Who Cares About Financial Literacy?

For years, financial literacy has seemed like a minor concern compared to more urgent problems facing the nation. In the aftermath of the financial crisis, however, the issue is now getting a lot of high-profile attention.

According to a recent Forbes article, the Obama administration is now committed to educating Americans in saving and investing, following the worst economic crisis since the Great Depression. The U.S. Treasury and Education departments announced plans to improve financial education for high school students, focusing their efforts on poorer neighborhoods with few financial services. 

The impetus for this newfound commitment came on the heels of a survey from the Financial Industry Regulatory Authority and the Investor Education Foundation, showing that young adults display much lower financial literacy than older generations. The proof is unfortunately in the pudding when you look at the decline in the U.S. savings rate: According to the Bureau of Economic Analysis, the national savings rate was above 10% as recently as 1985, but fell below 1% several times in recent years before climbing back to an average of between 4% and 5% in 2009.

Now, some well-known corporations like Bank of America (NYSE: BAC  ) , Charles Schwab (Nasdaq: SCHW  ) , JPMorgan Chase (NYSE: JPM  ) , Allstate (NYSE: ALL  ) , McGraw-Hill (NYSE: MHP  ) , and Ford (NYSE: F  ) have dedicated philanthropic efforts to financial literacy. But increased government involvement will only help as it attacks the problem on a new front.

At the Fool, we applaud all these efforts as we embark on our own philanthropic mission to spread financial education, via our annual Foolanthropy campaign. We're thinking globally and acting locally, by "adopting" a D.C. public charter school and pledging to donate $0.10 for every article comment, blog post or comment, and discussion board post throughout the campaign. We'll also organize employee volunteers and teach financial literacy workshops to students and parents.

The campaign has certainly taken off in the CAPS community, generating over 2,000 comments on one particular blog post, setting a new record for the Fool. We've also solicited some great financial advice prompted by our CEO, Tom Gardner.    

So let us know what you think in the comments box below (you'll add another $0.10 to the campaign!). Will the government's plan have an impact, or are we, as a nation, a hopeless case of overspenders and undersavers? What advice would you give to the next generation of consumers?

Claire Stephanic does not own any of the companies mentioned. Charles Schwab is a recommendation of Motley Fool Stock Advisor. The Fool has a disclosure policy

Read/Post Comments (7) | Recommend This Article (8)

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  • Report this Comment On December 17, 2009, at 4:04 PM, PhulishMortal wrote:

    Wait a minute. The federal government -- the United States "Hey, it's only a trillion here and a trillion there, no real money" federal government -- wants to educate their citizenry in saving and investing? The same bunch who can't keep their own spending under control? The folks who never met a dollar they couldn't wait to devalue? Would this be the "Spend-everything-you-can-get-your-hands-on Democrats" or the "Rail-at-government-spending-and-then-spend-everything-you-can-get-your-hands-on Republicans?"

    Up next: the "Tiger Woods Marriage Counseling" seminar series.

    Sorry: I'm feeling a bit more snarky than usual today.

    Seriously, though, I'm all for teaching financial literacy, at least in a limited, basic sense. Anything we can do to teach basic skills -- checkbook balancing, familiarity with the power of compounding, the effects of inflation, etc -- is all to the good; I'm just not sure it's the place of the federal government. I'm sure they'd be more than happy to fund it, though.

  • Report this Comment On December 17, 2009, at 10:18 PM, rd80 wrote:

    I've long believed that with the 401K pushing defined benefit plans aside, it is critical that basic personal finance be a part of public school curriculum.

    It is simply essential that people entering the workforce have some ability to plan for the future or at least understand enough to know when they need help. There's no one there to make sure it gets done for them.

    We have too many people in their 40's and 50's who have no retirement plan and not enough time. Where that was a conscious decision on their part - shame on them. Where it was because they didn't know any better - shame on our education system.

  • Report this Comment On December 18, 2009, at 4:04 AM, ozzfan1317 wrote:

    I agree wholeheartedly the only reason I started saving was from what my mom taught me. I knew nothing of the stock market until age 18 when a financial counselor told us about it in boot camp and I even wasted a couple of years chasing penny socks. I guess the best education is the one that life teaches you.

  • Report this Comment On December 18, 2009, at 7:01 AM, neskolf wrote:

    The effort to increase financial literacy is laudable. But can the decline in savings be attributed to a lack of financial literacy or a lack of financial responsibility?

    All of the financial literacy courses in the world are meaningless if people don't exercise restraint and live within their means. In a time when the government is doing everything it can to shelter people and institutions from their own fiscal irresponsibility (while practicing their own form of fiscal irresponsibility, as cited by PhulishMortal above), it's difficult to believe that this government initiative will lead to any meaningful change.

  • Report this Comment On December 18, 2009, at 8:33 AM, sid2286 wrote:

    I think that this is a wonderful thing. My fiance and I have had long conversations about how high schools should teach this early and often. This would effectively prevent people signing up for loans and credit cards with rates and conditions that they do not understand. I'll even go as far as saying that if they had started this in the 90's the whole housing bubble would have been much less and there would have been much fewer foreclosures, because people would not have signed up for things that put them in over their heads. And here is my ten cents towards fixing it.

  • Report this Comment On December 18, 2009, at 11:05 PM, DDHv wrote:

    I've found Robert Kayosaki's books & games to be useful. The explanations are even simple enough for me to grasp them well! ;-))

  • Report this Comment On December 29, 2009, at 11:55 AM, thetucket wrote:

    In junior high and high school we had model stock-trading exercises, etc., and you could take economics, but that doesn't mean you were going to be trained to save--that's more of a value on develops with experience and exposure to familial financial decisions--both wise and poor. I think at least a basic financial literacy course should be a standard part of the secondary school curriculum, just like algebra or chemistry or English, but wise financial decisions will require a cultural shift that is bigger than academics alone.

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