In today’s rocky economic environment and weak job market, we’re reading frequently how many of our young people are completing higher education mired in debt. Yet they’re not alone. As former Federal Deposit Insurance Corp. Chairwoman Sheila Bair pointed out, legions of homeowners nationwide who did not comprehend the impact of their subprime and nontraditional mortgages paid a very high price when they lost their homes.
Bair said the financial crisis showed: “An educated consumer is our first line of defense. Because at the end of the day, it is the consumer who signs on the dotted line.”
She and others say financial education should be taught in every grade and incorporated into math, reading and core classes.
David Nelms, chief executive of Discover Financial, agrees, noting, “As a country, we are failing in financial literacy. We owe it to our children to provide them with the best opportunity for a brighter financial future.”
Only 13 states require students to take a personal finance course to graduate from high school; California is not among them. Yet Tom Torlakson, California state superintendent of public instruction, believes students need such skills to be informed consumers. In April, he launched a financial literacy awareness campaign. Financial institutions, consumer groups and other government agencies have joined this effort.
The private sector provides 60 percent of funding for Operation Hope, a nationwide financial literacy program, which has educated nearly 168,000 L.A. youth and some 42,250 area adults.
The Jewish Community Foundation of Los Angeles shares the concern about financial literacy and recently made grants to non-profits that address the issue – especially those that serve homeless teens, women, immigrants and others challenged by the economic downturn.
In Los Angeles, there are several effective programs. Three of the outstanding non-profits awarded grants by the foundation are:
• The California Council on Economic Education’s MoneyWise Teen provides training and standards-based economics curriculum for California youth. MoneyWise Teen trains more than 80 Los Angeles Unified School District teachers annually to teach money management to help students make responsible financial decisions.
• Financial Literacy Workshops conducted by Jovenes, an organization that helps disenfranchised youth and families to become integrated community members. The workshops provide financial education to 90 homeless young adults that enable them to manage their finances, maintain independent living, develop decision-making skills and obtain permanent housing.
• Smart Consumer, a program of New Economics for Women, provides financial education to more than 250 Latino women per year to improve their economic security. Workshops based upon the FDIC’s Money Smart curriculum help participants track expenses, manage budgets, and understand credit and credit card solicitations.
Not surprisingly, the need for financial literacy does not appear to be understood by the general public. It’s not a headline grabber. Yet fiscal responsibility will play a critical role in avoiding another economic crisis and mortgage meltdown. Educating consumers on money management is one of the most effective ways to prevent them from losing their principal asset or help them recover from a job loss.
Let’s give the younger generation a head start by including financial education in the curriculum from K through 12. Make financial education fun – and engaging – through digital media, such as online games and apps.
“It’s up to all of us – parents, schools, government, private sector and public sector – to … ensure that our kids remain competitive and prepared for the future,” said Discover’s Nelms.
Navigating today’s complex and unpredictable global economy requires Americans to recognize the importance of personal financial responsibility. We need to return to the fundamentals of financial management, and implement savings and spending strategies that will sustain us in times of both prosperity and recession.
Money-advice maven Suze Orman is one of the many vocal advocates for basic monetary practices to achieve financial health. Considering her lucrative career dispensing such advice, it might bode well to take a few tips from her.
Amelia Xann is vice president of the Center for Designed Philanthropy at the Jewish Community Foundation of Los Angeles, among the 11 largest L.A. foundations, with total assets of $737 million.