[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
FINANCIAL LITERACY EDUCATION: WHAT DO STUDENTS NEED TO KNOW TO PLAN
FOR THE FUTURE?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON EDUCATION REFORM
of the
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
October 28, 2003
__________
Serial No. 108-39
__________
Printed for the use of the Committee on Education and the Workforce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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______
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COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN A. BOEHNER, Ohio, Chairman
Thomas E. Petri, Wisconsin, Vice George Miller, California
Chairman Dale E. Kildee, Michigan
Cass Ballenger, North Carolina Major R. Owens, New York
Peter Hoekstra, Michigan Donald M. Payne, New Jersey
Howard P. ``Buck'' McKeon, Robert E. Andrews, New Jersey
California Lynn C. Woolsey, California
Michael N. Castle, Delaware Ruben Hinojosa, Texas
Sam Johnson, Texas Carolyn McCarthy, New York
James C. Greenwood, Pennsylvania John F. Tierney, Massachusetts
Charlie Norwood, Georgia Ron Kind, Wisconsin
Fred Upton, Michigan Dennis J. Kucinich, Ohio
Vernon J. Ehlers, Michigan David Wu, Oregon
Jim DeMint, South Carolina Rush D. Holt, New Jersey
Johnny Isakson, Georgia Susan A. Davis, California
Judy Biggert, Illinois Betty McCollum, Minnesota
Todd Russell Platts, Pennsylvania Danny K. Davis, Illinois
Patrick J. Tiberi, Ohio Ed Case, Hawaii
Ric Keller, Florida Raul M. Grijalva, Arizona
Tom Osborne, Nebraska Denise L. Majette, Georgia
Joe Wilson, South Carolina Chris Van Hollen, Maryland
Tom Cole, Oklahoma Tim Ryan, Ohio
Jon C. Porter, Nevada Timothy H. Bishop, New York
John Kline, Minnesota
John R. Carter, Texas
Marilyn N. Musgrave, Colorado
Marsha Blackburn, Tennessee
Phil Gingrey, Georgia
Max Burns, Georgia
Paula Nowakowski, Staff Director
John Lawrence, Minority Staff Director
------
SUBCOMMITTEE ON EDUCATION REFORM
MICHAEL N. CASTLE, Delaware, Chairman
Tom Osborne, Nebraska, Vice Lynn C. Woolsey, California
Chairman Susan A. Davis, California
James C. Greenwood, Pennsylvania Danny K. Davis, Illinois
Fred Upton, Michigan Ed Case, Hawaii
Vernon J. Ehlers, Michigan Raul M. Grijalva, Arizona
Jim DeMint, South Carolina Ron Kind, Wisconsin
Judy Biggert, Illinois Dennis J. Kucinich, Ohio
Todd Russell Platts, Pennsylvania Chris Van Hollen, Maryland
Ric Keller, Florida Denise L. Majette, Georgia
Joe Wilson, South Carolina George Miller, California, ex
Marilyn N. Musgrave, Colorado officio
John A. Boehner, Ohio, ex officio
------
C O N T E N T S
----------
Page
Hearing held on October 28, 2003................................. 1
Statement of Members:
Castle, Hon. Michael N., a Representative in Congress from
the State of Delaware...................................... 2
Prepared statement of.................................... 2
Woolsey, Hon Lynn C., a Representative in Congress from the
State of California........................................ 3
Statement of Witnesses:
Duvall, Dr. Robert, President and CEO, National Council on
Economic Education......................................... 22
Prepared statement of.................................... 24
Response to a question submitted for the record.......... 48
Iannicola, Hon. Dan, Jr., Deputy Assistant Secretary for
Financial Education, Office of Financial Institutions, U.S.
Department of the Treasury................................. 4
Prepared statement of.................................... 6
Knell, Gary, President and CEO, Sesame Workshop.............. 17
Prepared statement of.................................... 19
Lyons, Dr. Angela, Assistant Professor and Extension
Specialist, Department of Agriculture and Consumer
Economics, University of Illinois - Urbana/Champaign....... 27
Prepared statement of.................................... 30
Additional statement submitted for the record............ 49
Strong, Robert, Executive Director, Securities Industry
Foundation for Economic Education.......................... 32
Prepared statement of.................................... 34
Additional materials supplied:
Bryant, John, Founder, Chairman, and Chief Executive Officer,
Operation HOPE, Inc., Statement submitted for the record... 50
Caslin, Michael J., III, Chief Executive Officer, National
Foundation for Teaching Entrepreneurship................... 53
Visa U.S.A., Statement submitted for the record.............. 64
Woods, David F., Chief Financial Officer, National
Association of Insurance and Financial Advisors and
President, Life and Health Insurance Foundation for
Education.................................................. 65
FINANCIAL LITERACY EDUCATION: WHAT DO STUDENTS NEED TO KNOW TO PLAN FOR
THE FUTURE?
----------
Tuesday, October 28, 2003
U.S. House of Representatives
Subcommittee on Education Reform
Committee on Education and the Workforce
Washington, DC
----------
The Subcommittee met, pursuant to call, at 2:30p.m., in
room 2175, Rayburn House Office Building, Hon. Mike Castle
[Chairman of the Subcommittee] presiding.
Present: Representatives Castle, Osborne, Biggert, Wilson,
Woolsey, and Majette.
Also Present: Representative Hinojosa.
Staff Present: Kevin Smith, Senior Communications
Counselor, Krisann Pearce, Deputy Director of Education and
Human Resources Policy; Amanda Farris, Professional Staff
Member; Kevin Frank, Professional Staff Member; Liz Wheel,
Legislative Assistant; Deborah Samantar, Committee Clerk/Intern
Coordinator; Ricardo Martinez, Minority Legislative Associate/
Education; Joe Novotny, Minority Legislative Associate/
Education; and Lynda Theil, Minority Legislative Associate/
Education.
Chairman Castle. The quorum being present, the Subcommittee
on Education Reform of the Committee on Education and the
Workforce will come to order. We are holding this hearing today
to hear testimony on financial literacy education, what the
students need to know to plan for the future. Under Committee
rule 12(b), opening statements are limited to the Chairman and
Ranking Minority Member of the Committee.
Therefore, if other members have statements, they will be
included in the hearing record. With that, I would ask
unanimous consent for the hearing record to remain open 14 days
to allow members' statements and other extraneous material
referenced during the hearing to be submitted in the official
hearing record.
Without objection, so ordered.
Good afternoon.
I would like to welcome our guests, witnesses, and members
to today's education reform Subcommittee hearing entitled,
``Financial Literacy Education: What Do Students Need to Know
to Plan for the Future?''.
Thank you very much for being here.
STATEMENT OF HON. MICHAEL N. CASTLE, CHAIRMAN, SUBCOMMITTEE ON
EDUCATION REFORM
Now, more than ever, we live in a world that has become
increasingly complicated when it comes to personal financial
matters. A generation ago, a basic knowledge of balancing a
checkbook and maintaining a savings account was adequate.
However, in today's complex world, many Americans are faced
with difficult decisions, such as determining what type of loan
they need, whether to invest in stocks or bonds, how to best
manage credit, and how soon to start planning for family
education needs and their retirement.
There are, approximately, 40,000 different credit products
available, an intimidating thought for even the most educated
consumer. Unfortunately, large numbers of consumers never learn
the basics of maintaining their personal finances and may
struggle with choices leading to financial freedom. Instead,
many live paycheck to paycheck and acquire financial debt.
According to the Federal Reserve, outstanding non-secured
consumer debt increased over $845 billion over an 11-year span.
In 2002, more than a million families filed for bankruptcy.
Today, our Nation's youth are bombarded with a multitude of
financial options at an increasingly young age, yet many are
ill-equipped to make informed decisions about financial
matters. According to a 2001 Teen-age Research Unlimited
survey, teenagers spend, rather than save, 98 percent of their
money, a total of $172 billion in 2002. One out of every three
teenagers has credit cards and even more have an ATM card.
