coalition, with support and
insight from our national Jump$tart Coalition, I offer both local and
national perspectives on Jump$tart initiatives, challenges and
successes. I witness the seventh grade Mini Bank teller processing
savings deposits for classmates while also sharing and celebrating best
practice amongst State and national coalition leaders and supporters at
the annual events on Capitol Hill. Wyoming Jump$tart also prides itself
on the steadfast congressional level support from Senator Enzi.
Collaboration is a critical component of Jump$tart. Jump$tart is
not just a financial literacy organization; we're the organization that
brings together those organizations that conduct/support financial
literacy. With vast geographic, demographic and educational territory
to cover, coordination amongst financial literacy stakeholders is key.
Jump$tart believes it contributes significantly to that part of the
cause, identifying and bringing together varied participants in the
effort (government, financial institutions, non-profits, academia,
parents, teachers, etc.). At both the State and national levels,
Jump$tart is the facilitator of collaboration and communication in this
field. An example of this collaboration in Wyoming is the Mini Bank
Program, a partnership between Jump$tart partner First InterState
Banks, community schools, and First InterState BancSystem Foundation.
Serving hundreds of K-9th grade students each year, there are now 23
Mini Banks in Montana and Wyoming, with a combined savings of over $1.2
million. Through this program, students gain exposure to banking and
knowledge and behaviors that promote good savings habits, and
experience hands-on math and economic concepts.
Jump$tart has about 150 national partners from government, business
and finance, non/not-for-profits, and education. Jump$tart is a network
of 49 affiliated State coalitions; each one independently operated,
almost exclusively by volunteers. Wyoming Jump$tart board members
coordinate resources as well, in order to provide events and services
statewide.
initiatives
In recent years, Jump$tart has focused on teachers. We believe that
educators are a huge factor in the effectiveness equation. A great
teacher can make magic with a mediocre curriculum; but a great
curriculum in the hands of a less-inspired teacher won't have the same
result.
The Jump$tart National Educator Conference was launched in 2009
with seed money from Experian. The cost for teachers to participate is
subsidized significantly. Our conference is not extravagant, but we
strive to treat teachers very well--to thank them, acknowledge them,
inspire them. In the spirit of the Coalition, our conference always
features a multitude of diverse speakers, exhibitors, sponsors. While
the overriding objective is to support the teachers; Jump$tart's
secondary objective is to support its partners--giving them a platform
for their products and programs; helping to get the resources into the
hands of those who need them. Over the 4 years of the national
conference, 961 teachers from across the country have been served.
Thirteen Wyoming teachers have attended, in part, funded by Wyoming
Jump$tart.
Additionally, since 2007, Wyoming Jump$tart has continually
provided local continuing education financial literacy training to high
school teachers. Wyoming Family and Consumer Science and business
teachers across the State participate via career & technical education
pre-conference workshops and online interfaces.
The Jump$tart Teacher Training Alliance is an alliance of five of
the major, non-profit participants in the financial literacy space:
Jump$tart, Junior Achievement, the Council for Economic Education, the
National Endowment for Financial Education, and the Take Charge America
Institute at the University of Arizona. The Alliance members worked
with three ex officio Federal agencies: The FDIC, Department of
Education, and Department of the Treasury, to create a model for
conducting teacher training. Since the Alliance Model focuses on
providing teachers with underlying financial knowledge--rather than
teaching them how to use a program--it actually supports and
facilitates use of all the many financial education programs already in
existence.
Celebrating Financial Literacy Month and Financial Literacy Day on
Capitol Hill, Jump$tart also hosts the Jump$tart State Coalition
Leaders' Meeting in Washington, DC, along with the Jump$tart Coalition
Awards Dinner.
Jump$tart is publisher of the National Standards in K-12 Personal
Finance Education, now in its third edition. Like many national subject
matter standards, use of these standards is voluntary. Many States have
used these standards as the starting point to build their own State
standards.
Jump$tart operates the online Jump$tart Clearinghouse of financial
education resources. There are currently over 800 resources listed. All
resources are screened for listing--we do not allow marketing
materials, anything unbiased, and anything with content that does not
align with our national standards. These resources are not Jump$tart's;
but rather, the resources published and provided by our partners and
other participants. Currently the Jump$tart Clearinghouse is undergoing
a major overhaul with two objectives: one, to upgrade the search
technology to make it easier for educators and other users to find the
resources that best fit their need; and two, to strengthen the listing
criteria to ensure that users are finding the most effective resources
available.
A flagship of Wyoming financial literacy programs is the annual
Jump$tart Financial Literacy Conference for Youth. Another example of
collaboration, Wyoming has partnered with Money Savvy Generation,
implementing their curriculum into the 1-day conference covering asset-
building, including budgeting, compound interest concepts, and various
investment options. Now in its 5th year, the conference has served more
than 850 Wyoming youth, grades 8 through 12.
In closing, Jump$tart Coalition for Personal Financial Literacy is
a committed stakeholder in the effort to implement the financial
literacy boost our students need. Composed of knowledgeable and
passionate partners, collaboration and advocacy, research and
standards, and financial educational resources, Jump$tart is a catalyst
for improving the financial literacy of pre-kindergarten through
college-age youth. HELP Committee interest in enhancing financial
literacy opportunity for students is greatly appreciated. I thank you
for your time and look forward to your questions.
Senator Hagan. Thank you, Mr. Biggs.
Our next witness is Ms. Nicole Lipp, a social studies
teacher at Garinger High School in Charlotte, NC.
Ms. Lipp.
STATEMENT OF NICOLE LIPP, SOCIAL STUDIES TEACHER, GARINGER HIGH
SCHOOL, CHARLOTTE, NC
Ms. Lipp. Good afternoon. Thank you so much for having me
here. I'm a civics and economics teacher to 10th graders, so
this whole event today is totally up my kids' alley, and they
are so excited that it's happening. So I'm excited to be a part
of it.
In 2005, I started implementing personal financial literacy
into my classroom, and it was mainly because of my personal
experience. Growing up, I had a mother who, thank God, taught
me financial literacy, and little by little, whether it was
saving $1 or it was saving $2, she would make us put it in our
little piggy banks underneath the kitchen cabinet counter.
We had a ledger, and we had to put ``plus $1'' allowance
for the week of whatever. If we wanted to take out even 50
cents for candy, she would ask us the questions, ``Is 50 cents
worth--this is half of what you just made for your allowance.
Is that candy worth it?'' And we had to sit there and kind of
think about it, because 50 cents can be--I mean, it's very
tempting.
As we grew up, she also was a big proponent that instead of
Christmas presents and birthday presents from aunts and uncles,
she took that money and she invested it into our college
savings accounts. And she always told us as little kids--we
thought, ``Oh, we've got $25. We should be able to spend that
on whatever.'' And now, I had no college debt when I graduated
from college, and that $25 toy when I was six or seven is
meaningless to me. I don't miss it at all, being 33 with no
college debt.
She instilled a lot of those things into us at a very, very
young age. When I became an adult and I was able to buy my own
house, they approved me for a loan that was ridiculous. It was
around $300,000, and my husband and I made a combined salary of
$50,000. They showed us this house, and it had the granite
counter tops and these wonderful cabinets.
I felt the twinge, knowing better, that, ``Oh, my gosh, I
can afford this. The sales person says I can afford it.'' We
didn't buy it. We bought one for half. I started thinking about
my kids, because I've only taught in low-income schools for the
last 11 years--about 60 percent to 70 percent with free and
reduced lunch rates. Now, the school I teach at is title I.
We're up in the 90 percent range.
These kids didn't have my mom's voice in their head, and I
had to somehow figure out how to get that to them. And in 2005,
I came across a budget project that North Carolina had created,
and I started tweaking it and playing around with it, and then
I handed it to the kids. I gave them certain guidelines that
went along with it.
They had to put 10 percent of whatever they made away into
savings, no matter what, and they weren't allowed to touch that
part of the budget. If they wanted to get a bus pass instead of
a car so they could afford a nicer apartment, they could make
those decisions. But that 10 percent wasn't allowed to be
touched at all.
They also weren't allowed to count on having a spouse. And
high schoolers all think that they are in love, and this was
just such a shock to them. ``But you don't understand, Ms.
Lipp. I love them and we're going to be together forever,'' and
3 months later, it was over. So I told them, ``You have to do
that because it's why women stay in bad marriages, and it's one
of the leading causes of divorce.''
Financial literacy and finances is a huge thing. It's not
just understanding finances. It affects your emotional and your
mental state, especially if you're trying to figure out how to
budget.
So I assigned this project, and they were angry. They
didn't want to do it. They were fighting me left and right on
it. And my kids have my cell phone number and they have my e-
mail address, and by that weekend, I started getting e-mails
and text messages about the project, and I'm sitting at home,
going, ``Oh, my gosh. OK. They got it. They got it.''
And as the project went on, the questions kept coming. They
were visiting banks. I sent them to go and compare and contrast
banks and credit unions, and they were coming in with pictures
of themselves with the bank person that they interviewed. And
this went into their portfolio, and I'm laughing.
But it started taking on this whole different shape that I
had no idea was going to happen. Those kids that participated
in that project are now graduated from college. One of them
actually teaches with my husband, who is seated behind me.
We've gotten to see what the effects of this project have been.
A lot of them have said they opened up savings accounts.
They understood that the stock market wasn't just for the rich
people. They started to learn that there were things that they
could do to take control of their financial future at 16 and 17
years old instead of just thinking, ``OK, well, when I graduate
from college or graduate from high school, I will now have to
deal with bills.''
It is imperative, imperative, that we do this. And I am so
excited that we're talking about it on a Federal level, because
it does--we can change the way things happen financially in
this country.
Thank you very much.
[The prepared statement of Ms. Lipp follows:]
Prepared Statement of Nicole Lipp
Early on in childhood, I was taught the lessons of financial
literacy. Starting in elementary school my mom had my brother and I
keep banks for our allowance in a cabinet in our kitchen. She had a
ledger neatly tucked into each bank where we kept track of our spending
habits to prepare us for balancing a check book. Each week we would
pull out our bank and add our $1.00 to $2.00 allowance and log it in. I
distinctly remember printing neatly and clearly on the graph paper the
date, what the money was from and how much it was. In the end we had to
total up the money in our banks so we could see how our saving was
adding up. Each time we wanted to buy something, no matter how trivial
it was, we had to return to our banks and deduct the amount with an
explanation of our use for the money. Even as an elementary school
student I began to understand the value of money and that buying a 50
cent candy wasn't worth losing half of what I earned for the week. With
her home banking system, my mom very carefully planted the seeds of
financial literacy in my mind.
Soon after graduating from college I moved to a new city 8 hours
from my family and was immediately faced with tough decisions. Where
was I going to live? Should I buy a new car? Where should I do my
banking? In those moments, the financial lessons taught by my mom came
clearly to mind and I was able to navigate the world of adulthood. When
I went to buy my first house in 2003 my husband and I were approved for
nearly $300,000 while only having a combined income of slightly over
$50,000 a year. As the salesmen paraded us through the largest house
they built, I felt a twinge of excitement seeing the granite counter
tops, cherry cabinets, tile floors and so on. A part of me was pulled
to trust the salesperson and buy the house. After all, with the
adjustable rate mortgage he was offering, we could afford the initial
year of payments and it was possible that we would have salary
increases over the next 2 years to keep up with the increase in cost.
In that moment the words of my mom rang through my ears and we chose
instead to purchase a house within our means, actually listed at half
of our approved loan amount.
In 2005 it became evident just how far above their means people
were living, as for sale signs and foreclosure notices appeared around
my neighborhood. The people who bought more expensive houses on
adjustable rate mortgages lost those houses, while we came out the
other side of the recession relatively unscathed despite my husband's
job loss, and pay freezes in the school system. I attribute this to the
financial training I had throughout my childhood. As I looked at my
students I realized that most of them didn't have my mother's voice in
their heads. They didn't know what to do with their paychecks. They
didn't realize there was a difference between a credit union and a
bank. When I mentioned that I owned stock (once again because my mom
invested when I was young) my students were blown away. They believed
that the stock market was only for rich people. It became very clear to
me that I needed to find a way to become my mother's voice for all of
my students.
With this goal in mind, I began to search for resources I could use
to teach my students how to be financially sound. I stumbled across a
budget project developed by the State of North Carolina. I realized
that this project was the way to teach 20 years of my mom's financial
lessons in one semester. I worked to tweak the project to make it user
friendly and then passed it out to the kids. Almost instantly they were
annoyed with the project. I gave my students 2 months to finish the
project and it included getting an apartment, buying a car, budgeting
for student loans, getting renters and auto insurance, visiting banks
and much more. The kids were given a few rules:
No. 1. You must live off the lowest salary posted for the career
you want.
No. 2. You may not account for having a spouse. Financial disputes
are a major reason for divorce and one of the leading reasons women
stay in abusive relationships. You must do it on your own.
