On a dreary afternoon in rural Indiana, Amish schoolchildren sit in a cozy, lantern-lit classroom and learn how to use an ATM card.
Across the state line in Louisville, Ky., teen-agers at a public high school are learning about the power of good credit.
And in St. Louis, Mo., adults who struggle to survive on meager incomes spend a series of weeknights improving their basic money management skills.
All of these activities are a small part of a nationwide effort to educate the public in what has been dubbed "financial literacy"—the ability to understand financial conditions that affect personal material well-being and to manage those conditions in an effective manner.
Although literacy has been a cornerstone of education in America since pioneer children trudged to prairie schoolhouses with primers in hand, the concept of teaching financial literacy is a fairly modern one. Its importance came to the forefront in the late 1990s when, despite a prosperous economy and the availability of expanded financial services, many families still struggled to make ends meet.
Ongoing problems are only too evident in the seven states served by the Federal Reserve's Eighth District, where more than 140,000 people filed for personal bankruptcy in the first six months of 2001. According to the American Bankruptcy Institute, they are not alone: The number of personal bankruptcies nationwide has been on the rise since 1990. In addition, research by the Federal Reserve indicates that household debt is at a record high, financial stress (debt payments that represent more than 40 percent of income) is up and delinquent payments on bills are more common.
Financial literacy programs give consumers the skills to create household budgets and savings plans, make sound investment decisions for their children's education or their own retirements and understand the vast array of financial products available in today's economy. And the efforts are paying off. When the National Endowment for Financial Education evaluated its high-school financial literacy programs, it found that those who participated improved their knowledge, behavior and confidence with respect to personal finance. Nearly half of them saved more after completing the programs.
The Federal Reserve is committed to promoting personal finance education for people of all ages. Throughout the Eighth District, hundreds of programs are available. A sampling of those is highlighted in this special issue of Bridges.
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