ByRandall C. Sumner
What are the fundamental components of literacy in our society? Few would argue the importance of the three Rs: reading, 'riting and 'rithmetic, but what about financial literacy and money management? We think that more must be done to teach Americans financial-management skills, and that the education process needs to start as early as possible—preferably elementary and secondary schools.
For those not equipped with sound financial knowledge, the consequences can be enormous. When young people are not taught basic financial-management skills, they often wind up as adults making devastating financial decisions that can take years (or a lifetime) to overcome.
Financial literacy empowers consumers to make choices that will contribute to their well-being. It empowers them to create household budgets, initiate savings plans, make strategic investment decisions for their children's education or their retirement, and evaluate the broad array of products that are offered by financial-service providers.
Studies show that poor financial-management education has kept some lower-income families and minority groups from fully benefiting from economic expansion. Nowhere is this problem more clearly illustrated than by abusive-lending practices that target specific neighborhoods or vulnerable segments of the population. Such practices result in unaffordable payments, equity stripping and foreclosures.
As part of our ongoing efforts to promote financial literacy, our District is participating in a number of initiatives. They include: Fed Challenge, an economic education competition for high-school students; Making Sense of Money and Banking, a course for teachers; and resource fairs on home buying and credit for employees at each of our four offices. Also, our Community Affairs staff recently conducted a review of financial-literacy programs throughout the Eighth District. Many of those programs will be shared in an upcoming issue of Bridges, our Community Affairs newsletter.
Overall, our nation's evolving economic and financial systems have been highly successful in promoting economic growth and higher standards of living for the majority of our citizens. But we need to reach further to engage those who have not been able to participate fully.