Various public and private organizations that develop programs
to promote public knowledge of basic finances.
Many are working with elementary and secondary students to
provide them with strong money management techniques and how to
integrate financial education principles into curricula; for
example, my home State of Delaware, MBNA opened the Financial
Advisory Service over 10 years ago, which offers professional
advice to MBNA employees and their immediate family members.
Under the leadership of Tom Dimmel, it has extended the service
into the community and into the local school systems through
the facilitation of basic credit and money management
curriculum to all grade levels in elementary, high schools and
colleges throughout the country. It has educated nearly 1,500
students in Delaware and 14,000 students throughout the country
since 1995. Their extensively educated advisors teach not only
credit information, but especially in the case of students,
spend a great deal of time on financial basics like balancing a
checkbook and budgeting.
I am looking forward to hearing the witness' testimony.
[The prepared statement of Mr. Castle follows:]
Statement of Chairman Michael N. Castle, Subcommittee on Education
Reform, Committee on Education and the Workforce
Good Afternoon. I would like to welcome our guests, witnesses, and
members to this afternoon's Education Reform Subcommittee hearing
entitled, ``Financial Literacy Education: What Do Students Need to Know
to Plan For the Future?'' Thank you very much for being here.
Now more than ever, we live in a world that has become increasingly
complicated when it comes to financial matters. A generation ago, a
basic knowledge of balancing a checkbook and maintaining a savings
account was adequate. However, in today's complex world many Americans
are faced with difficult decisions such as determining what type of
loan they need; whether to invest in stocks or bonds; how to best
manage credit; and how soon to start planning for their retirement.
Unfortunately, large numbers of consumers never learn the basics of
maintaining their personal finances and do not have the tools necessary
to make choices leading to financial freedom. Instead, many live
paycheck to paycheck and acquire substantial debt. According to the
Federal Reserve, outstanding, non-secured consumer debt increased over
$845 billion over an eleven year span. In 2002, more than a million
families filed for bankruptcy.
Today, our nation's youth are bombarded with a multitude of
financial options at an increasingly young age. Yet many are ill-
equipped to make informed decisions about financial matters. According
to a 2001 Teenage Research Unlimited survey, teenagers spend rather
than save 98 percent of their money, a total of $172 billion in 2002.
One out of every three teenagers has credit cards and even more have an
ATM card.
Various public and private organizations have developed programs to
promote public knowledge of basic finances. Many of these organizations
are working with elementary and secondary students to provide them with
a strong education in money management and provide teacher training on
how to integrate basic financial education principles into curricula.
I am looking forward to hearing the witness' testimony pertaining
to the efforts these organizations are making to educate our young
people about the basics of personal finance.
With that, I yield to my colleague from California, Mrs. Woolsey
for whatever opening statement she may have.
______
Chairman Castle. With that, I yield to my colleague from
California, Ms. Woolsey, for whatever opening statement she may
have.
STATEMENT OF HON. LYNN C. WOOLSEY, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF CALIFORNIA
Ms. Woolsey. Thank you, Mr. Chairman.
I, too, am pleased we are having this hearing on financial
literacy because it affects all Americans each and every day.
From a seemingly small decision like how much to spend for
lunch, to a major life decision like obtaining a mortgage,
financial literacy is absolutely crucial.
Yet, it's clear that too many Americans are not financially
literate. During the first 2 months of 2003, mortgage
foreclosure set a record high. In the first quarter of 2003,
household debt service payments were close to 14 percent of the
disposable personal income. Personal bankruptcy filings
continued to set record levels. While some of this may be due
to current economic conditions, much of the financial trouble
Americans face today could be lessened or even avoided if we
talked financial literacy to school age children.
Children are still in school when they form the financial
habits and attitudes that will last throughout their lives, and
financial literacy teaches them about basic but important
transactions, such as savings, borrowing, and investing.
Unfortunately, a recent report by the financial literacy
organization, Jump Start, showed that high school seniors
scored lower on a financial literacy survey in 2002 than when
the first survey was conducted in 1997. It is not surprising
then to find out that bankruptcy of 18- to 25-year-olds nearly
doubled in less than 10 years.
The real world implications of not teaching our children
financial literacy are clear, and it is also clear that our
children are the ones who suffer most when they do not have a
good understanding of personal finances. I am glad to see that
our panel includes witnesses from their organizations that
should be and are on the front lines of improving financial
literacy. I look forward, Mr. Chairman, to hearing their
testimony.
Thank you for putting this together.
Chairman Castle. Thank you, Ms. Woolsey.
We have two panels today. The first panel consists
obviously of one person, and the second panel consists of more.
We will have the panelists speak and then the members will have
5 minutes in which to ask questions and elicit answers from the
panelists. The first panel consists of the Honorable Dan
Iannicola, who is a deputy assistant secretary for financial
education for the Office of Financial Institutions at the
United States Department of Treasury.
Prior to his current position, he served as special counsel
to the Assistant Secretary and director of communications in
the Department of Education'S Office of Post-Secondary
Education.
Additionally, Mr. Iannicola has worked as a counsel for the
May Department Stores Company as vice president and regulatory
liaison for the May National Banks. Before he begins his
testimony, I would like to remind our members that we do have a
5-minute limitation and Mr. Iannicola, with that, you may
proceed, sir.
STATEMENT OF HON. DAN IANNICOLA, JR., DEPUTY ASSISTANT
SECRETARY FOR FINANCIAL EDUCATION, OFFICE OF FINANCIAL
INSTITUTIONS
Mr. Iannicola. Thank you.
Good afternoon, Chairman, Counsel, Ranking Member Woolsey,
and distinguished members of this Subcommittee.
Thank you for the opportunity to appear before you today to
talk about American students' critical need for financial
education and what the Department of Treasury is doing to meet
that need.
Mr. Chairman, I commend you for focusing attention on this
important topic. Let me begin by drawing together a few
seemingly random facts that paint a troubling picture. 40
percent of Americans say they live beyond their means. 60
percent of American households have failed to pay their credit
card bills each month, and in 2001, more people filed for
bankruptcy than graduated college, but what has this got to do
with today's hearing?
Plenty. Rising bankruptcy, low savings rates, and frequent
misuse of credit are adult problems that can be traced upstream
to where some of our schools are failing to prepare their
children for their financial futures and children need our help
in this area more than ever.
Back when we were kids, a child's financial portfolio
consisted of an allowance, earnings from mowing lawns, baby-
sitting, and a piggy bank. But today, young people must be
familiar with things like credits cards, ATM and variable
APR's.
For them, learning basic financial skills is no longer
child's play. Consider the following: 28 percent of 12-year-
olds did not know that credit cards are a form of borrowing. 40
percent of 12-year-olds did not know that banks charge interest
on loans, and more than 20 percent of kids, aged 12 to 19, have
their own credit cards or access to their parents' credit
cards.
What is the solution?
One, we need to inform schools of what needs to be done.
Two, we need to help equip them to do it, and three, recognize
those schools that have succeeded. I will take them in order.
First we need to spread the word that the best way to introduce
financial literacy into schools is to encourage them to
integrate financial topics into existing curriculum. This
strategy is much more practical than asking schools to create
stand-alone classes in financial education.
At the local level, resources are so precious that every
decision is ultimately a tradeoff. As the president of a local
school board, I know what that is like. If I resurface the
parking lot, I cannot fix the leaky roof. If I purchase the new
computers, I cannot give the faculty the raise I want to give;
and if I have to have a stand-alone class for financial
education, I have to do away with something the kids might need
to be taught.
It is out of this appreciation for those local challenges
that we have the manageable alternative for curriculum
education and it is manageable; for instance, a primary
schoolteacher who is discussing addition and subtraction can
easily teach students how to make change for a dollar. A middle
schoolteacher who is telling his class how to figure
percentages can do it through a lesson on the compounding of
interest, and a teacher showing students how to perform long
division can teach them how to figure a monthly payment.
