Financial Literacy: A Critical Component of Financial Reform

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The Huffington Post
By: Jason Alderman
May 19, 2010

Among the many lessons to be learned from the recent financial crisis is that people of all ages need access to better financial education so they can make smarter decisions on critical issues that will impact their financial futures. We also need to ensure that everyone has access to basic financial services many of us take for granted.

Consider that:

  • More than half the world's population has no access to basic financial services like a bank account.
  • One in four American households is either "unbanked" (i.e., has no financial accounts) or "underbanked" (may have an account, but the mainstream financial system is not meeting their basic financial needs).
  • Three out of five parents in the U.S. haven't set aside money for their children's college education.
  • More than half of Americans don't have a rainy day fund for unanticipated emergencies.

These are only a few of the eye-opening statistics revealed at the Financial Literacy and Education Summit co-hosted by the Federal Reserve Bank of Chicago and my employer, Visa Inc., on April 19 in Chicago. Now in its fourth year, the Summit brings together leaders from federal, state and local governments, educators, and non-profit organizations and financial institutions to discuss ways to improve financial education around the world.

Skeptics might question why a company like Visa is involved in personal financial literacy issues since after all, we don't extend credit to individuals and businesses or set their interest rates. Financial literacy is one of the cornerstones of Visa's corporate responsibility efforts and has been a top priority for the company for more than a decade. At last year's Clinton Global Initiative annual meeting, for example, we announced our goal to reach 20 million people worldwide through our financial literacy programs by May 1, 2013; and as of April, we're already halfway there. Quite simply, it's the right thing to do.

For me, one of the highlights of this year's Financial Summit was hearing Michelle Greene discuss steps the Obama Administration is taking to put Americans on a better financial footing.
Greene is the U.S. Treasury Department's Deputy Assistant Secretary for Financial Education and Financial Access and serves as executive director of the President's Advisory Council on Financial Capability.

In her presentation, Greene outlined five key strategic priorities guiding the Administration's goals to boost financial literacy, change behaviors and improve people's access to safe and appropriate financial products and services that are needed to act on that knowledge:

  • Implement policies that have been proven to change behaviors through rigorous, meaningful measurement. This involves creating a set of basic financial skills everyone needs to succeed. Greene likens this step to research that went into developing the USDA's Food Pyramid, which lays out goals for healthy eating.
  • Make financial education tools available wherever they've been proven to work. For example, including family financial empowerment curricula in Head Start programs can have an enormous, positive impact on a young child's life.
  • Focusing efforts and resources where they are most needed -- for example, targeting disproportionately underserved communities and programs that integrate financial topics into high school curricula, such as the recently concluded National Financial Capability Challenge.
  • Increase access to safe, appropriate financial products and services to all, particularly unbanked and underbanked households, which can least afford high fees for basic financial services. Greene noted that President Obama's 2011 budget includes funding to develop a new initiative, Bank On USA, which is designed to increase the number of Americans able to access such services, as well as the knowledge needed to use them effectively.
  • Develop strategic partnerships among all sectors, including governmental agencies, non-profit organizations, businesses and educators. "Financial capability is not a problem that can be addressed by the federal government alone," said Greene. "People talk about money and learn about money from those they trust -- the people in their communities."
Greene also noted that the Financial Literacy and Education Commission (FLEC), a consortium of 21 federal government agencies and bureaus that coordinates federal financial literacy efforts, is developing a new national strategy for financial capability, using input from more than 150 interested stakeholders. She told the Financial Summit audience of more than 1,500 who attended and/or watched online,

"We will be putting the new national strategy out for comment soon, and we hope you will let us know what we got right and what we didn't. More importantly, when it is finalized, we hope that you will all see how your own organizations can play a role in implementing this shared set of goals. While no single sector alone will be able to get there, by working together, collaboratively and in partnership, we can make enormous progress."

As Visa's Director of Financial Education Programs, I'll be monitoring the President's Council's progress closely and looking for ways to incorporate their successes into our educational outreach efforts. In the meantime, you can watch a webcast of the Summit and learn more about Visa's financial literacy programs.

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This page contains a single entry by CFED published on May 20, 2010 4:35 PM.

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