No. 3. You may not count on having scholarships because they are
not a guarantee. Ask your parents if they will be helping you with
college and if they aren't, budget for paying back student loans.
No. 4. You may not count on your parents giving you a car or any
furniture. You have to do it on your own.
No. 5. Last, 10 percent of your income must be dedicated to
savings. That is non-negotiable.
They began their project grumbling about how their boyfriend or
girlfriend was their soul mate and they would be together forever and I
was being unreasonable. I was so nervous that they weren't going to
catch on and were going to blow off the project. But then something
miraculous happened . . . they started texting me and e-mailing me that
weekend with questions about the project.
Answering their questions became a part of my day, every day, for
the next 2 months. They were calling utility companies to find out
averages for the apartments they wanted. They were visiting banks and
finding out the difference between savings accounts, checking accounts,
IRAs, and CDs. They were coming to class with pictures of themselves
with the bank workers. The project took on a life of its own and the
grumbling stopped. Excitement replaced all their reservations and they
were learning! I was so proud of them. On the day the project was due
the kids were full of energy and were scrambling to put their
portfolios together. When it came time to collect the projects the kids
were more worried about getting their projects back than what their
grades would be. I assured them that they would get them back and they
would be theirs to keep and to use as a blueprint for their lives.
I flipped through the pages of their projects and was amazed. My
students found ways to live within their means by making sacrifices.
They found roommates, chose to rent apartments on a bus route instead
of buying a car, others took on additional extra jobs, and some decided
to forego clothes shopping so they could eat out during the week.
Sophomores in high school were able to make budgeting decisions that
their own parents couldn't make. In that moment I knew that this
project would forever be a requirement in my classroom.
Fast forward to 2013, those students have now graduated from
college, and are working in the real world. I recently heard from
several of them on the impact that the project had on their ability to
budget later in life.
One former student, Dillon, wrote me that the budget project left a
lasting impression on his spending and saving habits.
``I make sure I'm able to pay all my bills on time and still
save a little bite more in case something unexpected happens.
Now that I'm about to graduate college, I've managed my money
so well that I don't have any college bills or loans to pay off
because I realized the importance of `buying now instead of
paying later.' Learning the importance of saving money has
changed my life for the better, and I believe that it should be
emphasized in high school. Without the knowledge of properly
spending money I probably would have bought unnecessary things
with credit cards, just to discover later I don't have the
money to pay it back. Too many people I know live in debt
because of poor spending and investing habits. I'm happy to say
that because of this project, I will never follow that path.''
Another former student, Shannon, echoed Dillon's reaction to the
project. She wrote me that at first, she
``hated the budget project. However, the more I worked on it,
the more I enjoyed it. In the beginning it was just fun to plan
out my future, the way I wanted it to be. By the end, it was
eye-opening to see exactly how the financial aspects of my
decisions would play out, especially how my career choices
would affect my ability to afford the things I knew I would
want to buy. At this point in my life, I'm making these choices
all over again, but this time it's not for a grade. Now, the
consequences are real. I'm not as afraid about how to manage my
money as some of my other friends are, and that has to do with
the budget project. I was able to do it once before, so
hopefully I'll be able to do it again now.''
All 11 years of my teaching experience have been spent in schools
with high percentages of students who are from low socio-economic
backgrounds. In many of my student's homes every penny counts and they
need the skills to make their money work for them. The North Carolina
Council on Economic Education (NCCEE) has a lesson about being a
millionaire. The teacher reads a list of statements about millionaires
and the students have to guess if it is true or false. It is amazing to
watch the kids guess that millionaire's drive fancy cars or earned
their money from the entertainment industry. They don't realize that
most millionaires live within their means, too. My students learn that
no matter where they are economically it doesn't mean it is where they
have to stay.
Garinger High School in the Charlotte-Mecklenburg School District,
where I teach Civics and Economics, is among the poorest in the area,
with a high percentage of students eating free and reduced priced
meals. This year we began implementing the Stock Market game into our
classes to help increase financial literacy. The feedback from the
student's has been incredibly positive. Many of the students are
realizing that the stock market isn't just for the wealthy. They are
learning that they too can take control of their financial future and
invest their money. We are striving to teach them the life lesson that
the immediate gratification of buying new clothes or new shoes doesn't
outweigh a fiscally sound future.
I feel a great sense of urgency surrounding this topic because I
have personally experienced the effects of learning financial literacy
lessons early on, and have also helped teach these lessons to students
who desperately need them. Becoming financially literate can give
someone without a lot of money the knowledge needed to take control of
their finances and the tools they need to break a cycle of overspending
and debt.
Since 2005, when North Carolina passed laws requiring that personal
finance be taught to high school students, the State has been a leader
in integrating personal financial literacy content into the curriculum.
This year, students will be tested on their financial literacy for the
first time.
In Charlotte-Mecklenburg School District I have been a part of a
team trying to prepare our teachers for the upcoming tests and new push
of financial literacy. This past year we have worked hand in hand with
the North Carolina Council on Economic Education (NCCEE) to train our
teachers on how to teach financial literacy lessons. We have held three
professional development sessions and provided each teacher with a set
of curriculum called Virtual Econ 2.0. In these sessions teachers are
given practical ways to implement financial literacy and each teacher
is given support from the district as well as from the NCCEE so they
can further their knowledge. Teachers have been given access to the
Stock Market game for their students and the training as to how to
teach it and integrate it into their lessons. We are making great
strides to make our teachers feel comfortable with the content so they
can seamlessly integrate it into their lessons.
My classroom and my students are the greatest testimony as to why
teaching financial literacy should be a must for students around the
country. I live in an area that is still feeling the backlash of the
financial crisis. Many people were taken advantage of by the banking
system and made poor financial choices because they didn't know any
better. We have a duty to educate our citizens no matter their economic
status and give them the tools to create a sound economic future.
Thank you for your time and the opportunity for me to be able to
speak on behalf of educators to you about this urgent need in our
country.
Senator Hagan. Thank you very much.
Our next witness is Dr. Annamaria Lusardi, the academic
director of the Global Center for Financial Literacy at the
George Washington University.
Dr. Lusardi.
STATEMENT OF ANNAMARIA LUSARDI, Ph.D., ACADEMIC DIRECTOR FOR
THE GLOBAL CENTER FOR FINANCIAL LITERACY AT THE GEORGE
WASHINGTON UNIVERSITY, WASHINGTON, DC
Ms. Lusardi. Thank you very much, Senator Hagan and Senator
Enzi, for the opportunity to speak to you about the economic
importance of financial literacy for students.
I am the director of the Global Center for Financial
Literacy at George Washington University, and as part of my
research, I develop tools for testing financial knowledge,
conduct studies in financial literacy levels, and assess what
the result of those studies mean for the United States. I'm
here to tell you that the vast majority of Americans do not
have the financial knowledge they need to fully participate in
the economy or to make informed decisions about their own
financial futures.
This reality has implications for their lives and for the
economic health of the economy. According to the 2009 Financial
Capability Study, only 30 percent of the population can do a
simple 2 percent calculation and has a basic understanding of
inflation and risk diversification, concepts that are important
in financial decisionmaking. The second wave of that study is
about to be released, and it shows no improvement in the level
of financial knowledge between 2009 and 2012.
Financial illiteracy is not only widespread, but it is
particularly severe among specific groups of the population,
including people aged 18 to 25. These youths just out of school
and young adults beginning their careers are less financially
knowledgeable than the general population.
When we focus on high school students, the findings are
even more sobering. Data collected bi-annually by the Jump$tart
Coalition show that only 7 percent of high school students can
be considered financially literate. These statistics have
troubling implications. Studies show that Americans who are not
financially literate are less likely to participate in
financial markets or to invest wisely. They are less likely to
save and plan for their retirement.
It's really important, and I think there are four reasons
why academic research points to the launch of financial
literacy efforts in schools. The first reason stems from the
fact that financial illiteracy is widespread. This means that
young people with poor financial knowledge are unlikely to
learn from their parents, other adults, or peers.
The second reason to include financial literacy in school
has to do with equality. A failure to understand financial
concepts is especially prevalent among certain demographics in
the population. Data from the Jump$tart Coalition and other
surveys show that white male students from college educated
families disproportionately account for the small percentage of
students who are financially literate. This distinction
persists over the life cycle, and is strikingly robust across
countries.
Olivia Mitchell and I found this finding across as many as
eight countries. And this is the case at all stages of the life
cycle, from youth to old age.
Another reason to focus on financial literacy in school is
that it is a necessary skill for navigating today's complex
world. This is so evident that the OECD last year added
financial literacy to the topics it evaluates in its Program
for International Student Assessment. Financial knowledge now
joins math, science, and reading in those tests administered to
15-year-olds around the world.
The fourth reason why school is a powerful place to teach
financial knowledge is a simple one. Young people need to
understand how to make wise financial decisions before, not
after, they are faced with life-changing decisions. Most
notable among those decisions is whether or not to invest in
higher education. Education beyond high school has a tremendous
effect on financial literacy.
Even though there is criticism about what to do and whether
financial education is effective in high school, I think a lot
of the recent studies really do find effectiveness, and
particularly when schools require financial education and
require a full course. There is also a great deal of material
now available to teachers and schools to add financial literacy
in their curriculum.
For example, we have standards from the Jump$tart Coalition
for Personal Financial Literacy and, more recently, the Council
for Economic Education. Other countries, such as the United
Kingdom, recently added financial literacy in their schools.
There is a cornerstone of economic theory: Where you have
well informed consumers, you will find vigorous competition and
efficient markets. In other words, financial literacy is not
only good for Americans because it allows them full
participation in society, but financial literacy is also
essential for business, the economy, the country, and in this
age of globalization, the world.
Thank you very much for this opportunity to be here.
[The prepared statement of Ms. Lusardi follows:]
Prepared Statement of Annamaria Lusardi, Ph.D.
Ms. Chairwoman and members of the Subcommittee on Children and
Families, thank you for the opportunity to speak to you about the
economic importance of financial literacy for students.
I am the director of the Global Center for Financial Literacy at
the George Washington University. As part of my research, I develop
tools for testing financial knowledge, conduct studies into financial
literacy levels, and assess what the results of those studies mean for
the United States.
I am here today to tell you that the vast majority of Americans do
not have the financial knowledge they need to fully participate in the
economy or to make informed decisions about their own financial
futures. This reality has implications for their lives and for the
economic health of the country.
According to the 2009 National Financial Capability Study, only 30
percent of the population can do a simple 2 percent calculation and has
a basic understanding of inflation and risk diversification, concepts
that are important in financial decisionmaking. The second wave of that
study is about to be released. It shows no improvement in the level of
financial knowledge between 2009 and 2012.
Financial illiteracy is not only widespread, but it is particularly
severe among specific groups of the population, including people aged
18 to 25. These youths just out of school and young adults beginning
their careers are less financially knowledgeable than the general
population.
When we focus on high school students, the findings are even more
sobering. Data collected bi-annually by the Jump$tart Coalition for
Personal Financial Literacy show that only 7 percent of high school
students can be considered financially literate.\1\ These statistics
have troubling implications. Studies show that Americans who are not
financially literate are less likely to participate in financial
markets or to invest wisely. They are less likely to save and plan for
the future. At the same time, they are more likely to rely on high-cost
methods of borrowing. This is a serious problem. Remedying it is
difficult, but adding financial literacy to the curriculum in schools
would be a good start. Academic research points to four reasons why we
should launch financial literacy efforts in schools:
---------------------------------------------------------------------------
\1\ See Mandell, Lewis. 2008. Financial Education in High School.
In Overcoming the Saving Slump: How to Increase the Effectiveness of
Financial Education and Saving Programs. Ed. A Lusardi. Chicago:
University of Chicago Press: 257-79.
(1) The first reason stems from the fact that financial illiteracy
is widespread. That means young people with poor financial knowledge
are unlikely to learn from their parents, other adults, or peers. Only
a small fraction of students currently have access to adults and peers
who are financially literate.
(2) The second reason to include financial literacy in school has
to do with equality. A failure to understand financial concepts is
especially prevalent among certain demographics in the population. Data
from the Jump$tart Coalition and other surveys show that white male
students from college-educated families disproportionately account for
the small percentage of students who are financially literate. This is
a distinction that persists over the life cycle. Women, African-
Americans, Hispanics, and individuals with few educational
opportunities continue to display very poor levels of financial
literacy--much lower than their counterparts--at middle age, before
retirement, and into retirement.
This finding is strikingly similar and robust across countries. In
a study that compares financial literacy in eight countries--Germany,
Italy, Japan, the Netherlands, New Zealand, Russia, Sweden, and the
United States--Olivia Mitchell from the Wharton School and I found that
women and those with low levels of education display disproportionately
poor financial knowledge. This is the case at all stages of the life
cycle, from youth to old age.