With input from the Department of Education and a number of
private groups, Treasury last year published this white paper
on that very subject. The paper identified ways financial
literacy could be integrated into current curricula. The
Treasury's white paper has already been cited by Colorado,
Montana and Texas in their State's financial literacy
proclamation.
The second part of this solution is equipping students with
the materials they need. Numerous private and governmental
organizations--excuse me, equipping schools and students with
the materials they need. Numerous private and governmental
organizations have created and distributed great teaching
materials for financial education, many of which are available
free of charge. Treasury has added to these resources with its
own contributions; for instance, the Bureau of Public Debts
Program called ``Money Math, Lessons for Life,'' teaches middle
school students about savings and budgeting and has been used
by 16,000 students nationwide.
The IRS has a program called ``Understanding Taxes,'' which
teaches high school and community college students about the
American college system. And the U.S. Mint has an interactive
Web site which educates young students about coins and their
history.
The final step is to recognize the ones that get it right.
This summer, the Department of Treasury honored with a
certificate of recognition a program that taught credit card
management at historically black colleges and universities, and
earlier this month, I got the chance to recognize an
Alexandria, Virginia high school for a financial literacy
program there. So the three steps of informing, equipping, and
recognizing schools is how we get this important job done.
The bottom line on financial education is that it works to
help children live better lives as adults. Until more schools
become aware of this reality and act upon it, our work is not
finished.
[The prepared statement of Mr. Iannicola follows:]
Statement of Dan Iannicola, Jr., Deputy Assistant Secretary for
Financial Education, Office of Financial Institutions, U.S. Department
of the Treasury
Good afternoon Chairman Castle, Ranking Member Woolsey and
distinguished members of the subcommittee. Thank you for this
opportunity to appear before you today to talk about the critical need
to provide financial education to school aged children as well as what
the Department of the Treasury is doing to address this important
issue. Mr. Chairman, I commend you for focusing a national spotlight on
this critical topic, which is so closely linked to our economic
futures--as individuals and as a nation.
The Problem
Let me begin by drawing together a few seemingly random facts to
paint a troubling picture. Forty percent of Americans say they live
beyond their means. 1 In 2002 the average American household
had $8,900 in credit card debt, up from $3,200 just 10 years earlier.
2 Sixty percent of American households fail to pay their
credit card bills in full each month and carry average balances of more
than $4,000. 3 The average household pays over five hundred
dollars a year in interest charges on credit cards alone. Finally, in
2001, more people filed for bankruptcy than graduated from college.
4
What has all of this got to do with the subject of today's hearing?
These grown up financial problems have everything to do with how we
prepare children for economic adulthood and why we need to be talking
about financial literacy in schools here today. The downstream, adult
problems of rising bankruptcy rates, low saving rates and frequent
misuse of credit, can all be traced upstream to how our schools fail to
adequately prepare children for their financial futures.
While financial education is very important for adults, it can have
the greatest overall life impact on young people. Young people have not
yet established bad spending patterns. Therefore, education can mold
their habits more effectively than it can for adults. Finally, young
people simply have the most years ahead of them to earn, save and
invest.
Consequently, young people are a great target audience for
financial education. However, that has always been the case. Why is the
issue of youth financial education more critical, more pressing today
than ever before?
When we were kids, a child's financial portfolio consisted of an
allowance, earnings from mowing lawns and babysitting and a piggy bank.
Times, however, have changed. Today's young people must be familiar
with things like credit cards, ATMs and variable APRs. For America's
youth, who spent over $172 billion in a recent year 5,
learning basic financial skills is no longer child's play. Consider the
following: 28 percent of 12-year-olds did not know that credit cards
are a form of borrowing, 40 percent of 12-year-olds did not know that
banks charge interest on loans, 28 percent of students with a credit
card roll over debt each month and more than 20 percent of kids ages 12
to 19 have their own credit cards or access to parents' credit cards.
6
Solutions
Treasury White Paper
Understanding the times in which our kids live and diagnosing the
overall financial literacy problem are relatively straightforward
exercises. Finding the best remedy however is more complex. That is why
the Department of the Treasury last year partnered with the Department
of Education to co-host a panel discussion with representatives from
groups such as the Jumpstart Coalition, the Black Alliance for
Educational Options, the National Council on Economic Education and the
National Association of Elementary School Principals. Following the
discussion, our office published a white paper based on the group's
findings called ``Integrating Financial Education Into School
Curricula.'' In the paper we explored the different means by which
financial education can be incorporated into other subjects.
One might ask why we advocated integrating financial education into
established curricula instead of calling for a separate class devoted
to financial literacy. Certainly a dedicated class would seem like the
obvious solution. Obvious solutions, however, are not always the best
ones. Speaking as a former school board president, I can tell you that
a federal demand for a new stand alone class is a demand that few
school districts could easily meet. Schools would have trouble finding
the funds, the faculty and the time to teach such a class. Moreover,
each school would need to calculate the opportunity cost of scaling
back instruction on another discipline that is also likely important to
student development.
While some of these concerns from the state and local level may
seem mundane in the face of a national financial literacy problem, we
should nonetheless listen closely to these local issues. My experience
tells me that local educators are frequently aware of critical details
that distant policy makers sometimes overlook. At the school district
level is where teachers know their students by name and by need. It is
where parents become actively engaged in their children's intellectual
development. The local level is also where students learn, where lives
are changed and where we will ultimately succeed in solving this
problem.
Mindful of these challenges at the local level, we explored
integrating financial education into established curricula like math
and reading as a more achievable goal. This approach allows schools to
impart valuable financial skills to students while they continue to
learn other core subjects. When schools seamlessly integrate financial
education into existing curriculum, students can better see how
financial issues are integrated into their lives. Introducing a school
to financial education in this way can lead to a plan that is less
costly to the school, less disruptive to the curriculum and, therefore,
more likely to actually happen.
The question then becomes ``how do advocates of financial education
get an integrated financial literacy curriculum into schools?'' The
white paper I mentioned earlier identified five access points for
integrating financial education into school curricula.
The first access point is the state educational standards. In a
standards-based education system, standards have a significant
influence on what is taught in the classroom. Informing the state
boards of education, which generally develop and adopt standards, about
the importance of including financial education in the standards can
help increase the chances that financial concepts are included in math,
reading and social studies curricula.
The second access point is through testing. A standards-based
education system uses testing to assess whether students are meeting
academic standards. Educators generally focus on subject matter that
will be tested. Therefore, including financial concepts in tests allows
teachers to prioritize financial education topics in the classroom.
The third access point is through textbooks. Publishers of
textbooks and other instructional materials can be informed about the
value of integrating financial concepts into other subjects, such as
math, reading and social studies. Before purchasing instructional
materials, states can impose requirements that publishers demonstrate
how their materials incorporate financial concepts into other subjects.
The fourth access point involves the use of financial education
materials. There are ample financial education resources available on
the Internet and directly from public and private groups that produce
or compile such materials. Many of these ``off-the-shelf'' materials
are excellent, free of charge and can be incorporated into math,
reading and social studies curricula to provide a financial education
component to these subjects.
Training educators is the fifth access point. Educator training and
professional development requirements provide an opportunity to stress
the importance of financial education to those individuals who are
directly responsible for conveying such information to students. This
strategy takes note of the reality that teachers themselves must first
be comfortable with financial education topics before they can
effectively instruct their student on such matters.
The white paper, which is available on the Treasury website
(www.treas.gov/financialeducation), was released a year ago this month.
We hope that it will continue to serve as a source of guidance and that
it will influence policymakers, educators and others to begin the long
process of incorporating financial education into core curricula. We
are gratified that only a year after its publication, the Treasury's
white paper has already been cited by Colorado, Montana and Texas in
their states' financial literacy proclamations.
Educational Resources
Like many other private organizations and governmental agencies,
the Treasury has contributed financial education teaching tools to
schools and the public. I would like to highlight four such programs.
