One of the most important trends of the 1990s was the rapid increase in the number of Americans with capital investments -- some through individual stock purchases, some through employer-sponsored mutual funds, and still others through tax-deferred savings vehicles, such as IRAs, 401(k)s, and college accounts. By the end of the decade, nearly one-half of all American households contained stockholders.
However, over the past five years, Americans have witnessed a declining savings rate, and increased debt. Regardless of whether the economy peaks or plummets, one thing remains the same: personal financial responsibility is crucial to maintaining and accumulating wealth and building retirement security.
Unfortunately, for the average American financial decision making has never been more complex. Whether it is navigating the differences between a Roth or regular IRA, or interpreting the fine print of a convoluted credit card statement, Americans face a continually growing array of options about what to do with their money. Without basic financial literacy, people frequently make bad investment and spending choices and are sometimes deterred from saving at all.
New Democrats in several states are now ensuring that workers have access to what may be the most critical tool they need to prosper in the New Economy: financial literacy.
One of the undisputed leaders in this effort is Delaware State Treasurer Jack Markell, who has been a pioneer in improving financial literacy since the late 1990s. Soon after becoming treasurer, Markell set up seminars entitled "Everywoman's Money," aimed at giving women, especially those recently divorced or widowed, basic training in financial management and investment. Working with Delaware's higher education institutions and K-12 schools, Markell also developed a school curriculum, "Bank At School," that seeks to provide children with a fundamental understanding of money matters by bringing a bank to school and giving them the opportunity to engage in basic banking activities. This model has been duplicated in Chicago, Illinois, New Jersey, California, and West Virginia.
Markell has also paved the way for the development of the "Summer Institute for Teachers," a one-week educational conference worth two credit hours, and "Money Talks," a newspaper for K-8 teachers. Both of these tools give teachers the skills to teach financial lessons to their students. Markell also developed an Annual State Treasurer's Summit for High School Students, where high school juniors from Delaware go each year to brush up on their saving and investing skills.
In 1999, Markell launched the groundbreaking "Money School," which provides free, convenient, and comprehensive financial education to Delaware residents. Topics covered by the Money School curriculum are widely varied, including debt management, homeownership, day-to-day budgeting, and retirement planning. The very popular school offers more than 500 classes statewide, ranging from workplace programs to "lunch and learns," responsible renting classes to breakfast sessions, all of which are taught by volunteer analysts, financial planners, and other financial experts. One recent Money School initiative brought financial education in both English and Spanish to the residents of a low-income apartment complex.
In 2001, Markell sought private funding to create the nonprofit Delaware Financial Literacy Institute to manage the Money School and provide financial education for Delawareans. In 2004, Delaware created Purses to Portfolios: Delaware Women Take Charge of Their Money, a comprehensive program that offers women encouragement and incentives to pursue ongoing financial education.
Even private companies have lent in a hand to increase financial literacy. In Chicago, Ariel Capital Management teamed up with John Nuveen & Company to run an innovative program raising awareness among young African-Americans about their private investment options. The program is simple: The first grade class at Ariel Academy is given $20,000 from the Ariel Nuveen Investment Fund to invest as a class throughout their primary and secondary education. Parents also receive information about their children's investments and lessons in savings and economics, which reinforce the classroom experience at home. Upon graduation, the seniors will return the initial investment amount to the school for another first grade class to invest. The profits are then used for college scholarships for class members, initiatives to improve the academy, and various philanthropic programs in the community.
In the non-for-profit sector, a consortium of organizations, and led by the National Endowment for Financial Education (NEFE), aims to increase student knowledge of investing and financial planning. Because this program focuses solely on high school students and does not include classroom investing with real money, NEFE has been able to introduce its curriculum in a much larger and more diverse environment and has, in fact, now reached more than 5 million students across the country during the past 24 years. Offered free to all public and private high schools nationwide, the program prepares students with hands-on learning techniques to develop good budgeting practices, create sound financial and savings plans, protect their assets, and fully comprehend the cost of borrowing money.
Beyond these innovative, there are many other models for policymakers to use when developing ways to improve financial literacy. Approaches will vary according to diverse needs of particular communities; the important thing is that policymakers act quickly to ensure that people develop the financial literacy they need to invest effectively, and build wealth for a financially secure future.
Delaware Money School
www.delawaremoneyschool.com
National Endowment for Financial Education
www.nefe.org/
Jump$tart Coalition
www.jumpstart.org/
National Foundation for Teaching Entrepreneurship
www.nfte.com/
Financial Literacy 2010
www.fl2010.org/
Hearing on "The State of Financial Literacy and Education in America," prepared testimony by Paul O'Neill, Alan Greenspan, and Harvey Pitt, U.S. Senate Committee on Banking, Housing, and Urban Affairs, February 5, 2002
http://banking.senate.gov/02_02hrg/020502/index.htm
Jack Markell, "Every Kid Also Needs the ABC's of Money," News Journal, December 19, 2000
www.dlc.org/ndol_ci.cfm?kaid=104&subid=116&contentid=2815
"Saving and Investing Among High Income African-American and White Americans," Ariel Mutual Funds and Charles Schwab & Company, June 2003
http://www.arielmutualfunds.com/forms/
2003-surveyBlack%20Investor%20Survey%202003_web.pdf
"Youth Financial Literacy: Preparing Youth for Financial Responsibility," Credit Union National Association, Inc., 1999
http://buy.cuna.org/detail.php?sku=22646
Honorable Jack Markell
Delaware State Treasurer
Thomas Collins Building
2nd Floor, Suite 4
540 South DuPont Highway
Dover, DE 19901
(302) 744-1000
(302) 739-5635 (fax)
jmarkell@comcast.net
Ronni Cohen
Executive Director
Delaware Financial Literacy Institute
3301 Green Street
Claymont, DE 19703
(302) 792-1200
(302) 792-1050 (fax)
ronni@delawaremoneyschool.com
Katie McMinn Campbell
Policy Analyst
Progressive Policy Institute
600 Pennsylvania Avenue, SE, Suite 400
Washington, DC 20003
(202) 547-0007
202) 544-0054 (fax)
Kcampbell@ppionline.org
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