(3) Another reason to focus on financial literacy in school is that
it is a necessary skill for navigating today's complex world. This is
so evident that the Organisation for Economic Co-operation and
Development (OECD) last year added financial literacy to the topics it
evaluates in its Programme for International Student Assessment (PISA).
Financial knowledge now joins mathematics, science, and reading in
those tests administered to 15-year-olds around the world.
The PISA tests gauge whether students are prepared for future
challenges, whether they can analyze, reason and communicate
effectively, and whether they have the capacity to continue learning
throughout their lives. These assessments are conducted every 3 years
to help us understand if students near the end of compulsory education
have acquired the knowledge and skills essential for full participation
in society. Given these objectives, financial literacy seems to be an
essential addition.
(4) The fourth reason why school is a powerful place to teach
financial knowledge is a simple one: Young people need to understand
how to make wise financial decisions before--not after--they are faced
with life-changing decisions. Most notable among those decisions is
whether or not to invest in higher education. Education beyond high
school has a tremendous effect on future financial security.
At the same time, whether and how to finance higher education has
changed dramatically in recent years. The cost of a college education
has increased rapidly in the United States, surpassing the increase in
both wages and inflation. This means that young people who pursue
degrees often start their careers with substantial amounts of debt.
Some past studies looking into the effectiveness of financial
literacy programs in high school did not find encouraging results. One
study found that students in States that required financial education
scored no better in financial literacy tests than those in States that
did not require financial education.\2\ However, subsequent analyses
concluded that this research was incomplete since it did not account
for course content, test measurement, teacher preparation, and the
amount of instruction, just to cite some of the most important
limitations. When researchers looked more closely at State education
requirements, they found that when students are required to take a
financial education course, they perform much better than students in
States with no such requirements.\3\ Thus, there is evidence that
requiring personal finance education may, in fact, be effective in
increasing student knowledge--but only when it requires significant
exposure to personal finance concepts.
---------------------------------------------------------------------------
\2\ See the discussion in Mandell (2008).
\3\ Tennyson, Sharon and Chau Nguyen. 2001. State Curriculum
Mandates and Student Knowledge of Personal Finance. Journal of Consumer
Affairs 35 (2): 241-62.
---------------------------------------------------------------------------
Other researchers have looked at teacher preparation. They found
that less than one-fifth of teachers were prepared to teach any of the
six personal finance concepts normally included in financial education
courses. Moreover, States requiring high school financial education do
not necessarily provide or promote teacher training. As a result, State
education mandates appear to have no effect on whether teachers take
courses in personal finance, teach the courses, or feel competent to
teach such a course.\4\
---------------------------------------------------------------------------
\4\ Way, Wendy and Karen Holden. 2009. Teachers' Background and
Capacity to Teach Personal Finance: Results of a National Study.
Journal of Financial Counseling and Planning 20(2): 64-78.
---------------------------------------------------------------------------
Other studies attempted to provide a more rigorous framework for
evaluating financial education in high school, recognizing that
students who take financial education courses are not a random sample
of the population of students and test scores might not align with what
is taught in school. In research published in 2010, economics
professors William Walstad of the University of Nebraska-Lincoln and
Ken Rebeck and Richard MacDonald at St. Cloud State University used a
quasi-experimental method to assess a well-designed video course that
covered fundamental financial concepts.\5\ The test was designed to
measure improvements in financial knowledge. These researchers found a
significant increase in the level of personal finance knowledge among
students exposed to financial education, suggesting that conclusions
from earlier findings were premature.
---------------------------------------------------------------------------
\5\ Walstad, William, Ken Rebeck and Richard MacDonald. 2010. The
Effects of Financial Education on the Financial Knowledge of High
School Students. Journal of Consumer Affairs 44(2): 336-57.
---------------------------------------------------------------------------
There is now a great deal of material available to help teachers
and schools add financial literacy into school curricula and to improve
the quality of that education. For example, we have national standards
for financial literacy from the Jump$tart Coalition for Personal
Financial Literacy and, more recently, the Council for Economic
Education. The OECD also issued guidelines for financial education in
high school,\6\ and its International Gateway for Financial Education
serves as a global clearinghouse on financial education, providing
access to a comprehensive range of information, data, resources,
research, and news on financial education issues and programs around
the globe.\7\
---------------------------------------------------------------------------
\6\ Details are found at http://www.oecd.org/finance/financial-
education/48493142.pdf.
\7\ For more information, see http://www.financial-education.org/
home.html.
---------------------------------------------------------------------------
Other countries, such as the United Kingdom, recently added
financial literacy in their schools.
Young people--not only in the United States but also around the
world--face a new economic environment with more complex financial
markets. They will have more individual responsibility in investing in
their own education and in planning for their own financial security
during their working lives and into retirement. And they will be doing
this, among other things, on a global scale.
If they are going to do this well, they must be equipped with the
right tools and skills. Just as it was not possible to contribute and
thrive in an industrialized society without basic literacy--the ability
to read and write--so it is not possible to successfully navigate
today's world without being financially literate.
There is a cornerstone of economic theory: Where you have well-
informed consumers, you will find vigorous competition and efficient
markets. In other words, financial literacy is not only good for
Americans because it allows them full participation in society, but
financial literacy is also essential for business, the economy, the
country and, in this age of globalization, the world.
Thank you for this opportunity. I would be pleased to answer any
questions.
Senator Hagan. Thank you, Dr. Lusardi.
And now, Ms. Cathy Pace, the current president of the
Credit Union Division and recently named CEO of the Allegacy
Federal Credit Union in Winston-Salem, NC.
Ms. Pace.
STATEMENT OF CATHY PACE, PRESIDENT OF THE CREDIT UNION
DIVISION, ALLEGACY FEDERAL CREDIT UNION, WINSTON-SALEM, NC
Ms. Pace. Chairwoman Hagan, Ranking Member Enzi, and
members of the subcommittee, thank you for the invitation to
testify in front of the subcommittee today regarding the
importance of financial literacy education for students. As you
mentioned, my name is Cathy Pace, and I am the president of the
Credit Union Division at Allegacy Federal Credit Union.
Founded in Winston-Salem in 1967, Allegacy has grown to
become one of the largest credit unions in North Carolina,
serving nearly 120,000 members. Today, I will share with you
information on two programs Allegacy supports, the Student Run
Credit Union Program and the Center for Smart Financial
Choices.
In a struggling economy, the need for financial literacy is
emphasized as millions in our State and across the country
struggle to make ends meet. Recent statistics state that half
of all Americans are living paycheck to paycheck, and 40
percent of Americans say they live beyond their means.
Fewer and fewer American youth are entering adulthood
having learned the value of a dollar. This is an age-old saying
that is falling on deaf ears, because we, as parents,
educators, and financial stewards, are allowing it to happen.
As member-owned financial institutions and cooperatives, it is
in the interest of credit unions to have members that are
financially literate.
Therefore, credit unions engage in a wide variety of
efforts aimed at ensuring that members of all ages have access
to resources that help them make smarter financial choices.
North Carolina credit unions demonstrate their commitment to
financial literacy by providing financial counseling and
education to more than 500,000 North Carolinians every year.
At Allegacy, our professionals are playing a lead role in
addressing this problem. We partnered with the Winston-Salem/
Forsyth County School District and established the Allegacy
Student Run Credit Union Program. The program provides students
with real-world financial experience and the necessary skills
for financial responsibility.
Allegacy's first student-run credit union opened in August
2008 at Reagan High School, the first student-run credit union
at the high school level in the State of North Carolina.
Allegacy currently operates student-run credit union branches
in seven of our high schools across the school district with
1,354 members.
The student-run branches allow students, parents, and
faculty to enjoy the benefits and convenience of conducting
their banking needs right on campus and offer a unique way for
students to learn the responsibilities of handling cash,
confidentiality, professionalism, computer skills, and
marketing. The students staffing the branches receive classroom
education required by the State's Business Advanced Studies
Program. They are trained and supervised by professional staff
and attend a 3-day training session at Allegacy that prepares
them for the roles of customer service assistance and member
service representatives.
These students participate in the traditional audit process
of a full service, freestanding credit union and build
executive, marketing, and business plans to grow their
location, membership base, and transaction activity. In
addition to developing valuable life skills, students receive
community service credit as well as high school class credit
for their participation.
The second program I'd like to speak to you about today is
our financial literacy efforts for students and the broader
population. Allegacy recently established the Center for Smart
Financial Choices to be a trusted, reliable, and partial source
of financial information and training. The creation of the
center adds a new dimension to financial education, focusing
its curriculum on a broad range of courses offering something
for every age or life stage.
The center's unique and creative model uses a variety of
tools to accommodate different learning styles. Financial
wellness guides assist students through the use of technology,
individual and group instruction, visual aids, as well as
hands-on activities. All courses offer a periodic review and
adjustment component to ensure the application of the student's
knowledge.
Instruction is also provided after traditional work hours,
at varying times of the day for shift workers, and includes
Saturday classes. The center's volunteer staff is comprised of
over 85 percent of Allegacy employees who provide expertise and
curriculum content and teach the courses made available to the
public.
These are just a few of the examples of the center's
program. We have a class titled Surviving in the World of Debit
and Credit, which was created for approximately 30 economically
disadvantaged youth ages 9 to 14. Also, we begin with grade
levels fourth and fifth, and the center educates these students
in order to understand market economy and the importance of
developing a personal budget.
And, finally, the Youth Financial Planning Council works
with teens who are helping other teens to cover the topics of
budgeting, saving, spending, and credit. Our efforts extend to
all age groups and ensure our young adults have the resources
necessary. The National Credit Union Foundation also
complements and supports the coordination of the financial
literacy efforts of the credit union system, cementing these
efforts as a key part of the credit union philosophy of people
helping people.
Chairwoman Hagan, Ranking Member Enzi, and the members of
the subcommittee, I would like to thank you for allowing us to
be here today.
[The prepared statement of Ms. Pace follows:]
Prepared Statement of Cathy Pace
Chairman Hagan, Ranking Member Enzi, members of the subcommittee,
thank you for the invitation to testify in front of the subcommittee
today regarding the importance of financial literacy education for
students. I appreciate you taking the time to hear my testimony. My
name is Cathy Pace, and I am president of the credit union division at
Allegacy Federal Credit Union. Founded in Winston-Salem in 1967,
Allegacy has grown to become one of the largest credit unions in North
Carolina with over $1 billion in assets and nearly 120,000 members.
In a struggling economy the need for financial literacy is
emphasized as millions in our State and across the country struggle to
make ends meet. Recent statistics state that half of all Americans are
living ``paycheck to paycheck'' and 40 percent of Americans say that
they live beyond their means. Fewer and fewer American youth are
entering adulthood having ``learned the value of a dollar.'' This age-
old saying is falling on deaf ears, because we as parents, educators,
and financial stewards are allowing it to happen.
Federal Reserve Chairman Bernanke has said,
``Consumers who can make informed decisions about financial
products and services not only serve their own best interests,
but, collectively, they also help promote broader economic
stability.''
Financial education ``can play a key role'' in promoting financial
planning such as budgeting and saving for emergencies and retirement,
which will help households live better and be better positioned to
handle financial shocks according to Chairman Bernanke. And, in
coordination with parents and educators, financial institutions can
play a vital role toward increasing the financial literacy rate of
America's youth and young adults.
For credit unions, financial literacy is part of our key mission.
Credit unions were established to promote thrift and provide access to
credit for provident purposes. As member-owned financial cooperatives,
it is in the interest of credit unions and their memberships to have
members that are financially literate; therefore, across the country,
credit unions engage in a wide variety of efforts aimed at ensuring
that members of all ages have access to resources that help them make
smarter financial choices. North Carolina credit unions demonstrate
their commitment to financial literacy by providing financial
counseling and education to more than 500,000 North Carolinians every
year. At Allegacy, our professionals are playing a lead role in
addressing this problem.
The importance of financial literacy education early on in a young
person's life cannot be overstated. According to Hartford Financial
Services Group, less than 24 percent of students and only 20 percent of
parents say students are prepared to deal with the financial challenges
that await them in the real world. Seventy-six percent of students
report that they wish they had more help preparing for their personal
finances.
In an effort to combat these grim statistics, Allegacy has
partnered with the Winston-Salem/Forsyth County School District and
established the Allegacy Student Run Credit Union (SRCU) Program. The
purpose of the program is to provide students with the real world
experience of handling their own finances and the necessary skills for
financial responsibility. Allegacy's first SRCU opened in August 2008
at Reagan High School-Raider Student Credit Union, with the distinction
of being the first SRCU at the high school level in the State of North
Carolina. Allegacy currently operates student-run branches in seven
high schools across the school district with 1,354 members. Allegacy
intends to continue expanding this successful model to neighboring
counties.