First, through its Bureau of Public Debt, the Treasury has
distributed, free of charge, more than 150,000 copies of the Money
Math: Lessons for Life program. The Money Math curriculum is used to
teach math concepts to middle school children using real-life examples
from personal finance. Lessons include teaching children the importance
of budgeting, that savings leads to the accumulation of wealth and the
relationship between careers and earnings potential. The program has
been used in more than 16,000 districts nationwide.
Second, the Treasury's Internal Revenue Service (IRS) has developed
an interactive, instructional tax program called ``Understanding
Taxes'' to provide high schools, community colleges and the public with
a technology-based financial education instructional tool. Divided into
two areas of content - the ``How's of Taxes'' and the ``Why's of
Taxes'' - the program offers both print and online materials to help
students learn more about the history, theory and application of
America's tax system and how it impacts them.
Third, the IRS also provides tax guidance for teenagers and young
adults through its ``TAX Interactive'' (TAXi) website. The website
includes a collection of tax-related resources to help teachers
integrate lessons about taxes into a variety of classroom settings.
Finally, the Treasury's United States Mint helps to promote
financial literacy by combining technology and education on a web site
that uses coinage as a theme to foster education among children. The
United States Mint H.I.P. Pocket Change web site uses games,
informational features and animated cartoons to teach young learners
about subjects such as social studies, language arts, mathematics and
science through the use of coins. The site is also a resource for
teachers by offering lesson plans and classroom activities that help
teachers instruct about coins and the history that surrounds them.
Development of Standards, Recognizing and Coordinating
To encourage other high quality programs around the country, the
Treasury's Office of Financial Education develops standards for
financial education programs. Periodically, the Office will recognize
an effective financial education program through a visit and
presentation of a certificate of recognition. These events not only
honor the selected program, but they help raise awareness of the
featured program as a model for others to emulate.
The Department of the Treasury also coordinates activities with
other federal agencies that have financial education programs,
partnering with them as opportunities arise. To make all the financial
education resources of the federal government more accessible, the
Department has recently launched an on-line directory of major
financial education programs, complete with contact information.
Through the directory, visitors can locate the federal financial
education programs most suitable to their needs.
Conclusion
Since I began with the bad news, please allow me to close with the
good news. For those young people and adults struggling with saving,
spending and credit issues, a better life is possible, and financial
education is the way to get there.
The best research tells us that financial education can, and does,
make a difference in people's daily lives. Studies show that in states
that mandate personal financial education in schools, high school
graduates have higher savings rates and higher net worths as a
percentage of earnings, when compared to those from other states.
7 The positive effects of financial education carry into
adulthood, as borne out by the fact that individuals who have received
financial education tend to participate in employer 401(k) plans at a
higher rate and with larger contributions than others. 8
The bottom line on financial education is that it works to help
children live better lives as adults. Until more schools acknowledge
this reality and act upon it, our work is not finished.
Endnotes
1 Fort Worth Business Press 2002
2 Patricia Wolff,--Area Lawmaker Wants Students to Learn
More about Personal Finance,'' Oshkosh Northwestern, April 28, 2003
3 Mary Judice, ``Money Matters; Prudent Students can
Avoid Big Debt,'' Times Picayune, April 27, 2003
4 Patricia Wolff,--Area Lawmaker Wants Students to Learn
More about Personal Finance,'' Oshkosh Northwestern, April 28, 2003
5 ``Check Out These Dollars and Sense,'' Peoria Journal
Star, May 12, 2003
6 Jennifer Goldblatt, ``Kids Turn to Parents to Learn to
Manage Money,'' The News Journal, August 25, 2003
7 B. Douglas Bernheim, Daniel M. Garrett, and Dean M.
Maki, Education and Savings: The Long-Term Effects of High School
Financial Curriculum Mandates (Jun. 1997)
8 Robert Clark, Ann McDermed, Kshama Sawant, and
Madeleine d Ambrosio, ``Financial Education and Retirement Savings,''
Federal Reserve Bank Paper, March 2003
______
Chairman Castle. Thank you very much, and I will start the
questioning by yielding myself 5 minutes.
Tell me about--I realize you have an education background,
as well as the work you are doing now. But tell me about the
integrating of financial literacy into the existing curriculum.
I tend to agree with you, and every time you talk to educators,
they will always tell you they do not have room for anything
else, and I respect that, and I think it is crap, but on the
other hand, I am not sure that we have perfected the
methodology for doing this.
I--and let me preface all of this by saying I think the
problem is greater than my opening. I just think it is
unbelievable that basically you are responsible for your own
investments, probably in terms of your retirement, maybe your
kids' college and all kinds of other financial steps you have
to go through and the choices are unbelievable.
If you get into mutual funds, not even stocks, there are a
variety of choices, so this is a very difficult issue, and I
worry--is anyone looking at that methodology of that
integration into the existing curriculum, I guess is my
question?
Mr. Iannicola. No, that is a great question, and there were
a lot of chips on the table for everyone. Through the white
paper, and let me talk a little bit about that that we got done
with the Department of Education and others, we identified five
areas that--five access points through which--those who
advocate integrating curricula can get to the schools, through
which they can make their case.
The first one was State Educational Standards. If we can
get a State to put something in their standards, regarding
financial education, that obviously gives the school the
guidance they need.
Second is through testing, which usually follows on the
heels of standards, and if something about financial education
is in a test, obviously, it is going to more likely make it
into a lesson plan.
Third access point is textbooks. Textbook publishers make
important decisions and have tremendous downstream effects, and
if we can emphasize to them to put some examples in a math
textbook, we are getting into the constituency we need to speak
to. The fourth was the use of education materials. I gave a few
of the ones the Treasury produces, but that is just a small
part of what is out there on the way.
Consequently, whenever I speak to teachers, it is not that
they do not want to put things in their classroom. A lot of
them just do not know what is there, and they are amazed when
they find out it is there and it is free. So promoting
financial educational materials is another way.
And the last is training educators. We have a lot of
educators who want to do the right thing, but maybe they need
to brush up on their own financial education teachers, so that
way we get to the kid much more effectively.
Chairman Castle. Let me shift gears for a moment, and that
is something you didn't talk about too much but is of interest
to me, and that's the cultural aspect of this; I mean, I do not
think a lot of kids subscribe to money magazine or watching TV
shows about money, but in looking at the media, the culture
that is getting to them, is there anything that we can do,
obviously, you cannot regulate it, it is not what government
should be doing, but is there anything we can be doing to
encourage the different cultural outlets for children, to be
building some of these things in just as they are in schools?
Have you given any thought to that or is that beyond your
purview at this point?
Mr. Iannicola. That is beyond our purview, to give those
types of goals for culture, but one insight I have that might
relate to this: Frequently, the place where financial education
can do the most good is with the people who do not know they
have options: I have met some kids, a recent trip to Brooklyn,
the school was 98 percent free and reduced lunches, and I met
one student who, an eighth grader, was adamant that he never
wanted to put his money in the bank, and I tried to make my
case, but he would have none of it.
I realized why he took that position. One asked me: If my
money gets put in the bank and the bank burns down, is my money
gone? If it gets robbed, is my money gone; so he didn't know he
had a choice. I guess if I thought my money was going to
disappear that quickly, I would put it in my mattress, too. So
a lot of folks are taking their guidance from movies, but
others just don't know there is another way.
Chairman Castle. Let me fit in one more question: In your
work in Treasury and your work in education, personally and
professionally, have you--is thought being given to the low
income circumstances of all of this money management, because
they, obviously, they have greater credit problems there, there
are a lot of things I think we could be fixing, even on the
incomes that people presently have, but I think it is
different. I think that educational process is different.
Mr. Iannicola. I think that's right; I mean, the education
you give to kids whose parents have brokers is different from
the ones who have case workers, and we need to target education
specifically for them.
Basic savings is the main thing we need to get through to
those kids and actually, you can make a bigger difference to
those kids because their parents aren't giving it to them, they
may not be in high school, that is teaching them what they need
to know. So we do focus on those projects, we do recognize
schools who do good work at any income level, but we certainly
can see the difference in the lower income schools that you
mentioned.
