Financial education a foundation to build on: Getting more people into the financial mainstream helps build a secure future, a local advocate says.
By Sheila Hagar
February 24, 2010
Feb. 24 -- "An ability to understand finance. More specifically, it refers to an individual's ability to make informed judgements and effective decisions about the use and management of their money." -- Wikipedia
Today begins a two-day presentation that includes local stories of reaching bottom and climbing out, as well as money management education you can take advantage of.
Financial literacy is a fluid, subjective and narrow term and Noah Leavitt is not a big fan of using it.
It's too black and white and is not really relevant, said the coordinator of the Walla Walla Asset Building Coalition.
"There's been a shift or change of even the language in asset-building groups," Leavitt noted last week. "We're going from talking about financial literacy to talking about financial education."
While the focus of his group and others like it across the state have been on guidance for un- or under-banked folks, the reality is that America as a whole needs an education in managing money, he explained. "Most people have an understanding of money but need the skills to know how to use it ... to grow in their ability."
What financial education should mean is giving everyone "higher control of their money."
In Walla Walla, the general population is not thinking about continuing education in money, including debt and investment management, he said. "Most think 'I know what I'm doing and that's good enough. And I'm surviving."
Here, and in the rest of the nation, people tend to underestimate the importance of financial health, Leavitt feels. "Do we do that with our physical health? No. We go to the doctor, we go to the gym, we take vitamins."
The lack of insight can mean ignoring chances to create financial opportunity for ourselves and our children, he said. "So many of us live from one paycheck to paycheck, from one month to one month."
The Walla Walla Asset Building Coalition works to help people understand the assets they already have, like the Earned Income Tax Credit. That's a tax credit for certain people who work and have low wages, but which many eligible people are unaware of and don't apply for when submitting their income tax paperwork. "That's a hard asset that can be thousands of dollars," Leavitt said.
Goals for the coalition include promoting money education in schools and getting un-banked adults to get their money in mainstream financial institutions -- "to have the security to use a bank, a whole relationship with a financial institution that is guaranteed by the U.S. government."
The coalition has found that a number of people in Walla Walla who lack a financial education choose to keep their money in their house, "because they don't trust banks," he said.
Despite the recession's effect on banks, the federal reserve backs up deposits and no one in Walla Walla has lost money in a bank closure, Leavitt pointed out.
While that can be one aspect of the spectrum, the problem of money mismanagement is everywhere.
"There is a huge (concern) that people in Walla Walla don't have savings to get through emergencies ... if they lost their main source of income, could they weather that?"
It's an issue across the country, with numbers of Americans in the same leaky boat estimated as high as 25 percent. In this state, at least 30 percent of residents are asset poor, defined as without liquid savings to maintain their household for more than three months, according to Paul Knox of the Washington state Asset Building Coalition.
In other words, the personal safety net has evaporated for many people in this country, Leavitt said. "Which can lead to all sorts of crises being triggered."
And when people don't have a financial foundation in place, it's impossible to build upward with long-term planning, he added. "A huge number of people don't have that. They are the ones where it will snowball."