The student-run branches are open 3 days a week during lunch for
students, parents, and faculty to open new accounts, make deposits,
withdrawals and transfers. Students can access their accounts if they
need money for lunch or to deposit their paycheck if they have a part-
time job. Teachers and staff can take care of basic transactions
without leaving their place of employment. The student-run branches
allow everyone to enjoy the benefits and convenience of conducting
their banking needs right on campus and offer a unique way for students
to learn the responsibilities of handling cash, confidentiality,
professionalism, computer skills and marketing.
The students staffing the branches receive classroom education as
required by the North Carolina Public Schools' Business Advanced
Studies Program and are trained and supervised by professional staff.
The students are also required to attend a 3-day training session at
Allegacy in order to prepare them for the roles of Customer Service
Associate (CSA) and Member Services Representative (MSR). These
students participate in the traditional audit process of a full-
service, free-standing credit union location. They also build and
execute marketing and business plans to grow their location's
membership base and transaction activity. In addition to developing
valuable life skills, students receive community service credit as well
as high school class credit for their participation.
In continuation of our efforts on early financial literacy
education for students and the broader population at large, Allegacy
recently established the Center for Smart Financial Choices to be a
trusted, reliable, impartial source of financial information and
training. The creation of the Center adds a new dimension to financial
education, by focusing its curriculum on a broad range of courses that
will offer something for every age or life stage.
The Center's unique and creative model will use a variety of tools
to accommodate different learning styles. Financial Wellness Guides
will assist students through the use of technology, individual and
group instruction, visual aids and hands on activities. All courses
will offer a periodic review and adjustment component to ensure the
application of the students' knowledge. Instruction will be provided
after traditional work hours, at varying times of the day for shift
workers and will include Saturday classes.
The Center's volunteer staff is comprised of over 85 percent
Allegacy employees who provide expertise and curriculum content as well
as teach the many courses made available to the public. For example,
the partnership with Winston-Salem/Forsyth County Schools Exceptional
Children's Division created a comprehensive educational class on
banking and making personal financial choices that was held on May 16,
2012 with 12 students with developmental disabilities. The Center was
also asked by ED-CORE 21st Century Leaders and Scholars Program to
design a financial education program that would be unique, creative and
engage youth. As a result, a class titled ``Surviving in the world of
debit and credit'' was created for approximately 30 economically
disadvantaged youth ages 9-14 in July 2012.
In August 2012, the Center began its partnership with the Winston-
Salem/Forsyth County Schools District to serve as an educational
outreach resource in providing real world application of financial
education following standards set out by North Carolina. Beginning as
early as 4th and 5th grade, the Center educates students in order to
understand scarcity and choice in a market economy, as well as the
importance of developing a personal budget for spending and saving.
When students reach the junior high level, they learn the economic
activities of modern societies and regions, and later, the economic
activities of North Carolina and the United States. After these
students have acquired this vital information in their earlier years,
they are then challenged to analyze the concepts and factors that
enable individuals to make informed financial decisions for effective
resource planning.
More recently, the Center has engaged in various initiatives aimed
at enhancing financial literacy among all age groups. The Center
conducted a workshop for 30 young people ages 16-21 from the Northwest
Piedmont Workforce Investment Act Elink Youth Program titled ``It's
Your Money,'' to learn about the importance of saving money and how to
get and keep good credit. The Center has presented to students on the
basics of banking transactions and has led financial education field
trips in order to learn the differences between credit unions and
banks. In addition, the Center has assisted in the organization of the
Youth Financial Planners Council with 12 teens who are creating a class
for other teens to cover the topics of budgeting, saving, spending and
credit. The Center has partnered with an after school club for girls in
grades 3-5 for students to learn how ``money doesn't grow on trees.''
The Center has even held family events for parents and children ages 5-
7 to learn about spending, saving, and sharing.
As you can see, our efforts extend to all age ranges, in order to
ensure our youth have the resources necessary to succeed when they
reach adulthood. These examples are only a promising start to what
Allegacy views as a long lasting relationship between existing and
future members of the credit union movement.
In closing, I would note that while we are very proud of the
efforts we are making in our community to encourage financial literacy,
credit unions across the country are engaging in similar efforts. The
National Credit Union Foundation supports and helps coordinate the
financial literacy efforts of the credit union system, cementing these
efforts as a key part of the credit union philosophy of ``people
helping people.''
Chairwoman Hagan, Ranking Member Enzi, and members of the
subcommittee, I would like to again thank you for inviting me here
today for the opportunity to testify on the importance of financial
literacy education. I appreciate your consideration on these matters
and for recognizing that financial literacy is best applied early on in
a young person's life. I look forward to progress being made on this
very important component of our next generation's financial well-being.
I am happy to answer any questions you may have.
Senator Hagan. Thank you very much, Ms. Pace.
And our final witness today is Cy Richardson, vice
president of Housing and Community Development at the National
Urban League.
Mr. Richardson.
STATEMENT OF CY RICHARDSON, VICE PRESIDENT, HOUSING AND
COMMUNITY DEVELOPMENT, NATIONAL URBAN LEAGUE, NEW YORK, NY
Mr. Richardson. Good afternoon, Chairwoman Hagan, Ranking
Member Enzi, and members of the Subcommittee on Children and
Families. My name is Cy Richardson, and I am the vice president
for Housing and Community Development, as you said.
I appreciate the opportunity to share the National Urban
League's views on financial education as a key driver in
developing sound decisionmaking among youth. We understand that
improved decisionmaking is an important and under-appreciated
component in narrowing the racial wealth gap in America.
Heightened awareness and measuring changes in financial
decisionmaking and other forms of behavior modification has
produced a diverse array of education programs and targeted
strategies. And while some see the most accessible group as
high school students, undeniably, K through 12 school-based
programs can provide a vehicle for delivering relevant
financial education and life skills training to a broad captive
audience. And, further, learning financial responsibilities and
concepts early in life can certainly help our youth before they
get into financial trouble.
If not during the school day or via a well-structured
after-school program, where, we ask, are children living in
poverty, children of color, and children living in rural
localities supposed to learn such things? Particularly, survey
data, as was previously referenced, also suggest that their
parents and peers are unlikely to have all the answers.
One solution is outlined in the Project Ready STEM Act,
H.R. 1343, introduced in the House by Representative Marcia
Fudge. It is designed to authorize a funding stream to support
an evidence-based model designed by the National Urban League.
Project Ready STEM is an Urban League Signature Program
developed to support students' successful completion of STEM-
related course work and expose them to STEM-related career
options.
This year, we are seeking to develop a financial literacy
and asset building component to the program. Asset building
programs enable participants to develop savings behavior and
build assets to reach lifelong goals, while financial education
programs impart financial skills and knowledge among
participants. Although asset building programs are critical to
youth's economic success, many of our affiliates have found
that these programs are most effective when coupled with
financial education and one-on-one financial counseling and
coaching.
Beyond the common sense push to embed and scale fundamental
financial literacy principles and techniques in primary and
secondary school-based platforms, we believe additional
tactical methods must be employed to improve financial
literacy, financial capability, and financial education in the
United States. For example, the nonprofit sector must be more
deeply engaged in partnership across a number of integrated
service delivery dimensions.
These organizations, such as the Urban League, are regarded
with trust in the community and can serve to moderate and
quantify the client experience. In this regard, we would
support an initiative targeting partnerships with nonprofit
consumer advocacy and community-based organizations to create
free materials, outreach, and training similar in scope and
field to the successful Bank On and America Saves campaigns.
Moreover, as the government's role is to catalyze
innovation and identify the key architects of change within a
given policy sphere, community partners must be supported with
ongoing financial support to allow us to fully participate in
the national financial literacy dialog and discourse. This
involves bringing together stakeholders to further develop and
coordinate existing financial education programs and materials
and increasing awareness of success stories, best practices,
and key incentives for teaching financial literacy.
The racial wealth gap, fed, fueled, and exacerbated by deep
information deficits in low income and communities of color,
must be addressed, must be addressed. The National Urban League
will continue to focus on and confront this inequality as a
civil rights issue in terms of its social effects and
historical causes.
Additionally, a commensurate level of national focus and
resources must be targeted toward solutions in order to break
this vicious cycle. Given the increasingly complex world of
modern personal finance, a new push must be made now to ensure
youth are ready for the challenge.
Thanks very much for the opportunity to share our views.
[The prepared statement of Mr. Richardson follows:]
Prepared Statement of Cy Richardson
Good afternoon Chairwoman Hagan, Ranking Member Enzi and members of
the Subcommittee on Children and Families. My name is Cy Richardson and
I am the vice president for Housing and Community Development at the
National Urban League. I appreciate the opportunity to share the
National Urban League's views on financial education as a key driver in
developing sound decisionmaking among our youth. We understand that
improved decisionmaking is an important and underappreciated component
in narrowing the racial wealth gap in America.
Implicit in the title of this hearing and embedded at the heart of
the matter is an acute understanding that in today's demanding
financial environment, consumers confront complicated financial
decisions at a young age. Therefore, any financial mistakes made early
in their consumer life can prove to be extremely costly and have
lasting deleterious effects. Understanding the factors that contribute
to or detract from the acquisition of financial knowledge can help
policymakers design effective interventions targeted at this Nation's
youth. Young people often find themselves carrying large amounts of
student loans or credit card debt, and such early entanglements can
hinder their ability to ultimately establish credit worthiness,
accumulate wealth, and gain economic empowerment. For the National
Urban League, the financial literacy imperative is deeply rooted in a
broader dialog concerning this country's rapidly expanding racial
wealth gap.
The National Urban League Equality Index of Black America shows
that the median net worth of African-American families was $4,955--22
times less than the $110,729 median net worth of white American
families.\1\ This disparity has been referred to as the racial wealth
gap, and it has been growing exponentially since the 1980s. More
granular data analysis looking specifically at the status of African-
Americans indicates that the need for financial literacy is alarming.
Anecdotal evidence culled from the collective experience and
familiarity of Urban League affiliates across the country suggests that
many African-Americans continue to struggle developing a working
knowledge of personal money management concepts and practices. Deeply
exacerbated by the Great Recession, African-Americans generally
experience the following:
---------------------------------------------------------------------------
\1\ 2013 Equality Index of Black America, 2013 State of Black
America, Redeem the Dream, Jobs Rebuild America, National Urban League
(2013), p. 34.
Higher debt delinquencies than any other ethnic group.
Comparatively lower savings.
A lower home ownership rate than any other ethnic group.
A greater incidence of home foreclosure than any other
ethnic group.
A greater incidence of predatory lending practices.
A greater incidence of higher cost auto/consumer loans.
Compounding this matrix of disproportionality are surveys which
indicate that many African-Americans do not have a working knowledge of
how to accumulate wealth to establish a financial legacy. This
vulnerability is particularly striking considering that nearly one-
third of older African-Americans rely on Social Security for 90 percent
of their family income. Moreover, the Joint Center for Political and
Economic Studies' 1998 and 2009 polls indicate that 35 percent of
African-Americans expect to receive a major portion of their retirement
income from Social Security, and 29.2 percent receive it from employer-
sponsored pension plans. Additionally,
as shown in our 2013 Equality Index of Black America, 27.8 percent of
African-Americans compared to 36.9 percent of Whites invest in a 401(k)
plan, and 10.1 percent of African-Americans compared to 25.6 percent of
Whites invest in an IRA.\2\ Despite these dire data points we believe
that wealth disparities can be narrowed through financial literacy--
particularly when embedded or integrated within existing societal
structures and trusted institutions.
---------------------------------------------------------------------------
\2\ 2013 Equality Index of Black America, 2013 State of Black
America, Redeem the Dream, Jobs Rebuild America, National Urban League
(2013), p. 34.
---------------------------------------------------------------------------
The African-American community reflects a wide range of socio-
economic backgrounds, yet common linking variables exist which reveal
deep insecurities around personal money management habits and a lack of
familiarity with and exposure to the systems and mechanisms typically
employed to build and sustain wealth in this country. Nevertheless, the
acquisition of financial knowledge--heightened financial acumen and the
confidence that it engenders--does not eliminate the invisible barriers
or discrimination that exist in the marketplace. Such knowledge,
however, can serve as a moderator in which persons are equipped to
become aware of the function of financial transactions and personal
money management concepts so that they will not be taken advantage of
and know how to efficiently and effectively utilize their financial
resources. Notwithstanding these points, the racial wealth gap is a
profound and significant problem that impacts people of color on a
daily basis and limits opportunities for long-term wealth building. The
National Urban League's contribution at today's hearing is therefore
geared toward recognizing the structural impediments or barriers to
financial empowerment in communities of color, while emphasizing and
identifying public policies that can help narrow the wealth gap.