Chairman Castle. Thank you.
I appreciate your answers.
Mr. Iannicola. Thank you.
Chairman Castle. I will yield 5 minutes to Ms. Woolsey.
Ms. Woolsey. Actually, I think the first lesson for high
school and college kids who are getting credit cards in the
mail is to pick up the scissor and cut through the credit card,
lesson one.
Mr. Iannicola. OK.
Ms. Woolsey. How are we measuring best practices? Do we
have to wait for the NAPE tests and results before we know how
to truly measure what we are doing?
Mr. Iannicola. Right.
Quantitatively, it is difficult to measure these things,
unless you have the type of tests I think you cited in your
comments.
What we try to do when we look at a program is we have
eight standards. One of the qualitative standards actually
looks into whether the program has a quantitative standard, so
at our level, we are looking for programs that do things, for
instance, like target to the cultural issues of their audience,
things that have follow-up. If a program has follow-up, where,
after the seminar, whatever, kids can go to a Web site or one
800 number or the teacher is going to return or the seminar is
going to return. Those are the things that we look at when we
recognize a program.
Ms. Woolsey. Well, then, my other question would be: How do
we make this interesting?
I mean, how do we get kids onto a computer?
Now, one of the thoughts I have is, you know; I mean, I am
an old lady, so when I went to school, we learned how to
balance a checkbook.
Mr. Iannicola. OK.
Ms. Woolsey. Some would say I have never learned it, but,
nevertheless, I don't get in trouble, so I must balance it
eventually, but now you pay your bills on the computer, so I
mean, in the computer class, in the math class, it doesn't have
to be just totally about financial responsibility, but the math
questions can, you know, assimilate all the getting to the same
goal.
Mr. Iannicola. Agreed, agreed.
Ms. Woolsey. Not a whole separate program.
Mr. Iannicola. Two answers to that.
One, I think integration is an answer, because you and I,
we do not think of financial issues all by themselves. They
come naturally seamlessly throughout the day as per your lunch
example, so we need to integrate into our curricula lessons so
that kids do not know they are learning about financial
education, but what do you know, they did, because they learned
math, percentages, et cetera; and second I think it is good to
show them the money; that is, show them what is at the end of
the rainbow.
If you live the type of life you want to live, you will end
up with a nicer car, a nicer home, a brighter future, and I
think kids need to see that there is figuratively a payoff to
all this, not to make things too materialistic, but I think we
need to give them a view of the future and how financial
education is going to get them a better one.
Ms. Woolsey. I agree with you, but I also agree that it is
the greater society and it is the business folks and the banks.
They have a responsibility, too, to not dangle these credit
cards in front of our kids who cannot not use them because it
is just too much of a challenge for them.
Thank you.
Mr. Iannicola. Thank you.
Chairman Castle. Thank you, Ms. Woolsey.
I yield 5 minutes, at this time, to Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman.
I have just a couple questions. You said that there were a
lot of resources that are on the Web, but teachers just aren't
aware of it, aren't aware of what is available to them.
Mr. Iannicola. Absolutely.
Mrs. Biggert. Or haven't had any training?
Do you have any recommendations on how we can get this
information to them, how to spread the word, so that they know
that it is available?
Mr. Iannicola. Mm-hmm. Through the work of our office; I
mean, we are always working to do more outreach to those
groups, and there are many resources throughout the government
that are taking similar steps. I think you are going to hear
from some panelists who probably do some of the same work, and
I think helping them to do their work, supporting them and,
believe it or not, simply giving publicity of these issues can
have a great effect.
That is one of the reasons why we like to give
certificates, not just to open for the individual program, but
so that we create a ripple so people know it is there and
available to them. So I think it is much more of an awareness
issue maybe than an education issue, so I think just getting on
the roof tops and getting the word out.
Mrs. Biggert. OK. Earlier this year, President Bush signed
No Child Left Behind, and one of the innovative assistance
programs that has funds available for local school districts to
use, and there is 27 categories, and one of those categories is
activities to promote consumer economic and personal finance
education.
Do you know if those are people who are going after those
grants or do you have any access to that?
Mr. Iannicola. I do not. Probably that is for the
Department of Education. I am aware of that provision as well.
I do not believe it is on that provision. I know they did a
grant to the Jump Start coalition. I think that was from a
different pool of funds.
Mrs. Biggert. Yes, I know that. Do you think that the
consumer economic and personal finance education is broad
enough? Are we really--you know, there are so many courses that
are taught in the schools and in the past have been learning
how to write the checkbook or clipping from the newspaper of--
they are going to set up a, you know, household and how much
they are going to spend for rent, and then for food, and trying
to balance or make a budget for, their family budgets, and that
kind of thing, but that really doesn't get to a much more in-
depth economic vigorous course.
Do you think that this is--these programs are enough to
really get into pensions and--.
Mr. Iannicola. Right.
Mrs. Biggert. And stock market, inflation, what all that
means?
Mr. Iannicola. Right. Right. No. I think we are hoping,
with some of the people we speak to, to get them to crawl
first. I agree that is right. It would be great if we could get
them to know the ins and outs of how the economy works and the
bigger picture, but I guess this is a place where I guess we
would counsel selfishness first.
Let's get you to know about your own finances first and
then we will hopefully--that will kindle an interest so that
you will want to take a bigger picture of the macroeconomy, and
our office focuses not just on students, but on a variety of
groups, immigrants, people who are nearing retirement, who will
be facing sophisticated financial decisions, so I think that is
a good goal.
Our emphasis is on the first step.
Mrs. Biggert. Thank you.
Thank you, Mr. Chairman.
Chairman Castle. Thank you, Mrs. Biggert.
I yield 5 minutes, at this time, to Mr. Hinojosa.
Mr. Hinojosa. Thank you, Mr. Chairman.
Mr. Iannicola, I want to commend the administration for
issuing its white paper entitled, ``Integrating Financial
Education'' into school curricula--.
Mr. Iannicola. Thank you, sir.
Mr. Hinojosa. --this last October, and for Treasury and the
Department of Education working together on it. I especially
want to acknowledge the role Sheila Bayer played in determining
that white paper. She has been very helpful to me and my
constituents, especially to the Hispanic community, as I'm sure
you will be in your current role.
The white paper notes that there are a tremendous amount of
natural literacy resources on the Internet and available
through other sources. Obviously, it is impossible for each
school district to use all of these resources.
My question is: Would you and Treasury support the creation
of a national commission headed by President Bush that will
recommend how to integrate the economic and personal finance
education into primary secondary and post-secondary curricula?
Mr. Iannicola. We are excited about working with anyone on
financial education. We have been very enthusiastic about
seeing the level of interest. There were a number of pieces of
education about financial literacy, and we couldn't be happier
about seeing the level of enthusiasm.
With respect to a particular piece of legislation, we
really haven't taken a position on that one, but we would look
for the overarching principles of having a program that is
effective, that is, targeted to the right students, to teach
them the right things, and practical, something that can have
on the ground results, so those are our general positions.
Mr. Hinojosa. Let me add to my concerns. The commission
envisioned a legislation sponsored by Mrs. Biggert, the CENTS
Act, that I cosponsored that will identify and recommend best
practices for the teaching of economics and personal finance.
The proposed commission will also recommend how to better
coordinate Federal, State, local and private sector efforts to
develop financial literacy. This proposed legislation would
seem to meet all the goals set forth in your white paper, as
well as in your testimony given here today before this
Subcommittee, would it not?
Mr. Iannicola. Well, without taking a position, since we
haven't done that as of yet, I guess I would have to say that
we are--there is a lot of room for a lot of good ideas on this.
What I said today I stand behind, that we are in favor of
getting the word to kids and helping schools to integrate
financial education topics into the curricula. But there are a
variety of solutions, and we are eager to look at all of them
and again commend those who are contributing to the discussion.
