Councils & Commissions
A number of financial education initiatives have been undertaken by the Federal Government. The President has established a Council on Financial Capability. The Fair and Accurate Credit Card Transactions Act of 2003 created the Financial Literacy and Education Commission. The commission is coordinated by the Department of the Treasury has an Office of Financial Education. The thrust of these efforts appears to be to create a national agenda, to collect information on programs and resources and to outline possible courses of action for states and local communities. In addition, the Federal Government has developed many of its own programs and educational materials.
The President’s Advisory Council on Financial Capability
On January 29, 2010, the President signed Executive Order 13530, creating the President’s Advisory Council on Financial Capability (“Council”) to assist the American people in understanding financial matters and making informed financial decisions, and thereby contribute to financial stability. It is composed of non-governmental representatives with relevant backgrounds, such as financial services, consumer protection, financial access, and education. The Council will suggest ways to coordinate and maximize the effectiveness of existing private and public sector efforts and identify new approaches to increase financial capability through financial education and financial access.
January 29, 2010
Section 1. Policy.
To help keep America competitive and assist the American people in understanding and addressing financial matters, and thereby contribute to financial stability, it is the policy of the Federal Government to promote and enhance financial capability among the American people. Financial capability is the capacity, based on knowledge, skills, andaccess, to manage financial resources effectively. In order to develop this capacity, individuals must have appropriate access to and understanding of financial products, services, and concepts. Financial capability empowers individuals to make informed choices, avoid pitfalls, know where to go for help,and take other actions to improve their present and long-term financial well-being.
Section 4. Functions of the Council.
To assist in implementing the policy set forth in section 1 of this order,the Council shall:
(b) advise the President and the Secretary on means to implement effectively the policy set forth in section 1 of this order, including means to:
Theme I. Financial education should take its rightful place in American schools.
- (i) build a culture of financial capability by promoting messages and lessons about sound financial practices as broadly as possible;
- (ii) improve financial education efforts directed at youth, young adults, and adults in schools, workplaces, and other settings through innovative approaches;
- (iii) promote access to financial services;
- (iv) promote the private-sector development of financial products and services benefitting consumers, especially low- and moderate-income consumers;
- (v) educate consumers about effective use of such products and services;
- (vi) identify the most important basic financial concepts and actions individuals need to understand and perform to be financially capable;
- (vii) identify effective financial education approaches and methods for evaluating the effectiveness of financial education approaches; and
- (viii) strengthen and enhance coordination between public and private-sector financial education programs;
Financial illiteracy is widespread in the United States and Americans, including students, are worse off because of this. In one recent study adults scored a grade of C in financial literacy, while high school students mainly received failing grades (Lusardi, Mitchell, 2009). Low levels of financial literacy appear to be tied to higher rates of being “unbanked,” higher levels of indebtedness, lower rates of wealth accumulation, and lower rates of retirement planning (Lusardi, Mitchell, 2009). Eighty-two percent of Americans and eighty-nine percent of teachers think personal finance should be taught to all students at least as early as high school (Visa 2011, Way 2009). In particular, navigating whether and how to pursue higher education and how to finance this investment is critical, but many students appear unprepared to do it. Two million enrolled college students eligible for Pell Grants didn’t apply for Federal aid, leaving money on the table (NCES, 2008); two-thirds of students taking private loans didn’t exhaust more affordable, flexible Federal aid first (TICAS, 2009); and at a time when student loan debt now exceeds credit card debt in America, student loan defaults are on the rise.
Students need to be provided with effective financial education before they enter into financial contracts, yet:
- Only 9 states have formal requirements to assess students’ financial literacy (CEE, 2009).
- Less than 20 percent of teachers believe they are adequately prepared to teach personal finance topics (Way, 2009).
- Financial education and debt management programs aimed at students receiving Federal student loans are unevenly administered and rarely evaluated.
- While there are many financial literacy programs aimed at America’s students from pre-kindergarten through college and beyond, there is a dearth of research on the effectiveness of these programs and their impact on subsequent behavior.
Theme III. Americans should also learn the core concepts of personal finance at the heart of their lives— in their families and in their communities.
Families and the communities in which they live are the core social and economic units of American society -- the key environments within which financial capability can be taught and learned with long-lasting effectiveness. Responsibility for modeling and teaching financial capability begins in the family and extends to the local community of businesses, financial institutions, schools, non-profits, and even places of worship. Parents need to start the conversation (e.g., “talk to your kids about money”), and we need to provide the public, especially low and moderate income families, the learning tools and the financial access to become financially capable.
The financial crisis of 2008, in part, demonstrated the lack of understanding of basic financial management information and skills, which was costly to society and disproportionately impacted America’s low- and middle-income earners. Our country loses valuable human capital as Americans who struggle for daily financial survival are unable to pursue higher education or focus their talents on innovation, entrepreneurship and intellectual contributions to the nation’s progress.
- Parents are the single greatest influencers of positive financial attitudes and behaviors in their children (Shim, Barber, Card, Xiao, Serido, 2009).
- Even if parents do not model positive financial behaviors in front of their children, they influence positive financial behaviors through their expectations for their children. Also, they influence their children through direct teaching (Shim, et al., 2009).
- In addition, a growing body of research has been coalescing around the notion that young children can grasp rudimentary financial concepts.
- In a recently completed study in the Journal of Children and Poverty, Center for Social Development researchers found that among youth who expected to graduate from a four-year college, those with a savings account in their name were approximately six times more likely to attend college than those with no account.
- “Communities are an important entry point for social change.…” They affect individual and family well-being and their influences are amenable to change (Aspen Institute, 2002).
In beginning our work and participating in listening sessions, we members of the President’s Advisory Council on Financial Capability (PACFC) are struck by recurring themes we see in the landscape today:
- The sheer number of initiatives aimed at improving financial literacy and capability is staggering. These efforts emanate from every aspect of federal, state and local governments, a vibrant non-profit community, and the private, for-profit sector.
- There is an abundance of content available for most target populations, but much of this content is under-utilized, and has not been studied as to its effectiveness in effecting positive behavioral change.
The Financial Literacy and Education Commission was established under the Fair and Accurate Credit Transactions Act of 2003. The Commission was tasked to develop a national financial education web site ( MyMoney.gov) along with a hotline (1-888-My Money) and a national strategy on financial education. It is chaired by the Secretary of the Treasury and made up of the heads of 20 additional federal agencies. The Commission is coordinated by the Department of the Treasury's Office of Financial Education.
- MyMoney.gov is the federal government's website that serves as the one-stop shop for federal financial literacy and education programs, grants and other information. MyMoney.gov is available in English and Spanish.
- 1-888-MyMoney is the federal government's toll-free hotline accessible to the public seeking information about federal financial education materials. Information is available in English and Spanish.
- Promoting Financial Success in the United States: National Strategy for Financial Literacy 2011 was created through a process that included conversations with private, public, and non-profit representatives from the field. Articulating a vision of sustained financial well-being for individuals and families in our nation, this document sets strategic direction for policy, education, practice, research, and coordination in the financial literacy and education field. ?
Why and How: Background Report
Developing the 2011 National Strategy