As members of the subcommittee are aware, the lack of sustainable
employment and income in communities of color makes it extremely
difficult for households to consider saving and/or investing in
themselves. In addition, the foreclosure crisis has devastated minority
households' primary source of wealth, home ownership, and has
destabilized household balance sheets and greatly set back the decades
of progress communities of color had made to improve individual and
collective economic mobility. Most troubling is that young people of
color from low-income and low-wealth families face difficult decisions
for their college education, which often equates to high levels of debt
or no college at all. In our judgment, this must be a major touchstone
for this hearing on ``The Economic Importance of Financial Literacy
Education for Students.''
As our understanding of these seemingly intractable challenges
evolves, the National Urban League and its network of 96 affiliates
remain committed to experimenting and prototyping programmatic and
policy solutions. A key strategy that deserves greater public and
private sector scrutiny and investment is the tethering of asset-
building and financial education programs, which can contribute
significantly to young people's economic success and financial well-
being. Indeed, this is a solution that we have proposed as part of our
initial research for the Reimagining Aid Design and Delivery (RADD)
project for the Bill and Melinda Gates Foundation.\3\ The RADD project
provided us with a unique opportunity to build upon our direct services
work to directly assess the attitudes, experiences and ideas of those
we serve in order to understand how we can continue to best promote the
attainment of a meaningful degree or certification that will allow
black post-secondary students to gain economic empowerment. This is
important due to the high usage of student loans by African-American
students.
---------------------------------------------------------------------------
\3\ Education Transforms Lives: Post-Secondary Affordability Survey
& Focus Groups, National Urban League Policy Institute, 2013, see at:
http://www.iamempowered.com/article/2013/04/02/nul-radd-project.
---------------------------------------------------------------------------
Another solution is outlined in the Project Ready STEM Act (H.R.
1343), introduced in the House by Representative Marcia Fudge, and
designed to authorize a funding stream to support an evidence-based
model designed by the National Urban League. Project Ready STEM is an
NUL ``Signature Program'' \4\ developed to support students' successful
completion of STEM-related coursework and expose them to STEM-related
career options. This year we are seeking to develop a financial
literacy component to this program. Asset-building programs enable
participants to develop savings behavior and build assets to reach
life-long goals while financial education programs impart financial
skills and knowledge among participants. Although asset-building
programs are critical to youth's economic success, many of our
affiliates have found that these programs are most effective when
coupled with financial education and one-on-one financial coaching.
---------------------------------------------------------------------------
\4\ The National Urban League Signature Programs are those models
that are based on best practices gleaned from experimentation across
affiliates, data analysis and research. Our Signature Programs are the
models which we attempt to scale across the movement via subgranting
and additional supports to affiliates.
---------------------------------------------------------------------------
Financial education, especially for economically vulnerable
families, is an important part of an asset-building agenda for the
Urban League. Increasingly, our affiliates are linking financial
education programs to tax refunds, buying a home, required registration
for pensions, participation in welfare programs, and other key
teachable moments. Yet, while financial education programs have
proliferated in recent years, targeted research is necessary to learn
about the actual benefits of such programs and to insure that they are
well structured. Generally, we expect that educated consumers are more
capable of making sound financial decisions to increase their families'
economic security and, in turn, contribute to community economic
development. The idea is to teach individuals and families not only to
accumulate savings, but also to manage their assets.
Increasing interest in financial literacy has produced a diverse
array of education programs and targeted strategies. Some see the most
accessible group as high school students. Undeniably, school-based
programs can provide a vehicle for delivering relevant education to a
broad, captive audience. Further, learning financial responsibilities
early in life can help our youth before they get into financial
trouble.
Some researchers and educators believe the United States should
have a more comprehensive approach to the delivery of financial
education and training. Others argue that differences in the needs of
various target groups might make standardizing the curricula
counterproductive. Our organization has observed that program
objectives and key topics are often similar across programs. The
standards developed for school-based financial education programs show
that students are expected to learn about income sources, money
management, spending and credit, and saving and investing. Achieving
the standards requires students to know how to budget, to understand
the role of insurance, to see the value of savings, to recognize the
high potential costs of credit card debt, and to appreciate the risk-
return tradeoffs that arise when investing in various financial and
nonfinancial assets. If not during the school day, or via a well-
structured afterschool program, where are the children living in
poverty, children of color, and children living in rural localities
supposed to learn such things--particularly as survey data also
suggests that their parents are unlikely to have all the answers?
Beyond the common-sense push to embed and scale fundamental
financial literacy principles and techniques in primary and secondary
school-based platforms, we believe additional tactical methods must be
employed to improve financial literacy and financial education in the
United States. For example, the non-profit sector must be more deeply
engaged in partnership across a number of integrated service delivery
dimensions. These organizations are regarded with trust in the
community and can serve to moderate and quantify the ``client
experience.'' In this regard we would support an initiative targeting
partnerships with nonprofit consumer advocacy and community-based
organizations to create free materials, outreach and training.
Moreover, as the government's role is to catalyze innovation and
identify the key architects of change within a given policy sphere,
community partners must be supported with ongoing financial support to
allow us to fully participate in the national financial literacy
agenda. This involves bringing together stakeholders to further develop
and coordinate existing financial literacy programs, and increasing
awareness of success stories, best practices and key incentives for
teaching financial literacy.
According to the Corporation for Enterprise Development (CFED),
over 1.3 million American children born each year--and more than half
of minority children--are born into families with negligible savings to
invest in their futures. Working with CFED and other non-profits in a
national collaborative known as the Asset Building Policy Network has
afforded us, here at the National Urban League, the critical
understanding that family ownership of even a few thousand dollars in
assets can give children not only a measure of economic security, but
also a transformative sense of possibility and hope for the future. We
believe platforms that ally assets and knowledge building such as child
savings accounts offer an attractive cross-sectorial strategy to
eradicate poverty and narrow the racial wealth gap.
The widened wealth chasm has major ramifications for the country
going forward. Having less wealth and diminished home equity means it
will be more difficult for African-Americans to send their children to
college or to another post-secondary educational institution that are
key to gaining economic empowerment. The National Urban League will
continue to focus on and confront this inequality as a civil rights
issue in terms of its social affects and its historical causes.
Additionally, a commensurate level of national focus and resources must
be targeted toward solutions in order to break this vicious cycle.
Given the increasingly complex world of modern personal finance, a new
push must be made now to ensure youth are ready for the challenge.
Thank you for the opportunity to present our views.
Senator Hagan. I want to thank all of our witnesses today
for your opening comments. And Senator Enzi said he was
incredibly impressed that everybody stayed on time. So kudos to
all of you. We now want to move to some questions.
Ms. Pace, again, thank you for coming today. I want to ask
you about one of the topics you talked about in your opening
statement, and that is the student-run credit unions, which I
think is a unique model for teaching students about effective
money management.
I've had the pleasure of visiting two of the student-run
credit unions, one in Mount Tabor High School--I was there in
2010--and another one in Glenn High School in 2009. And it was
an exciting day. The ribbon was cut. The students were
involved, and they were opening up their own credit union space
in their school.
I understand, as you said, I believe, in your testimony,
that you now have--is it seven or nine?
Ms. Pace. Seven.
Senator Hagan. Seven different high schools. If you could
go over a few things with me, how many of the students are
involved, and how many have gone through the program since it
began? And I think you had one comment of 1,354.
Ms. Pace. We have a total number of members involved in the
student-run credit union--this is the ones who have actually
joined--of 1,354. The total number of students who have
participated in the overall program since 2008 is 300 students.
We currently have 82 students in this school year participating
in seven of the schools and 41 in this semester alone.
Senator Hagan. What are the typical transactions that a
student employee might handle?
Ms. Pace. They can do a withdrawal. They can make a
deposit, transfers. They can open a checking account and a
savings account.
Senator Hagan. Do you have to be affiliated with the school
in some way, either as a teacher, student, or parent of the
student, in order to do your banking through the student-run
credit branch? Or can any of your other members of the credit
union do their banking at a student-run credit union branch?
Ms. Pace. Yes. The staff, the students, and their parents
can participate in the student-run credit union.
Senator Hagan. But not other customers of Allegacy.
Ms. Pace. If we had a visiting person there, and they were
there during the lunchtime hour, which is when the student-run
credit union is open, and they wanted to perform a transaction,
they could.
Senator Hagan. Have you heard from the teachers at the
school that this kind of learning, where students are actually
getting the hands-on experience, has improved their personal
finance skills beyond what's taught in the classroom?
Ms. Pace. Yes. They have an overwhelming response to the
number of students who would like to participate in this. It is
also designated by the teacher who can participate. As I
mentioned, they have to go through a 3-day training process.
And I'd like to leave you with this thought on how
important this is to the students. In 2011, during August, is
when we have our 3-day training program. We had a young man,
age 16, who was a high school student who participated in this
and had just been elected to work as a student-run
representative. It was time for the training at our Allegacy
site.
When he got to the credit union headquarters, he walked in.
It was an August day. The temperature was 90-plus degrees. This
young gentleman walks in, and he's completely wet with
perspiration, but he's also carrying a change of clothes.
When he got there, he told us that his ride did not show up
to bring him to the training. This was very important to him
because he knew he could not participate in running one of the
student-run credit unions if he did not get the training. But
he also knew that because it was such a hot day, he brought a
change of clothes so that he would be presentable. And he
walked four and a half miles to do this.
That's telling us how important it is for our young adults
to have financial literacy, to be able to participate in a
program like this that's going to help them in their future.
Senator Hagan. And it's a 3-day training program?
Ms. Pace. A 3-day intense training from our professionals.
Senator Hagan. Is that an 8-hour day?
Ms. Pace. Yes, ma'am.
Senator Hagan. That's great. One thing I hesitated to say
was the length of time, and I want to say 5 or 6 minutes for
our questions.
Ms. Lipp, thank you, too, for coming today, and we also
welcome your husband. From your statement today, it sounds like
your budget project has had a real impact on student lives,
their ability to properly budget, their spending and saving.
How long have you been running the budget project? How many
students have completed it?
And I understand that this project has become quite well
known around the high school and in the community. Do people
outside the school now expect your students to come and
interview them? I think you said in your opening testimony that
they have the pictures taken, and they have them in their file.
Has the project had a greater effect than just on your
students?
Ms. Lipp. Yes to all. I started in 2005, and I teach
approximately 90--depending on the type of schedule--90 to 150
kids a year, something like that. All of my students who took
civics and economics--I tell them they're forced to do it, but
they were told that they had to do it. What was interesting is
that I can probably count on one hand the number of students
who have been assigned the project who didn't do it. So almost
every time, I got every project back from them, which is
amazing.
In the community, it started becoming known when my
students would go out to the banks. The kids would tell me when
they came back, ``Oh, you know, the banker knew who I was.
You're from Ms. Lipp's class. Sit down and we'll talk.'' And so
they got to know me indirectly.
This year, I got a grant for $20,000 for my school to get
iPads in the classroom, and it was hosted by Discover Card. It
was a financial literacy grant. And we started implementing the
stock market game.
In the school that I work at now, because it is a title I
school and mobility tends to be an issue for some of my
students, the budget project is a little bit more difficult to
put in, because a lot of times my students have to work after
school. And if I can't fit it into the actual day-to-day, the
parts of the project, they're probably not going to do it at
home.
So we've kind of had to shift away from the budget project
a little bit right now, which is why the iPads were such an
integral part of this grant so that they're now going to have
access to start doing it in the classroom, and we're waiting
for WiFi to get put up out in my trailer park that I'm in. So,
right now, they don't entirely work, but they work inside this
campus.
We started working with the stock market game for the first
time and worked with the North Carolina Council on Economics
Education. Now the kids participate in the stock market game.
And if you're not aware of how it works--are you aware of the--
OK. It functions with real-time stocks, and it's amazing for
the kids. They can buy and sell whatever they want to buy. And
it's been proven to increase math scores.
When we first started playing last semester, they wanted to
buy Apple, and they couldn't afford it because it was $800 a
share at that time. And they were saying, ``Why can't I buy
this? Why can't I buy this?'' Then they decided they wanted to
go the other way and start trying to buy penny stocks and
dollar stocks in hopes that it would get better. But the stock
had to be a minimum of $5 in order for them to buy it.
They had to do the research and go onto Google Finance.
And, suddenly, the kids that I work with at my school,
Garinger, who are predominantly low income and are on free or
reduced lunch rates, are suddenly starting to talk about what
the value of Target is and the value of all of these other
companies.
And they're starting to do the math, and they're sort of
fighting with each other, saying, ``No, we can't buy that,''
because they were on teams of three to five. And they're
arguing with each other----
Senator Hagan. Ms. Lipp, I am running out of time.
Ms. Lipp. Sorry.
Senator Hagan. We have some other questions, so just wrap
it up in about----
Ms. Lipp. OK. But all of this has been used to implement
it, and the kids are excited. At this point there's probably
been 500 kids who have been affected by it.
Senator Hagan. Thank you.
Senator Franken.
