Submitted to the
WHEREAS shifting demographics, the shift from defined benefit to defined contribution pension plans, the increasing complexity of the financial marketplace and other factors have increased the importance of being a financially literate consumer;
WHEREAS The American Savings Education Council in 1999 found in a Youth and Money survey that 15 percent of students said they understood financial matters very well, 67 percent said fairly well, and 18 percent said they did not understand financial manners at all;
WHEREAS in the Youth and Money survey, 18 percent thought they did a very good job of managing their money, 38 percent said they did a good job, 37 percent said they did an average job, and seven percent said they did a poor job;
WHEREAS in the Retirement Confidence Survey conducted by the Employee Benefit Research Institute, one-third of workers had a “high” level of financial knowledge, while 55 percent had a moderate level and 11 percent had a “very low” level of knowledge;
WHEREAS in 1998, the average consumer had five credit cards and a balance of $4,100 and in 2000 60 percent of U.S. households revolved a portion of their balance estimated as high as $8,000;
WHEREAS bankruptcy has risen over recent years from 1.27 million households in 1999-2000 to 1.38 million households in 2000-2001;
WHEREAS in it’s 2001 Retirement Confidence Survey, the Employee Benefit Research Institute found that only 39 percent had tried to calculate how much money they will need to save for retirement; and
WHEREAS data from the 1998 Survey of Consumer Finances showed that 56 percent of non-retired U.S. households had fewer assets than they would need to supplement Social Security and pension income throughout their retirement if they planned to maintain their level of living.
BE IT RESOLVED THAT AAFCS supports programs, services, and
policies locally, statewide, and nationally that are designed
to help members of households: 1) expand their knowledge
and education on the issues of managing money and assets,
banking, investments, credit, insurance, and taxes; 2) understand
the basic concepts underlying the management of money and
assets (e.g. the time value of money in investments and the
pooling of risks in insurance; and 3)
AAFCS function as a conduit for linking policy makers as well as members of households to research and learning resources; AND THAT
AAFCS engage in collaborative relationships including partnerships with the public and private sectors to effect dialogues and deliberation on financial literacy that takes place locally, statewide, or nationally; AND THAT
AAFCS members serve as resources to financial institutions in addressing financial literacy needs in local communities.
Financial literacy across the lifespan is a critical issue. There are stories in the press on a weekly basis describing the destitute financial plight of the elderly and the lack of financial knowledge of young people. This Association has from its earliest beginnings been at the forefront of teaching personal finance and encouraging financial stability.
Despite the critical importance of financial literacy to young people, the average student who graduates from high school lacks basic skills in the management of personal financial affairs. A nationwide survey conducted in 1997 by the Jump$tart Coalition for Personal Financial Literacy examined the financial knowledge of 1,509 12th graders. On average, survey respondents answered only 57 percent of the questions correctly, and only 5 percent of the respondents received a `C' grade or better. A more recent study conducted in 2001 reveals even more dismal results with only 50 percent of the questions being answered correctly. Further, the largest growing segment of the population declaring bankruptcy is in the age group 20-25. (Jump$tart Coalition for Personal Financial Literacy, 2001.)
The Consumer Federation of America and the Cooperative Extension system joined with the Consumer Literacy Consortium to quiz 1700 adults nationwide on a set of consumer skills; the average score was 75% correct but there was a wide variation in knowledge. (Hogarth, 2002) One of the glaring tragedies to emerge from the collapse of Enron Corporation is the demise of the financial security of its employees. ABC News reported that many employees invested their entire 401(k) retirement accounts in the corporation. This failure to diversify has resulted in many long time employees being essentially bankrupt. Financial counselors have strongly advised that employees diversity their retirement portfolios, however many employees continue their approach as a result of loyalty to the company.
Evidence would seem, therefore, to point to a lack of understanding of sound financial principles and the significant consequences of the lack of that knowledge. “Family financial failures have both personal and societal costs.” (Hira, 3) Certainly the additional stress on family members and family relationships is detrimental to overall health. And, there is a correlation between family violence and family stresses such as financial problems.
AAFCS serves as a board member on the Jump$tart Coalition for Personal Financial Literacy. The goal of the coalition is that every student should have the skills to be financially competent upon graduation from high school. Extension educators across the country offer seminars on personal financial literacy for young adults, young families, and for those preparing for retirement. This Association must continue its vigilance in helping individuals and families across the lifespan understand personal finance principles.
Duguay, Dara. “Graduating Money-Smart Students.” Vol.
94, No. 1, 2002. Journal of Family
Hira, Tahira. “Current Financial Environment and Financial
Practices: Implications for
Hogarth, Jeanne M., “Financial Literacy and Family
and Consumer Sciences.” Vol 94, No. 1,
Valenti, Catherine. “Retirement at Risk.” ABC News, December 4, 2001.
S. 807. “To Promote Youth Financial Education.” 5/1/2001. U.S. Senate.
Well-informed, well-educated consumers have the potential to make better decisions for their families, increasing their economic security and overall well-being. Secure households and families are better able to contribute to vital, thriving communities and foster community economic development. An effective and efficient marketplace requires knowledgeable consumers who make informed choices. Therefore, financial literacy is important for the individual, family, and community.
Members have expertise in financial management, human development, community development, and/or the learning process. They live in communities and have the capacity to bring people, programs, and resources together in timely and meaningful ways. Policy occurs locally, statewide, and nationally. For example, school curricula decisions are made locally and therefore, it is important to inform parents, school personnel, and boards of education about the need for and options financial education can be provided.
Passage of this resolution would not have a negative effect
on the AAFCS budget because:
Suggested Implementation Strategies
1. Use this resolution and rationale in the Hogarth article
to build partnerships such as
3. Make financial education resources available to financial
institutions and other entities
4. Be involved in dialogue and deliberation on financial
literacy that takes place