Mr. Hinojosa. Well, hopefully, you let Mrs. Biggert and me
drop down those hurdles, from saying yes, you will work--and if
the administration will say yes, we will work with you in your
legislation. Because I happen to have lots of young people,
young high school graduates, many college graduates, who are
very appreciative that somebody is paying attention to the need
to try to coordinate the resources that are available out
there, because they feel unprepared to be able to make a
decision such as buying their first automobile, much less
talking about buying a small home.
All of this to say that that is without touching another
segment that you mentioned in your last remarks, and that is
the immigration unbanked, those folks who are making a big
percentage of our work force throughout the 50 States and the
fact that they are unbanked makes it a big concern in my
district. So I am hoping that you will use all your persuasive
skills to get the administration to take a look at this
legislation that Mrs. Biggert and I are trying to get the
administration to look at and consider, because I think that
there is a great need, in listening to the banking community
and those who are seeing the importance of this financial
literacy throughout the country.
Mr. Iannicola. OK, and I guess--I appreciate your thoughts
on that; and two points that, right now, we can address without
getting into the legislative issue. I am sure you are familiar
with the First Accounts Program. That was established recently.
There is an $8.4 million that we have awarded in grants,
helping folks to get their first accounts, and we are looking
forward to investigating that program and seeing exactly how
effective that is. But the goal is a good one, as I think you
mentioned.
The other point about pulling all the resources together so
people know where to go, I think it would be helpful to direct
people to our Web site.
The Department of Treasury, Office of Financial Education,
we recently put together a financial education resources
booklet which contains descriptions of about 25 programs in
different organizations across the Federal Government. We kind
of consider it the first place to go, a starting point, if you
are going to look at all the resources the Federal Government
offers. We introduced it in August, and we had about 8,000 hits
in the first month. So anyone looking to find out more about
them, what all parts of the Federal Government offers in the
way of financial education, would be advised to start there.
Mr. Hinojosa. Finally, tell me: Aren't the first accounts
frozen, that one that you just mentioned?
Mr. Iannicola. Well, the grants are ongoing. The grants are
still being drawn down, and the work continues to the grantee.
Mr. Hinojosa. So there is money available to apply for?
Mr. Iannicola. No. There are people who receive money who
are presently spending it on programs, let me be clear.
Mr. Hinojosa. OK. Thank you.
Mr. Iannicola. Sure.
Chairman Castle. Thank you, Mr. Hinojosa.
Ms. Majette I yield to for 5 minutes.
Ms. Majette. Thank you, Mr. Chairman; and I thank the
witness for being here today.
In your written testimony, you say that the best research
and the conclusion--you say that the best research tells us
that financial education can and does make a difference in
people's daily lives and studies have shown that in States that
mandate personal financial education in schools, high school
graduates have higher savings rates and higher net worth as a
percentage of earnings when compared to those from other States
and that the positive effects of the financial education
carries into adulthood. But in--well, on page 2 of your
testimony, regarding the Treasury white paper, it seems to me
that what you are saying is that you are not calling or you are
saying, instead of calling for a separate class devoted to
financial literacy, you are looking into integrating financial
education into established curricula. Is that inconsistent with
the conclusion--what you say in the conclusion of what the best
research shows or do you have any--.
Mr. Iannicola. There is a lot of ways to get there. When we
advocate integration, it is not that a separate class will not
work. It is that a lot of places cannot do a separate class. I
guess I do not have pedagogical resources to say which is
better or worse, but if I get 5 minutes with the
superintendent, I am going to tell them about integration, not
a separate class, because I know one is an achievable goal and
one from any district is a dream.
Ms. Majette. And, at this point, what you are suggesting is
that the information that is available online is sort of the
best resource for or best way of getting this information out?
Mr. Iannicola. It is a great resource; and primarily
because, again, it is free. And coming from a public school
that had hard choices to make, like I am sure all schools do in
your districts, that is not an insignificant factor and not
insignificantly a lot of the material is very good. So, yes, it
is something that they can get easily and get into the
classroom, so the Web is a great source.
Ms. Majette. That would be how the instructors would get
the information to present to the classes?
Mr. Iannicola. That is right. There are lesson plans,
curricula, depends on the program, but those types of things
are available.
Ms. Majette. All right, and do you see that there is
sufficient--you think there would be sufficient funding for
implementing of a program that would allow for this kind of
education to take place nationally?
Mr. Iannicola. Well, I guess I am going to need
clarification, in terms of taking place nationally.
Ms. Majette. If each State wanted to implement a program,
do you think that there would be funding available or would it
be your suggestion that we make funding available at the
Federal level for the States to be able to implement those
programs?
Mr. Iannicola. As I said before, I think this is more of an
awareness issue than an educational one; and I think most of
the solutions that I mentioned are not high dollar, they are
not high-tech, and they are not highly controversial, either.
They are about teachers and school districts trying to fit
these topics into their curricula and integrate them, and there
is really not a high-dollar price tag for most of them. That is
why this is so compelling, because this is not a distant thing
we cannot reach. This is very achievable. And if more teachers
know about it and more school districts become aware and
committed, the resources are there. It shouldn't have to be a
big budget level at the local level, the Federal level, the
State level.
Ms. Majette. Thank you.
I yield back.
Chairman Castle. Thank you, Ms. Majette.
Let me thank you.
Mr. Iannicola. Thank you very much.
Chairman Castle. We are very pleased to have you here.
Obviously, we are very interested in the subject, and we
will continue to try to develop this over the next few months,
so we hope to be able to stay in touch with you, but we
appreciate you being able to be here today.
With that, this panel is concluded; and we will take a very
short break while we get the other panelists up to the table.
Mr. Iannicola. Thank you, Chairman.
[Recess.]
Chairman Castle. We will come to order and resume.
We appreciate the panelists and their swift move to the
seats. We will proceed in the same way we did with the first
panel, but we will go through some introductions, and some
members are going to introduce a couple of the panelists who
are here.
The first panelist we have is Mr. Gary Knell, who is the
President and Chief Executive Officer of Sesame Workshop. Prior
to his current position, he served as a Managing Director of
Manager Media International. Mr. Knell has also worked as
counsel to the U.S. Senate Judiciary Government Affairs
Committee and in California State legislature and in the
Governor'S Office.
Welcome.
Dr. Robert Duvall is currently the President and Chief
Executive Officer of the National Council on Economic Education
where he served since 1995. Previously, he was the President of
Pacific University in Oregon. Dr. Duvall has also served on the
faculty and the administration of Pitzer College, Rollins
College, and the University of Pennsylvania.
I believe that Mrs. Biggert would like to introduce the
next witness on our panel today, and I yield to the gentlewoman
from Illinois.
Mrs. Biggert. Thank you. Thank you, Mr. Chairman.
I am very pleased to welcome Dr. Angela Lyons. She is
currently an Assistant Professor and Extension Specialist for
the Department of Agriculture and Consumer Economics at the
University of Illinois, Urbana/Champaign. Previously she served
as Supplemental Instruction Program Coordinator at the
Department of Economics at the University of Texas at Austin;
and Dr. Lyons has conducted research on numerous economic
topics, including credit access and household repayment
problems, liquidity constraints and household credit.
Very happy that she is here today.
Chairman Castle. Thank you.
I would like to welcome the gentleman from Texas, Mr.
Hinojosa, to the Subcommittee. He would like to introduce our
last witness, and I recognize him for that purpose.
Mr. Hinojosa. Thank you, Chairman Castle, and thank you
Ranking Member Woolsey.
I would like to thank you for holding this extremely
important hearing, but I also want to thank you for inviting me
to sit on this Subcommittee today and to participate in this
hearing.
It is my honor to introduce you to Robert Strong, Vice
President and Executive Director of the Securities Industry
Foundation for Economic Education, a non-profit foundation
affiliated with the Securities Industry Association, known as
the SIA. He is here to explain the stock market game, which
allows students in grades 4 through 12 to learn the
fundamentals of investing in the stock market by playing a game
using a hypothetical but substantial sum of money.