Statement of Senator Franken
Senator Franken. Thank you, Madam Chair, and thank you for
your leadership on this issue. Financial literacy is so
important in so many ways, and I really believe it needs to be
taught in school. I know that we're seeing the OECD countries
doing it. I don't how anyone cannot look at our economy as a
whole and not consider that the financial literacy of the
people in the country is important to our economy. And school
is a place to start it, at least.
Dr. Lusardi, in your testimony, you talked about the
importance of students understanding how to make wise financial
decisions as they consider whether and how to invest in higher
education. One thing they need is good information. Currently,
the financial aid award letters that students and parents get
from colleges can be very confusing.
I've looked into this, and, very often, letters don't even
list loans as loans. They come under awards, an awards letter,
and you have something that's listed with some code, and you
don't know what it is. I put forward a bill called
Understanding the True Cost of Education, which would require
schools to have a uniform award letter so that every school
uses the same terms and uses the same designations for the same
scholarships or loans.
Can you speak to the importance of this kind of thing to
students today?
Ms. Lusardi. Thank you very much for your initiative. I
think it's critically important, of course, to simplify, to
provide information in a way that is easily accessible,
particularly in a moment in which we are putting the young
people in charge, not just of choosing their college or whether
to go to a college, but also how to finance that college
education. And I think given the amount of that that the young
people have to take up, this is incredibly important.
I think initiatives like simplification are incredibly
important. But I really do want to urge as well to think of,
indeed, empowering the young people to make decisions and to be
able to make choices and wise choices throughout their
lifetime. So the college is probably one of the most important
decisions they are going to make at that age, but there are
others as well. Equipping those individuals to make those
decisions is very, very important.
We certainly have to operate in many directions, from
having equipped students to have the skills to make those
decisions to also providing information that can be easily
accessible, that can be compared. And I think in this era of
technology, as well, we have certainly a lot of ways in which
the student can be helped in these very important decisions.
Senator Franken. Thank you. It's obvious that what we're
talking about are life skills. When I was in junior high and
high school, we used to have Home Economics for the girls and
Shop for the boys. And in Shop, I remember making a spice rack,
and in Home Ec, I remember the girls baking cakes. Thank God
those days are gone.
There's nothing wrong with a cake or a spice rack. But it
seems to me that when you're talking about financial literacy,
it is an important skill to be taught. And this is thrown open
to all of you. There are certain life skills that need to be
taught, and part of our question here is how to work this into
the curriculum.
It seems to me there are certain life skills that could
either be part of the same curriculum or not. For example, look
at health. My daughter runs the after-school programs at three
DC elementary schools. Cooking is part of the after-school
program, because nutrition is so important to your health, and
cooking is so important to nutrition.
And there are now generations of families that haven't
cooked. They haven't cooked for generations. For dinner, they
literally will go to a Super America and get a hot dog and a
soda, a pop, because they haven't cooked.
What configurations of curricula do you see? How do we
teach these things, physical exercise, physical fitness, all of
these basic life skills that would bring down our healthcare
costs, that would help our economy, on and on? How do you see
them fitting into a curriculum for K through 12?
Ms. Lusardi. I'm going to take this question quickly, but
we have an educator, so I'm happy also to hear what she thinks.
But I just want to say I think I'm happy that the word, Home
Economics, is dropped, because I think we really need to
associate the words of financial literacy with every girl's
subjects. Perhaps part of its ineffectiveness is due to the
fact that often what we teach in school are kind of simple
rules, how to balance a checkbook, and I think we need to move
away from that.
We need to empower people to make decisions. The world is
going to change very fast. In my view, one of the reasons why
there has been so much resistance in adding it in the high
school, is because they were thinking it's like woodwork, that
people can learn with practice, or they can learn by others.
There are actually a lot of scientific concepts behind
financial literacy. We can add it to all the courses in the
school from math to science to history to English. So if the
curricula are crowded, we can find a place for that. It really
does belong, because I think it really is based on very
important scientific concepts, and you need to consider that
and not just some skill that really belongs to an after school.
Senator Franken. I think it's easy to see how financial
literacy could be worked into a math curriculum. And I know I'm
over my time, but Ms. Lipp seems to want to answer.
Ms. Lipp. I'll be very short. Being an educator, we are
held to so many standards, and we have tests, and we have
Common Core. In civics and economics in North Carolina, we have
a personal financial literacy piece, and it's great. This is
the first year that it's being tested. This is the first year
you're seeing a panic. How are we going to teach it? How are we
going to get there?
I've been working with the North Carolina Council to get
that training in teachers' hands. Truthfully, the ideal way
would be to start implementing it in kindergarten, first grade,
second grade, third grade, and it aligns perfectly with the new
Common Core standards that are coming about, because it's all
application.
So you can take kindergarten math and have them apply what
they're learning with financial literacy. That's how I would
see it. I also completely agree with what you're saying about
the nutrition and health. A life skills class in high school--
to go back to that, we have a garden at my high school, and our
kids grow their own produce, and they sell it at the farmer's
market. And what about integrating more gardening--I mean, it
goes together. Financial literacy can go anywhere, ideally, K
through 12. If not, a high school life skills class would be a
great idea as well.
Senator Franken. Thank you, Madam Chair.
Senator Hagan. Thank you.
Senator Murray.
Statement of Senator Murray
Senator Murray. Thank you very much, Senator Hagan, for
holding this really important hearing. I think that financial
literacy is a crucial issue, one that I've worked on for a very
long time, and a hearing is really overdue on this subject.
One of the most troubling things that we learned from the
foreclosure crisis that we lived through was how many
homeowners simply lacked the basic skills they needed to make
good financial decisions. And, as a result, a lot of homeowners
signed mortgages that they didn't understand, and too many were
taken advantage of by predatory lenders, and we know what that
did to our entire country's economy.
I really am a believer that we need to do a lot more
education for people in financial literacy, both in K through
12 and for adult learners who haven't gotten those skills yet,
either. I'm surprised at how many of our K-12 schools don't
have any kind of basic financial literacy program even today.
I think it's really crucial as a country. Since 2008, when
we were in the middle of the crisis, I started introducing
legislation every year called the Financial and Economic
Literacy Improvement Act to invest some resources into personal
financial education programs in K through 12 and addressing the
problems adults were facing. I really do appreciate you having
this hearing and look forward to the members of this committee
taking this on.
I remember distinctly sitting in front of a group of
teachers at the time, 4 or 5 years ago, and talking about how
some kids don't even know how to balance their checkbook. And I
kind of saw this crestfallen look among the teachers, and I
said, ``How many of you balance your checkbooks?'' It was about
two. So we need adults to also get this education.
I wanted to ask all of you--I've seen some statistics
showing that most educators who teach financial literacy
courses don't even have any formal training or professional
development. If we were talking about science or math, that
would be unacceptable. So can one of you talk about the
importance of training and the kinds of training that is most
effective for teachers?
Mr. Biggs, we could start with you.
Mr. Biggs. Thank you, Senator Murray. As I mentioned in my
testimony, Jump$tart collaboration is the key element to why
we're successful. We find all those instructors and all those
parties interested in financial literacy, supporting financial
literacy.
The annual Jump$tart Teacher Training Conference is put on
in collaboration with NEFI, the National Endowment for
Financial Education. This conference put on every year here in
DC as well in the fall is dedicated to putting out the
resources and the training for all the instructors across the
country, along with any of the resources available, whether
it's through vendorships, similar to what we have here on
Capitol Hill on Friday, where all the different resources
available are coming together.
We see the value in the instructor beyond even the
curriculum. You can have a great curriculum with an instructor
that may not be trained well enough, and you won't see the
effectiveness that you will with an instructor that has gone
through the training.
I think those are some of the key elements--that national
alliance as well, that we have for the instructors. State-to-
state--for example, Wyoming--we, each year, whether it's online
or face-to-face, via preconference training for career and tech
ed, have training programs available for family consumer
science instructors and business instructors.
Senator Murray. Does anybody else want to respond to how we
educate the educators?
Ms. Lusardi. Just very briefly, I think the statistics are
alarming, and in many ways, this is the most important method
and way in which financial literacy can be transmitted in the
school. The fact that often financial literacy was mandated but
no resources were dedicated to training the teacher makes, in a
sense, the mandate not able to be effective.
What I think is critically important--and this very morning
at the Jump$tart Coalition, we saw some really important
presentations of the effectiveness that that training really
does. First of all, the teachers are very open and themselves
benefiting, as you had mentioned, of that financial education.
In my view, that makes this a really ideal group to target for
financial education.
They are the instrument to deliver that education. But
because they benefit themselves, everything is really aligned,
and they can be a lot more effective teachers. As we think of
financial education, an integral part of that financial
education improvement, in particular, in the schools has to be
also training the teachers.
Senator Murray. I've noticed that only four States require
a course in personal finance. The majority of States obviously
don't. Is there any research that shows the difference between
students in States where financial literacy is required versus
those that are not?
Ms. Lusardi. What you ask--and I'm going to try to be very
brief. What you ask is very important. But, unfortunately, the
research that has to be done to assess this is a lot harder
than just looking at the survey that we have done and, for
example, looking at whether the students in those States do
better.
The problem is, you have to control for the quality of the
teacher. Often we don't have information about that. We have to
control for when the course was offered, what the material was,
and so often I think we have very little information. We need
to do assessment in a more rigorous way, as, for example, it's
done in the medical literature.
And I think we are now drawing conclusions from studies
that have not really been able to find this type of causality.
Your question is so important. We need to know what works and
what doesn't, and what can have an effect. I think we need a
lot more work in this area rather than relying on some of the
simple statistics we see.
Senator Murray. I know my time is out. But I do want to
thank you. This is something I think is just so important in
our country today, and anything I can do to be supportive, I
want to do it. I really appreciate all of our panelists who are
here today helping us work on this. Thank you very much.
Senator Hagan. Thank you, Senator Murray.
And for the panel, she is now the chairman of the Budget
Committee.
Senator Murphy.
Statement of Senator Murphy
Senator Murphy. Thank you very much, Madam Chair.
And thank you so much to the panel for being here. I'm
sorry I didn't get to catch your testimony in person, but I've
read through much of it. I wanted to talk to you about a
concept that may be new to you, and so you might not have
immediate thoughts.
It is a concept that was employed in Great Britain for a
period of time and was introduced in the U.S. Senate through a
proposal by Senator Santorum and others. It goes by different
names, but it's commonly referred to as baby bonds or
citizenship bonds.
The idea is that as a matter of birthright, every child
would get, essentially, a bond that would accrue on an annual
basis of perhaps $250 or $500 per year, and then when they got
to college age, it would be available to them to go to school
or use for job training or to be used to get different job
skills. And the idea is that it's a means toward, obviously,
allowing kids to realize their dream.
We already make a commitment to kids of certain income that
we're going to help you with a Pell grant or with a subsidized
loan. Instead of just essentially handing them that at age 18,
why not hand that to them at age zero and allow them to watch
the money develop over time.
It also speaks to the issue of financial literacy. Even
though it's not money that you saved, you're watching
throughout your childhood and your teen years money accrue in a
bank account that is going to be available to you to use to
better yourself.
In some iterations, it actually hasn't been reserved simply
for higher education. It's just a grant that you get once you
become of a certain age to use to make a down payment on a
house or to go to school.
I've been attracted to this idea in part because it speaks
to what we're talking about today. It's another means to
achieve financial literacy. So I want to pose the question to
the panel.
I'm going to start with you, Mr. Richardson, because you
are nodding your head the most earnestly as I was saying it,
and you talked about asset building in your testimony. So I'll
pose the question to you as to your thoughts on that idea and
open it up to other panel members who may have thoughts as
well.
Mr. Richardson. First, Senator, absolutely, the concept has
merit. The controversy and criticism has always been that
they've been prohibitively expensive. But I think as a societal
commitment, I think it's something we need to pursue and double
down on, to your point.
I also would mention that the comment was made before about
financial illiteracy, kind of holding youth back from
participation in society. I would frame that by saying it's
only holding full participation back. But I think a lot of the
youth we're seeing are not participating efficiently and
effectively, which is why the teachable moment through a K
through 12 structure is very important, but also supplemental
programs offered by the nonprofit sector as well, and I'll tell
you why.
I understand the unit of analysis here are the youth, and
rightly so. But I think what we're onto here is the youth as a
portal for stabilizing the household and, by extension,
stabilizing communities. I really think intergenerational
learning and the social capital that churns in low-income
communities can really focus on the real-time application of
the skills that we're teaching in schools and teaching in these
programs.
I also think allied with child savings accounts, which
we're piloting in this country, as you know, can really provide
this kind of match savings practical application that follows
kids through their maturation and allows them to succeed and
fail in terms of how they would identify the assets they're
looking to build.
The last thing I'd say is children--often, youth live lives
without consequence. I think the decisionmaking is incredibly
important here, and the focus of the hearing is important. But
also, expanding the scope of what we're talking about, I think
of children, youth, as portals to also teaching their parents,
their parents' parents, in a real-time way.
