See Ben testify before Congress yesterday? Hear Ben talk about the importance of financial literacy? Speak, Ben, speak!
When Fed Chief Ben Bernanke appeared before the Senate Banking Committee on Tuesday to testify about financial literacy, he had to respond to pesky little questions about the stock market's recent slide, interest rate hikes, and his informal chat-fest with Maria Bartiromo last month. But when the subject matter got serious, Bernanke's words could not have been clearer: Financial literacy leads to better decision-making among consumers and to improvement in the financial markets.
This was no ambiguous banter of the type we've become accustomed to concerning, say, interest rate policy. Bernanke said clearly that while technology has transformed the ability of the financial services industry to provide a greater range of products to a larger audience, the public still needs the financial knowledge to make informed decisions. He believes that a better-informed public will also promote lower-cost financial products.
We also heard from Securities and Exchange Commission Chairman Christopher Cox, who emphasized that although it's not his agency's job to tell people how they should invest, it's still critical to help investors to make their own informed decisions. He pointed out the SEC's efforts to reach out to certain target audiences, including young adults, teachers, seniors, and members of the military. Recognizing that even knowledgeable investors can have trouble wading through reams of paper loaded with legal jargon, he also reported on the agency's efforts to make disclosure more user-friendly through the use of interactive data. I'll follow this development and summarize its progress in a future article.
It's nice to hear our policymakers speak about such important matters in clear and direct language. But some of the statistics they cited underscored just how much education the public needs about important financial matters. For example, fewer than half of high school students surveyed recently by the JumpStart Coalition understood the impact of inflation on savings, and average scores on the entire study were low. The data also revealed a gap between minority and non-minority students. White students averaged just 55% on the study, while Hispanics garnered only 46.8% and African Americans trailed with 44.7%.
Obviously, there's much work to be done. The good news is that the number and breadth of initiatives aimed at promoting financial literacy is growing. If you want to get involved, you can find various financial education projects throughout the country listed at the end of the Fed chief's prepared testimony, which you can find posted at federalreserve.gov. And if you want to brush up on your own knowledge while you're at home in your jammies, just visit our Fool's School or check out some articles from our Foolish Fundamentals series, starting with the most basic of all -- an introduction to stocks. We're also offering an exclusive teleseminar with Fool co-founders David and Tom Gardner, who can help you understand when to buy and sell stocks in this uncertain market.
Fool contributor S.J. Caplan believes it's never too early, or too late, to embrace the importance of financial literacy. Even in your jammies. She is a former vice president and assistant general counsel of Goldman Sachs and former vice president and derivative finance specialist at Lehman Brothers. She also serves as an arbitrator for the New York Stock Exchange and the NASD.
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