Mr. Strong will provide more details about the game in his
oral remarks, but I want to take this opportunity to thank him
for coming to testify on such a fun and important financial
literacy tool, especially on such short notice as I gave him.
Several schools in my district participate in this game,
using newspapers provided by the Monitor, the largest newspaper
in my congressional district.
Thank you, Mr. Chairman.
Chairman Castle. Thank you, Mr. Hinojosa, for the
introduction of Mr. Strong. I was interested in hearing what
you had to say about him, since I know Mr. Strong well. He is a
good friend from Delaware. You did very well, sir. We
congratulate and welcome him here.
The only change from the first panel is that each of you
will testify before we ask questions. Again, you have 5
minutes.
Mr. Knell, I think you have a presentation?
We will try to work that in and give you some extra time if
needed. You will each have 5 minutes, and then we will have
questions and answers from the panel.
We will start with you, Mr. Knell.
STATEMENT OF GARY KNELL, PRESIDENT AND CEO, SESAME WORKSHOP,
NEW YORK, NEW YORK
Mr. Knell. Thank you, Mr. Chairman, Ranking Member Woolsey
and members of the Subcommittee.
I am here to tell you that it is never too early to start
teaching our kids about this important issue of financial
literacy. Elmo is in fact up in New York today. I know some of
you are disappointed that he is not here today, but he had too
many questions in Mr. Hooper's store, and he is extremely busy,
trying to mail some things in the postage shop and figuring how
much things cost to make it to the Committee here today.
Sesame Workshop is a non-profit educational organization
whose whole goal is to use media to help children reach their
highest potential, and this particular issue you may be
wondering is why in the world is Sesame Street involved with
the whole area of financial literacy. It is never too early to
start on this issue, because our world is changing so fast and,
as you pointed out earlier, as it changes, grown-ups are
realizing that they need to take more responsibility for their
finances and plan carefully and earlier for things like their
kids' education or purchasing a car or a house or retirement,
other meaningful life events. Accomplishing that requires
making smart financial decisions which, in turn, require basic
financial skills and an understanding of earnings, spending,
savings and investing.
More and more Americans we are told are having trouble
managing their money. You know the statistics. Half of all
Americans live paycheck to paycheck. Bankruptcies are at an
all-time high, with a 50 percent increase of people under 25.
Credit card debt has grown, with 45 percent of college students
already in debt. Having a senior in high school myself, I am
getting ready for the onslaught of credit card applications as
well.
Too many Americans are underestimating the resources they
will need upon retirement. A recent survey revealed that teens
were spending 98 percent of their money, rather than saving it.
Much of this can be attributed to a lack of financial literacy.
While only 7 percent of parents say that their child
understands financial matters well, nearly 9 out of 10 parents
recently surveyed said that it was important that children
understand the basics of money and finance.
The question is, for us, when should these building blocks
for financial literacy be introduced? Believe it or not, we do
think it is never too early. Well, maybe before the age of
three, it is a little early, but from 3 years on you can start.
For instance, we know, in basic education, pre-school
education, a University of Kansas longitudinal study very
famous a few years ago showed teenagers who actually watched
Sesame Street and other educational programs did better in high
school. They read more books for pleasure. They had higher
levels of motivation. These things do seem in this media age to
stick with children. We think we can use the same model of
success and replicate the same results with financial literacy
and life skills.
So at age three, we can teach things about an idea that
objects have different values or that grown-ups actually engage
in different jobs. At age four, we can teach the value of coins
or money needs to be exchanged for objects. Or at age five the
idea that people work to make money and save money can be
introduced to the very young children in our society.
With this in mind, we launched a program called--an
outreach program called Talking Cents, C-E-N-T-S, funded by
Merrill Lynch and as part of their Investing Pays Off
initiative. The program offers age-appropriate information and
resources to help parents and other adult caregivers reach out
to other young children age three to five in fun and engaging
ways. The content of the program is based on value,
responsibility, resilience, savings, and money recognition.
We created--and I think you have this with you--a 16-page
outreach edition of Sesame Street magazine--this is made for
parents--just called Talking Cents, 10 playful ways to invest
in your child's future. It is in English and in Spanish. The
publication is filled with tips, activities and suggestions to
encourage children to begin to learn life skills such as
planning, the idea of persistence and patience. Two hundred
thousand of these have been--are being distributed, with 20,000
posters being distributed through the National Association for
Child Care Research and referral agencies and some Head Start
programs.
Merrill is also going to distribute the publication through
their employee volunteer program, and we have created three
educational television and video spots which reinforce the
content messages of Sesame Street muppets, like the Count and
Big Bird and Elmo and Telly and Cookie Monster, who I know some
of you are fans of, I am sure.
Online interactive stories kids can do with their parents
at Sesame Street dot com. Children can help Elmo and Zoe create
a lemonade stand, trying to sort out ways to make lemonade and
counting coins. Right now, in the first month, 60,000 kids
helped Zoe and Elmo make lemonade.
There are also creative coloring pages and other games kids
can explore. They are designed to transform children's everyday
experiences into life lessons as critical as learning their
ABCs or one, two, threes.
I brought, Mr. Chairman, a very short video. We are going
to show you just one of these spots to give you an idea of what
is being distributed, and it has Cookie Monster teaching
financial literacy.
[video shown.]
Mr. Knell. Sorry about the bad pun.
The program is designed to allow parents and caregivers to
get useful information on simple strategies which will help
kids understand some of the basic methods in forming good
financial habits as they grow up and become financially
responsible adults. Simple everyday moments, such as having
children understand the value of things, the ways people work
to make money, guiding children to overcome challenges and
dealing with setback, encouraging them to wait for something
they want immediately, understanding the relationship between
the value of money and actual money by sorting and matching are
a few of the many areas focused on in this program.
As our economy has expanded over the decades, our need to
create a financially literate America is more important than
ever. Big Bird, Cookie Monster and Elmo have taught generations
of Americans many lessons; and we are thrilled to expand their
muppet repertoire to help address this critical need in our
country.
Thank you very much.
Chairman Castle. Thank you.
[The prepared statement of Mr. Knell follows:]
Statement of Gary Knell, President and CEO, Sesame Workshop
The need for financial education is frequently in the forefront
nowadays, often coupled with the harrowing statistics of Americans'
lack of knowledge about basic personal economics. For example, during
the first quarter of 2003, more Americans filed for bankruptcy than any
other time in history (American Bankruptcy Institute, 2003). Similarly,
credit card debt has also increased to new highs. At the same time, 1
in 3 American teenagers carry credit cards as well as ATM cards
(Tucker, 2003). And, in a national survey of 4,024 high school seniors,
over 68% received failing scores on their knowledge of basic financial
literacy facts. This is a sharp increase from results in 2000 whereby
only 59% failed (Jump$tart Coalition for Personal Financial Literacy,
2002).
These are just a few of the many examples recognizing the limited
knowledge many young or older adults have in making fiscally sound
decisions in their lives. As a result, many initiatives are now
addressing the need to provide Americans with better knowledge and
skills on planning for their financial security. Research does indicate
that individuals, younger or older, and with diversity in incomes and
educational levels, benefit from financial education strategies,
especially as their personal and economic circumstances change
((National Endowment for Financial Education, 2002). There is little
data available however, that indicates where the ``foundation'' or the
``building blocks'' for financial literacy actually begin.
Some interesting citations shed some light on this question. In a
recent speech by Chairman Alan Greenspan during the annual Jump$tart
Coalition conference (2003), he stated, ``The importance of basic
financial skills underscores the need to begin the learning process as
early as possible.'' Likewise, in a symposium convened by the National
Endowment for Financial Education (2002) and resulting in the white
paper, Financial Literacy in America: Individual Choices, National
Consequences, one of the major recommendations was to view financial
education within the scope of a ``lifelong process'' that must begin
early in life through experiences that build on everyday activities or
``teachable moments.'' Finally, in a national survey of students ages
16 to 22, 94% identified their parents as their primary source of
financial education (American Savings Education Council, Employee
Benefit Research Institution, and Matthew Greenwald & Associates,
1999).
