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FROM THE OFFICE OF PUBLIC AFFAIRS
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JS-631
I would like to thank Bill Wilcox of the CBM Credit Education Foundation for inviting the Treasury Department to participate in this mornings welcome ceremony. I would also like to congratulate Bill, David Mancl, the Wisconsin JumpStart Coalition, and the Wisconsin Department of Financial Institutions for organizing this important teacher training event and for all of the work that they have done to promote financial education in schools in Wisconsin.
At Treasury, we believe that the first step in improving financial education is getting the word out; the second step is providing resources that allow educators to teach the subject of financial education to their students. Equipping young people with an understanding of basic concepts like budgeting, saving, investing, and credit management will enable them to build financial security and make smart financial decisions throughout their lives. We applaud the organizers of this event who have gone above and beyond the call of duty to ensure that students in Wisconsin learn the basics of personal finance in elementary, middle, and high school, rather than through the school of hard knocks.
While this is my first trip to Wisconsin, the thing that comes to mind whenever I think of Madison is the fact that my dad, who was a banker in Philadelphia, attended banking school for several summers here in Madison. All of the things that my father learned as a banker - the importance of credit history, paying bills on time, living within a budget, etc. - carried over to his personal life and the way he managed our family finances. He taught my brother and me at a very early age the importance of managing our money well. My stepmother has pointed out that one of the things my father and I still have in common is our need to balance our checkbooks several times a week!
I was very lucky to have parents who taught me good money skills before I had the opportunity to make serious financial mistakes. By the time I entered college, I had a savings account, checking account, and ATM card, and understood how to use them. Like most college students, I immediately began receiving credit card offers and soon had several credit cards in my wallet.
Unlike some of my friends, however, I saw my credit cards as a tool to build a good credit history. I paid for my books at the campus bookstore, knowing that I was going to pay off the full balance as soon as the bill arrived. I admit that I used my credit cards to buy new clothes when I didnt really need them, but I could always here my dads voice calculating the realcost of that new outfit if I decided to pay only the minimum balance due on the next bill.
Many kids today are not as lucky as I was. Their parents may not have good personal finance knowledge or skills to pass along to their children. They may be living paycheck to paycheck or even teetering on the brink of bankruptcy. Other parents may not be comfortable talking about money with their kids. Surveys show that parents are more comfortable talking to their kids about sex than they are talking about money!
Yet it is more important now than ever to make sure that young people learn about personal finance. In 2001, teenagers spent more that $172 billion. More than twenty percent of teens have their own credit card. Individuals under the age of 25 are the fastest growing group of individuals filing for bankruptcy. The statistics tell us that we need to do something so that young people can begin their adult lives in good financial shape, not under the burden of unmanageable debt that keeps them from getting an education, buying a home, or even being hired for a good job.
As educators, you have an opportunity to make a real difference. By learning the basics of personal finance and passing this knowledge along to your students, you can help them avoid costly mistakes. The important role that educators play in improving financial education throughout the country is something that Treasurys Office of Financial Education has been thinking about since its creation.
The Department of the Treasury established the Office of Financial Education in May 2002. The Office focuses the Departments financial education policymaking, raises awareness about the need for and importance of financial education, and provides information about financial education resources throughout the Federal government. The OFE emphasizes four key areas of financial education: savings, credit management, homeownership, and retirement planning.
Some of the things that the OFE has been doing to fulfill its mission include chairing the Federal Government Financial Education Coordinating Group, which coordinates and encourages financial education efforts and expands cooperation among Federal agencies; highlighting effective financial education programs across the country, and co-hosting panel discussions with other Federal agencies to seek collective solutions to help consumers deal with specific financial education issues.
Most recently, we co-hosted with the Board of Governors of the Federal Reserve System a roundtable discussion on credit management. In May 2003, sixteen organizations representing credit card companies and the banking industry, credit and debt counseling services, and community and consumer groups participated in the event. We will be releasing shortly a top five list of credit management fundamentals that we all agree consumers can and should do to improve their credit.
Last year, our panel discussion was co-hosted by the Department of Education and focused on a topic that is very relevant to this weeks program: integrating financial education into core curricula in grades K-12. What does this mean? It means that we think the best way for young people to receive financial education is by including personal finance concepts, such as the concept of compound interest or how to create a budget, when teaching other subjects, such as math or reading.
There are several advantages to approach. It provides a context for understanding personal finance concepts. It also enhances the teaching of these other subjects by providing real life examples that are meaningful to students. And, it makes financial education less susceptible to elimination because of budgetary cutbacks or scarce resources.
Last October, we released a white paper summarizing the discussion among the panel participants and highlighting its conclusions. The white paper goes into detail regarding the different means by which financial education can be incorporated into other subjects and includes the five access points identified during the discussion. These access points are: standards, testing, textbooks, financial education materials, and educators. We explain in the white paper how each of these access points can be used.
Standards: In a standards-based education system, standards have a significant influence on what is taught in the classroom. Informing the state boards of education, which generally develop and adopt standards, about the importance of including financial education in the standards can help ensure that financial concepts are included in math and reading curricula.
Testing: A standards-based education system uses testing to assess whether students are meeting academic standards. Because educators generally focus on subject matter that will be tested, including financial concepts in tests provides an incentive for teachers to teach the subject in the classroom.
Textbooks: Publishers of textbooks and other instructional materials can be educated about the value of integrating financial concepts into other subjects, such as math and reading. Before purchasing instructional materials, states can impose requirements that publishers demonstrate how their materials incorporate financial concepts into other subjects.
Financial education materials: There are ample financial education resources available on the Internet and from groups that produce or compile such materials. Many of these off-the-shelfmaterials can be incorporated into math and reading curricula to provide a financial education component to these subjects.
Educators: Educator training and professional development requirements provide an opportunity to stress the importance of financial education to those individuals who are directly responsible for conveying such information to students.
We feel strongly that publicizing the process for curriculum development and providing guidance for utilizing these access points are important steps for Treasury. We hope that the white paper will continue to serve as a source of information and guidance that will influence policymakers, educators, and individuals to begin the long process of incorporating financial education into core curricula. And we believe that we are already having an impact.
Several state legislatures have already passed or are considering bills that would require personal finance be taught in schools. Even better, weve seen bills that specifically call for personal finance concepts to be integrated into other core subjects.
At the end of the day, we ask ourselves: can financial education make a difference? The answer to that question is yes. We know that individuals who have received financial education participate more frequently in, and make larger contributions to, employer 401(k) programs . . . . that financial education results in higher savings rates . . . and that individuals graduating from high schools in states that mandate a personal finance education course have higher savings rates and net worths than individuals in other states. That is why we continue our work to ensure that all Americans have access to the financial education programs and resources that they need to take full advantage of the opportunities offered by this countrys great and diverse economy.
The Treasury Department is not the only federal government agency working to improve financial education. A wide variety of programs and resources are offered by entities like the U.S. Mint, the Federal Reserve System, the Treasurys Bureau of Public Debt, and the FDIC, just to name a few. These program and resources can help consumers with financial education issues ranging from opening a bank account to planning for retirement. The Office of Financial Education has been compiling a Federal resource directory that will be our website at www.treas.gov/financialeducation by mid-August.
In conclusion, I would like to thank you for your interest in improving financial education for students in Wisconsin. Working together, we can make a difference and ensure that young people have the knowledge and skills to effectively manage their financial lives. Enjoy the rest of the conference!
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