I'm concerned about the standards in school. Do they stay
current? Do they evolve and change with a dynamic and complex
world? For example, you talk about balancing a checkbook. Right
now, the financial services space are proffering other
promising services that would replace those--prepaid cards, for
example, which are much easier to use, much easier to market,
and much easier to get in trouble with. So understanding the
proclivities of youth today, keeping up with the Joneses, as it
were, I think is very important in school-based context and out
of school.
Senator Murphy. Let me ask if there are any other thoughts
from the panel on the issue of baby bonds.
Ms. Lusardi. I think this is actually a very clever idea
that really uses the interest compounding in favor of the
youth. It has the additional component, as you have mentioned,
of learning. So, in a sense, we are really investing in these
youth from the beginning and giving them an opportunity to
really see the importance of starting to save early and putting
money aside, for example, to achieve an objective.
I think this has a lot of value. And I want to come back to
that fact that, often, we don't have the capacity to say, ``Is
this a good idea or not?'' because we have not done enough
research. And that initiative, by the way, which was started in
the U.K. was eventually withdrawn, but with very little
evaluation. It's so important that, I think, more evaluation
was much needed.
Senator Murphy. I appreciate it, and I'm beyond my time.
But I guess the point is that we do make a commitment to these
kids to help them pay for education. So the question is: Can
you do that in a way that adds to financial literacy? Can you
make that commitment earlier?
I'll finish by saying that one of the things I would have
loved to explore with you is, in addition to making sure that
financial literacy involves counseling kids about how to go
through the financial aid process, there's still a lot of kids
who don't consider college because they don't even know about
the options that are available to them. I met with a group of
kids from Danbury, CT, most of them African-American and
Hispanic, who all went straight into the workforce, many of
them because they just didn't understand how to start the
college application process.
So when we talk about financial literacy with respect to
higher education financing, it's not just enough to make sure
that they can negotiate the FAFSA process. You have to start a
lot earlier to let them know that it's there in the first
place. I won't ask for a comment because I'm way over time.
Thank you very much, Madam Chair.
Senator Hagan. Thank you, Senator Murphy.
I wanted to pick up with you, Mr. Richardson, when you were
talking about the racial wealth gap. In your opening comments,
you talked about that. You noted that the median net worth for
African-American families was 22 times less than the net worth
of white American families. And that disparity, your written
testimony referred to as the racial wealth gap.
Numbers of factors contribute to this. Can you share how
the Urban League came to identify financial literacy as one of
the barriers to reducing it? And then what models are you all
looking at to help pursue this in underserved communities?
Mr. Richardson. Yes, as you say, the racial wealth gap is
something that is underappreciated and misunderstood, quite
frankly, in terms of the prospects of African-Americans and
white Americans that are shooting away from each other at light
speed. And financial literacy is something that we can control.
We can contain it.
We can talk about the standards and the application of
skills learned. But I think it's something that has to be
understood and has to be co-owned by communities of color in
terms of the decisionmaking imperative, as we're talking about,
that can lead to making more efficient and effective consumers.
Again, we're talking about constituencies that are
bombarded with mixed messages, Senator. You're supposed to be a
good American, and you're supposed to be part of the
communitarian ideal by spending and circulating dollars. But
you're also supposed to save, and you're supposed to put things
away for a rainy day.
Now, communities and individuals who live on the margins
find that a very difficult and tension-filled decision. And so
the decision in terms of when to save, how to save, which
vehicles can be understood and taught--and then also it allows
organizations like ours to be able to talk to the private
sector, the financial services entities, to demand the products
that our communities need to be able to reach a kind of parity
from an economic empowerment standpoint.
So I think what we're trying to do is--and I mentioned it
earlier--is the school-based solution is very real and needed,
and we would endorse that. I think out of school, supplemental
opportunities are very important as well, and that kind of
connectivity can be rebuilt.
We talked about the halcyon days of Home Ec and civics. I
think we can recreate that in a modern context, where we can
open up opportunities for out-of-school, real-time, practical
applications of what you're learning. Compound interest is
important. I think folks are kind of disillusioned with what
that means in their daily life, for example.
I think the nonprofit sector speaks the language, engenders
the trust that allows for learning. And as I mentioned earlier,
using children as portals to broadly envision what learning can
mean at the household level is important, particularly when you
have a proclivity of female-headed households that, for
generations, particularly in minority communities, have not
really handled the finances in a male dominated world. So in
female-headed households of multiple generations, how the
children can be portals to helping the older as well, I think,
is a very important opportunity for us here.
Senator Hagan. One quick question. Can you tell me more
about the Melinda and Bill Gates program to test asset building
and financial education? I believe it's called Reimagining Aid
Design and Delivery.
Or Dr. Lusardi.
Mr. Richardson. I would just say the template for us is to
not just suspect the kind of boosts and blocks for African-
American wealth building and asset preservation. It's to fully
know, and so we are focus grouping, we're testing, we're
evaluating, we're prototyping different models that allow us to
create the design that, again, touches each element of African-
American life and, by extension, each element of American life.
Senator Hagan. And then how will it be delivered?
Mr. Richardson. Well, it will create a program design that
we will test and evaluate and, hopefully, report our methods
for future expansion beyond the Urban League movement.
Senator Hagan. Dr. Lusardi, do you have any comment on
that?
Ms. Lusardi. I don't have any specific comment about the
Gates Foundation initiative. But I just want to reiterate that
it's critically important, and I think we need to pay a lot of
attention to some of the groups and really have programs that,
even after having added financial literacy in the school,
really do an important job in helping the communities behind
that.
And I think we have to remember that by having financial
literacy in the school, not only do we empower those
individuals, but we might also empower the parents of their
community. I just want to reiterate very much your point that,
for some students, this is the only opportunity to really have
experience in financial matters. They wouldn't have it among
their parents or their peers. So this is, I think, a real way
in which you can empower those individuals and potentially, via
them, also their own community.
Senator Hagan. Thank you.
Senator Murphy, second round.
Senator Murphy. Just one additional question, and I'll pose
it to Ms. Lipp. It's a followup on your answer to Senator
Franken's question about the fact that you've had this
requirement in your State for a while, and you just began
teaching it. And it speaks to the worry that if we don't test
it, we're not going to teach it.
So how big a barrier is that to teaching financial
literacy? If it's not part of the standardized tests, and there
continues to be such a mad rush on behalf of the administrators
and teachers and board of education members to get good test
scores, then how on earth do we ever fit in financial literacy,
never mind all the other things that Senator Franken wants to
teach in schools, which I don't disagree with. I just worry
that in this environment, we've got to realize the reality of
the pressures, I think, overdone on these test scores.
Ms. Lipp. Yes. I recently went to a conference, and what
they told us was that teachers in America are teaching more
content now than ever in the history of education. To put that
in perspective, my course is a 90-day course, and I have 1,500
vocabulary words to teach in 90 days. Personal financial
literacy, I think, is a course all in itself. Somehow, I have
to figure out how we're going to do it every day, bit by bit by
bit by bit.
As far as the training of educators in all of this, if you
bring the word, testing, out, you're going to scare a whole
bunch of people and they're not going to want to do it,
obviously. However, at the same time, if it's not tested,
teachers will shy away from it.
With financial literacy, you have two things working
against you. First is that it wasn't tested up until recently,
and what I think and what my experience is--financial literacy
isn't a class thing, meaning just because you're middle class
or just because you're upper class doesn't mean you have
financial literacy skills. And I think that's a common
misconception.
So you have a lot of teachers--it was kind of brought up
earlier with Senator Murray--who don't know how to do this
themselves. How can they teach it? So what needs to happen is
there has to be a way to seamlessly integrate it into all the
different grade levels, starting with kindergarten.
How could you start teaching a kindergartener financial
literacy, and how does that integrate into math with the new
Common Core standards so it doesn't add more onto a teacher's
plate, because, immediately, what they're going to do is shy
away, because we have so much to do right now. And in my
course, in particular, I'm trying to find the time to do it.
Senator Murphy. I know it isn't easy, and I appreciate all
your efforts. Thank you very much.
Senator Hagan. Thank you, Senator Murphy.
Let me ask about the role of parents, and a lot of you have
commented on that a little bit already. The research has shown
that parents, with good reason, are the No. 1 influence on a
young person's financial literacy. But because financial
literacy across the whole is so low, even across age groups,
parents may not have the financial knowledge, time, or skills
to be solely responsible for teaching their children how to
effectively manage their money.
Ms. Lipp, not everybody has your mother, who counseled you.
And just so that you know, when my children were young, they
each had a ledger book, and at the end of the week or the
month, if they couldn't account for how they spent that money,
they didn't get that money. If they were a dollar off, then
they got a dollar less. So it was a great way to make them
realize where their money was going.
It's interesting, I think, that in separate surveys
conducted by VISA and the College Savings Foundation, 85
percent and 90 percent of parents thought that financial
literacy should be taught in the schools and in the curriculum.
Ms. Lipp, as a teacher--and you've been working with
students on the skills for several years--have you seen an
increased interest among the students' parents in the budget
project, in the stock market game, or other financial education
lessons? And have they sparked conversations that have led
families to taking better control of their finances?
The other issue I wanted to ask you about is the 1,500
words that you have to include--what words?
Ms. Lipp. What do they include?
Senator Hagan. Yes.
Ms. Lipp. How much time do you have?
[Laughter.]
Senator Hagan. Three minutes for my round.
Ms. Lipp. Good. They include everything from civics and
economics. So you're talking about government terms, so
everything from gerrymandering, filibustering--that's a big
one.
Senator Hagan. Got it. OK. Move on to financial literacy.
Ms. Lipp. With the financial literacy piece, what I've
noticed is that parents--and I've heard this before. Parents
are not comfortable talking to their children about finances. I
recently read--and correct me if I'm wrong--but I've heard that
parents are more comfortable talking about sex with their
children than finances, which--that's just crazy.
As part of the project that I instituted, my kids had to go
home and ask their parents, ``Are you paying for college?'' in
their sophomore year of high school. And the kids came back,
and some of them were like, ``My parents aren't paying for
college.'' You just found out at 16, which is crazy.
What I have started to see, and because I stayed at that
school for 5 years, it was funny, because the parents started
contacting me, asking me for a copy of the project for other
parents that they knew, that they needed it for their children,
because, you know, Ms. Lipp can handle this. And it was like
they were still coming--parents I didn't know--coming to me,
because it was easier for them to have me give their child a
budget project than it was for them to sit down and talk with
them about it.
So I have seen that. I've also had parents who have told
their children when I've got their siblings, ``Oh, Ms. Lipp is
going to make you do this project, and you're going to have to
have this conversation,'' and things of that nature. And so,
yes, now there's more of a conversation that occurs with them
and their parents, and the parents are definitely interested.
But it's almost like they were relieved that somebody else was
doing it and not themselves.
Senator Hagan. Can you not adapt your budget project to the
new area that you're in, as far as not having the trips to the
bank, et cetera?
Ms. Lipp. Right, which is what I was hoping for the iPads
to be able to do. I've taken the project and broken it down by
sections. Now it's getting into the computer labs, and that's
where the iPads came into play, so that we can do it section by
section.
Senator Hagan. Ms. Pace, on the same issue of parents, have
you seen an increase in the parents' involvement with the
students at the high schools that are involved in the credit
union?
Ms. Pace. Yes. And the way I'd like to respond to that is
that children mirror their parents in a lot of habits, whether
they're good or bad. As the financial industry services go,
there's probably less than 30 percent of the adult population
that has any type of financial plan, because they're scared to
know how bad it could possibly look.
As it relates to our Student Run Credit Union Program, we
try to get the parents involved in as much of the initiative as
we possibly can, particularly at the end of the year. We reward
these students who have participated and bring their parents
in, and they can share the stories of what they've learned.
Senator Hagan. And do the parents come in?
Ms. Pace. Yes, they do, and they're so proud. They're so
proud of their children. One of the stories that we had most
recently was a young boy who told us the reason he wanted to
participate in the student-run credit union and be an active
participant was that he had a part-time job, and when he would
receive his money and he'd take it home to his mother, she
would take it and she'd just spend it for whatever.
This allowed him to open up his own savings account,
because he could see what was happening at home. And he was
able to keep his money and to use the tools and the skills that
he had learned as a participant in the student-run credit
union.
Also, as it relates to the Center for Smart Financial
Choices that we just opened about a year ago, one of our
objectives with that center is to get, as I mentioned, adults
of all ages to broaden their knowledge of financial literacy.
And I'll go back to, I think, what Senator Franken mentioned
and simply say this. If you have a poor financial outlook, that
usually equals some type of poor health, because financial
difficulties bring on stress and other issues to everyone's
life. So if we can improve financial literacy from K through
12, we might even help our own health population in the future.
Senator Hagan. Thank you. In North Carolina, we have many,
many areas in our rural communities.
Mr. Biggs, I understand, obviously, that Wyoming would also
be in that same situation. Can you share some of the unique
challenges in teaching financial literacy in the rural areas
and any successful ways you've identified to overcome those
challenges?
Mr. Biggs. Thank you, Madam Chairman. Yes, as you noted, we
are quite rural across the State. One way that the Jump$tart
Coalition has directly pursued the youth in the most rural
areas is working with the school districts for the financial
literacy conference that I mentioned in my statement.
We travel around the State each year. Very often, we have
centralized conferences for youth, adults, everyone, typically
in the center of the State or the capital, Cheyenne. But when
it comes down to getting these students out of the classrooms
to travel 2 to 5-plus hours away, that doesn't work.
So we moved each year to different parts of the State, and
we've had success, depending on the population of the region.
We are happy with 70 to 90 youth at one conference and 450 at
the next, based just on the population range from region to
region in the State. That's certainly one way.
Then the other would be the online access that we provided
through our trained instructors. We've done that for several
years now, and the numbers increase now, especially at the
State level, with legislative interest in increasing post-
secondary options for students.
We have gotten better fiber optic capabilities with remote
locations, such as Kaycee, WY. They're always very anxious to
make sure that their youth are served, and financial literacy
is one of those aspects that we include.
Senator Hagan. I really think that, as Senator Murray said,
this has been a very informative hearing. I have been
interested in financial literacy for many, many, many years,
and it really is a passion, because I've seen the consequences
of how it has had detrimental effects on so many young people,
on so many adults.
I give a lot of talks, a lot of speeches, and I always
mention the need to teach financial literacy. And at the end of
those speeches, I'm always amazed at the number of people who
come up to me and say, ``I wish I'd had that course when I was
in school.'' And I will say the preponderance of those people
who come up and tell me that are women. So it is really very
strong and, to me, shows the need.
I know we have a lot of great programs that are going on,
many of these from a volunteer perspective. But it's only
reaching a fraction of the students. That's why I think a
requirement or incentive is so important to our public schools.
Teacher training, we know, is of utmost importance. Otherwise,
I don't think you're going to have nearly as good an outcome
without good teacher training.
But we have to make this available, because to get by in
the United States today, you have to understand debt, you have
to understand credit. We need it to increase investment, to
increase net worth, but it has to be used in the right way.
And, obviously, when our students graduate, and they look
at student loans, they look at car loans, and they look at that
insurance payment that's coming due, they have to have, Dr.
Lusardi, as you said, the ability to make decisions and
understand the consequences.
I appreciate your time. Thank you for coming to the hearing
today, and we certainly did get some very, very useful
information.
The hearing will remain open for 10 more business days for
any other Senators who wish to submit statements or questions
for the record. So you might be hearing some more.
Once again, I do appreciate your time and your testimony.
[Additional material follows.]
ADDITIONAL MATERIAL
The Financial Services Roundtable
the roundtable supports financial education
Financial literacy, sometimes referred to as ``financial
education'' or ``financial capability,'' is one of the highest
priorities for the Roundtable and its member companies. The Roundtable
and its members are committed to improving the financial literacy of
consumers of all ages. Over the years, the Roundtable and its member
companies, working with non-profit partners, have provided financial
literacy resources and support to educate consumers in their local
communities. For example, in 2012 the Roundtable and its members
completed over 42,000 (see Roundtable 2012 Community Impact Report at:
www.fsround.org) financial literacy projects throughout the country.
We support an expansion of financial literacy for all segments of
society. The Roundtable firmly believes every segment of the
population, from school-aged children to military personnel to senior
citizens, can benefit from additional and more readily available
financial education. Enhanced early education about retirement savings
and investment products and services can help consumers make sound
decisions and allow them to maximize their retirement savings.
Accordingly, the Roundtable will be supporting `` The Financial
Literacy for Students Act of 2013,'' sponsored by U.S. Senator Kay R.
Hagan, when it is formally introduced later this week.
Expanding financial literacy is an issue that most, if not all,
Americans believe is a worthwhile goal. Even after the pain of the most
recent financial crisis, few Americans are making wise financial
decisions. According to a 2012 Jump$tart survey two in five adults gave
themselves a C, D, or F on their knowledge of personal finance. Last
year, more than 77 million Americans, one-third of U.S. adults, did not
pay their bills on time. More than half of adults admitted that they do
not create a budget for their expenses. Research shows that financial
curriculum can have a positive impact on how consumers manage their
finances. Financial education is likely to increase savings, use of
banking and insurance services, home purchases and improvements in
overall financial health. Although the public and private sector have
made great strides in raising awareness for the need for financial
literacy, there is still more work to be done to reach more people.
conclusion
The Roundtable believes that the Federal Government, State
governments, consumers, and the financial services industry must
coalesce to make financial literacy a national priority. We must do so
as soon as possible if our economy is to reach its full potential and
provide everyone the opportunity to attain the American dream of
financial independence. A fully functional 21st century economy must
have a fully engaged and financial savvy (re: literate) public that
understands the full variety of money management techniques, as well as
banking, saving services and investments offered in the marketplace in
order to make sound personal financial decisions and to perform
successful financial planning for their futures, and their children's
futures. The Roundtable stands ready to work with policymakers and
other stakeholders to preserve, promote and expand financial education
for all Americans. Additional information regarding financial literacy
resources and programs provided by Roundtable members can be found at:
http://www.fsround.org/fsr/financial_literacy/financial_literacy.asp.
______
National Association of Federal Credit Unions
(NAFCU),
Arlington, VA 22201-2149,
April 23, 2013.
Hon. Kay Hagan, Chairwoman,
Subcommittee on Children and Families,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510.
Hon. Michael Enzi, Ranking Member,
Subcommittee on Children and Families,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510.
Dear Chairwoman Hagan and Ranking Member Enzi: On behalf of the
National Association of Federal Credit Unions (NAFCU), the only trade
association exclusively representing the interests of our Nation's
Federal credit unions, I am writing to you regarding Wednesday's
hearing entitled ``The Economic Importance of Financial Literacy
Education for Students.''
As you know, April is Financial Literacy Month, and financial
education has long been a hallmark of the credit union community.
Credit unions offer financial literacy programs to people of all ages
from all walks of life--from students to retirees. Various programs and
products are designed to fit all circumstances and levels. While
administering such programs in schools, for example, elementary student
programs will focus on the importance of savings, while high school and
college students may need a more comprehensive approach that teaches
them budgeting and other financial management skills.
While credit unions provide financial education to members of their
communities regardless of age, they believe that financial education
should begin as early as possible to help students learn behaviors that
will assist them in managing their finances and maintaining a
successful and stable financial life. To that end, some credit unions
have set up branches inside high schools, middle schools and even
elementary schools to help teach young students the importance of
saving and managing their finances. Furthermore, in many instances the
students operate the credit unions themselves under the direction of
school faculty and credit union personnel. These opportunities offer
the students even more insight into financial management and give them,
to the extent possible, some ownership of their financial well-being.
NAFCU and our member credit unions are proud to be involved in
promoting financial literacy and personal savings, and currently
partner with the Consumer Federation of America in both their America
Saves and Military Saves programs. These programs focus on encouraging
increased savings for the general population and, specifically,
military personnel and their families in the case of Military Saves.
Credit unions work with their communities to raise awareness of the
need for savings, and they also work with members of their community to
address their overall financial situation.
NAFCU member credit unions understand the importance of financial
literacy. With an ever-widening array of financial services, it is
important that at a young age consumers are armed with an understanding
of the basics of personal finance. Financially literate individuals are
more likely to spend prudently and put money in savings, retirement
funds, and other wealth building accounts. Likewise, the same
individuals are less likely to rack up large, burdensome--and sometimes
unaffordable--debt, and are less likely to be victims of predatory
practices.
We thank you for holding this important hearing and we would
welcome the opportunity to work with the subcommittee to develop
innovative and effective financial education initiatives. Should you
have any questions, please do not hesitate to contact myself or NAFCU'
s Associate Director of Legislative Affairs, Quincy Enoch, at 703-842-
2261.
Sincerely,
Brad Thaler,
Vice President of Legislative Affairs.
Credit Union National Association (CUNA),
National Credit Union Foundation (NCUF),
April 24, 2013.
Hon. Kay Hagan, Chairman,
Subcommittee on Children and Families,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510.
Hon. Mike Enzi, Ranking Member,
Subcommittee on Children and Families,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510.
Dear Chairman Hagan and Ranking Member Enzi: On behalf of the
Credit Union National Association (CUNA) and the National Credit Union
Foundation (NCUF), we are writing regarding your hearing on the
``Economic Importance of Financial Literacy Education for Students.''
CUNA is the largest credit union advocacy organization in the United
States, representing nearly 90 percent of America's 7,000 State and
federally chartered credit unions and their 96 million members. NCUF is
the philanthropic and social responsibility leader of America's credit
union movement, raising funds, making grants, managing programs, and
providing education empowering consumers to achieve financial freedom
through credit unions.
Credit unions change lives each day through the ``People Helping
People'' philosophy that drives the credit union movement. Each year,
credit unions invest millions of dollars to provide financial education
and counseling programs to consumers. Against a fragmented landscape
where each credit provider is seeking maximum gain, not-for-profit
credit unions continue to be true to their mission of serving as
trusted advisors to their members and communities.
As the charitable arm of America's credit union movement, the
NCUF's programs and grants provide widespread financial education,
create greater access to affordable financial services, and empower
credit union members to build assets. One of the main pillars of the
NCUF is to provide funding and promotion of financial literacy tools
and education through credit unions across the Nation. This mission is
embedded in the fifth cooperative principle--education, training and
information. Indeed, it is in the interest of the credit union to have
members that are financially literate and understand the importance of
thrift and the responsibility of credit.
In an effort to catalog credit union efforts around financial
capability building, NCUF conducted a comprehensive research study to
provide an inventory of credit union financial education/counseling
programs nationally. Almost 600 credit unions shared their strategies
and progress toward helping members and consumers make better financial
choices. In 2010, the NCUF concluded its study and released a detailed
report titled ``Credit Unions: Focused on Financial Capability across
the Nation.''
Some highlights from the report show: coordinated efforts with NCUF
have assisted in credit unions' ability to provide financial counseling
to more than 1.5 million consumers a year and nearly 25,000 annual
educational presentations to more than 600,000 students; 111,500
student members had $34 million on deposit at 1,400 in-school credit
union branches that encourage savings and connect financial education
with financial access; nearly 5,000 student workers received on-the-job
training experiences at in-school credit union branches; and 85,000
teens and young adults participated in 1,200 experiential learning
events organized or provided by credit unions. Experiential learning
provides participants with a taste of the real financial world in a
safe and controlled environment. The report also found that in 2010
credit unions invested more than $140 million toward improving the
financial capability of members and consumers in general.
Furthermore, the report showcases the resounding success of the
financial literacy initiative Biz Kid$. A coalition of more than 200
credit unions and affiliates from across the country have helped
exclusively fund Biz Kid$, which launched nationally in January 2008
and teaches kids about money and business. The initiative includes a TV
series, free classroom curriculum, outreach activities, a Web site and
a monthly on-line newsletter targeting children 9-16 years old. It is
the first national public television series promoting financial
education for elementary and middle school students. Created by the
producers of Bill Nye the Science Guy, Biz Kid$ teaches students how to
use credit wisely and reinforces the importance of budgeting, saving,
and giving back to the community.
Since its inception, Biz Kid$ has received significant
entertainment industry recognition including a Daytime Emmy. More than
1.5 million students and teachers have been exposed to the curriculum,
which has been implemented in classrooms and afterschool programs
nationwide. The show has received the status of ``recommended
educational resource'' by the State Boards of Education in seven
States. In addition, Biz Kid$ has been adopted by the Internal Revenue
Service to use in their educational outreach program in schools across
the United States. The show has also been adopted by Ernst & Young to
use in their education outreach programs for middle school and high
school students. To extend the impact of the series, public TV stations
nationwide have established partnerships with credit unions and
community groups--sponsoring teacher seminars, kids' contents and
family events.
NCUF believes that access to financial products and services should
always be accompanied by educational opportunities. This link between
education and impending opportunities to make financial decisions
enables members to take action based on newly gained knowledge,
resulting in more financially capable and secure members. As the credit
union movement continues to grow, so too will the importance of
ensuring our members have the tools they need for a successful
financial future.
America's credit unions are committed to continuing to work to
ensure that consumers of all ages understand how to responsibly manage
their finances, and recognize that financial education needs to begin
at a very early age. On behalf of America's credit unions and their 96
million members, we appreciate the attention you are giving to the
importance of financial education.
Best regards,
Bill Cheney,
President & CEO,
Credit Union National Association.
Wendell Sebastian,
Executive Director,
National Credit Union Foundation.
[Whereupon, at 3:59 p.m., the hearing was adjourned.]