Remarkably, within child development there is little debate about
the critical role parents play as their children's first and most
important teachers. From the moment they hold their newborns in their
arms, parents are setting the stage for their children's future growth
and development. They guide them in their first steps, their first
words, their first friendships, and most of all, they help promote
children's innate curiosity for learning within safe and nurturing
environments. Parents firmly believe that the life skills they foster
during children's early years will help them grow and compete in the
future (The Child Mental Health Foundations and Agencies Network,
2001). In fact, Nuveen Investments conducted a survey with parents of
elementary school children in Chicago and over 86% of parents indicated
it was important that children understand the basics of money and
finance (Nuveen Investments, 2000). Additionally, in a national study
released by Public Agenda (2003) analyzing essential character values
important for children's success later in life, over 70% of parents
felt saving money and spending it carefully was ``absolutely essential.
The above data was instrumental in Sesame Workshop's response to
this obvious need and in keeping with its mission to help children
learn and grow and reach their highest potential. Sesame Workshop, a
not-for-profit educational organization, and Merrill Lynch, as part of
the Investing Pays Off have come together to bring a financial
education initiative, Talking Cents, that offers multiple media
information and resources to help parents and other adult caregivers
reach out to young children ages 3 to 5 years in fun and exciting ways.
These educational resources are designed to transform children's
everyday experiences into life lessons that will help them explore the
basics of finance and business. A little time spent in the early years
will certainly pay off down the road in helping preschoolers establish
the ``foundation'' or ``building blocks'' that can help them succeed as
financially literate citizens.
The Talking Cents resources include:
Educational Spots for Employees/volunteers (non-
broadcast) a collection of three video segments with familiar Sesame
Street characters--The Count, Elmo, Big Bird, Telly and Cookie
Monster--demonstrating three strategies, responsibility, patience, and
planning, all important life skills contributing to children's growth
and future success.
Special Issue of Sesame Street Magazine for parents--
provides ten important concepts such as understanding the basic value
of possessions, how money is earned, ideas on saving, and the concept
of giving to others along with suggestions and activities that can
provide a foundation of finance basics for preschoolers during their
everyday routines.
A Sesame Street online site, Sesame Savings, with
appealing and fun activities for preschoolers that highlight simple
finance basics, coloring pages, and information for parents and other
caregivers. An especially interactive component is the live story The
Lemonade Stand whereby preschoolers can help their familiar Sesame
Street friends, Elmo and Zoe, set up a lemonade stand business.
To date, the initiative has been rolled out in 10 major locations
including New York, Los Angeles, San Francisco, Miami, Chicago, Boston,
Dallas, Washington DC, Atlanta and parts of New Jersey with a
particular focus on underserved and minority communities. Over 89,500
Sesame Street magazines and other resources, such as posters, were
distributed through the National Association for Child Care Resource
and Referral Agencies, Merrill Lynch employees and events during
September 2003.
In the design of this initiative, great care was taken to ensure
that the information was both developmentally and age-appropriate for
preschool children. Furthermore, the information acknowledges the
critical role parents and other important caregivers play in fostering
early learning. The information and activities are meant to build on
how young children typically learn about simple finance basics, mostly
from merely observing adults engaging in daily activities such as using
or saving money, paying for items, going to the bank, using an ATM, or
making purchases.
Adults are often surprised that these tasks are the first
introductions to financial education for young children. The program
includes tips for parents and other adult caregivers that gently guide
them to use these opportunities as ``teachable moments'' for finance
basics. For example:
By exposing children to how and where people work and how
money is used to take care of family, community and the world, children
are introduced to an understanding of the value of money, prices, and
how people earn a living. This helps children gain a stronger work
ethic and a sense of responsibility early on in life.
By helping children to understand that all things have
value, not only their possessions but those belonging to others as
well, it helps them have a better understanding of not being frivolous
with their money or possessions as well as those of others.
By guiding children to overcome minor setbacks or work
along with others, it can help them develop problem-solving skills,
practice persistence and most of all, become more resilient adults.
By encouraging certain instances whereby children can
learn to wait for something or put off getting what they want
immediately, it can help them have a better understanding of setting
goals and patiently working towards them or even saving for the future.
By engaging in experiences whereby children can gain a
sense of a relationship between the value of money and actual money by
sorting, matching and learning to distinguish between different coins
and their values, it can lead to an understanding of the value of money
in general and a stronger economic sense as they get older.
These activities and general information are important ways to
establish a foundation for young children in the way they learn
throughout their early years. Primarily this approach continues to
support parents as their children's most important teachers within the
framework of naturalistic learning--the opportunities that present
themselves during everyday routines or ``teachable moments.'' The
program builds on experiences that strengthen basic life skills linked
to financial literacy, thereby providing a foundation for what is a
``lifelong process.''
Some very preliminary data is indicating the positive potential for
such an approach. Included within each Sesame Street magazine is a
reply card requesting the user to respond to whether or not the
information contained in the magazine was helpful, and if the
activities they planned to engage in was a result of that information.
Of 73 responses to date, 87% indicated the information was helpful in
explaining ``money matters'' to children in the areas of saving,
spending, earning, money and value and they requested additional
information on this subject. Approximately 65% of respondents indicated
that they would encourage their preschooler to save his/her money to
help pay for things he/she wants later; 63% indicated that they would
teach young children that different objects have different values; and
57% indicated they would teach children the value of ``delayed
gratification'' based on these resources. Although the data is
extremely limited it does begin to demonstrate the impact such
resources can have in the lives of young children and families. Sesame
Workshop believes this is only the beginning and the Workshop seeks to
lead the way in further guiding both adults and young children on
finance basics (used previously in the testimony) as it has in so many
other areas of young children's education.
References
American Bankruptcy Institute (2003). Total Bankruptcy Filings and Non-
Business Filings Break Records. Press Release/Rali Mileva.
American Education Council, Employee Benefit Research Institution and
Matthew Greenwald & Associates (1999). Youth and Money Survey.
Jump$tart Coalition for Personal Financial Literacy (2002). 2002
Personal Financial Survey of High School Seniors.
Jump$tart Coalition for Personal Financial Literacy (2003). Remarks by
Chairman Alan Greenspan. Jump$tart Coalition Annual Meeting,
April 3, 2003.
National Endowment for Financial Literacy (2002). White Paper--
Financial Literacy in America: Individual Choices, National
Consequences.
Nuveen Investments (2000). Kid$ense, Financial Education in Chicago
Survey.
Public Agenda (2003). Mind the Gap: Parents' Perspectives.
The Child Mental Health Foundations and Agencies Network (2001). A Good
Beginning: Sending America's Children to School with Social and
Emotional Competence They Need to Succeed.
Tucker, J.A. (2003). Youth Financial Literacy Statistics. Louisiana
Cooperative Extension Service, Louisiana State University
Agricultural Center.
______
Chairman Castle. Now, Dr. Duvall, I want to know what you
are going to do to top the Cookie Monster film clip.
Dr. Duvall. For those who are disappointed, I have to add
to that disappointment. They are not going to see the real
Robert Duvall, either.
Chairman Castle. The ranking member's already complaining
about that a little bit.
STATEMENT OF ROBERT DUVALL, PRESIDENT AND CEO, NATIONAL COUNCIL
ON ECONOMIC EDUCATION, NEW YORK, NEW YORK
Dr. Duvall. Taking the title of one of his movies, I see
myself as the apostle for financial literacy. So Chairman
Castle and Ranking Member Woolsey and members of the
Subcommittee on Education Reform, a subject dear to my heart, I
want to thank you for inviting me to testify today on the
timely, crucial and vital issue of improving financial literacy
through education.
I have submitted written testimony to the Subcommittee. Let
me briefly summarize that statement, and I would be happy in
due course to take some questions.
The National Council on Economic Education, NCEE, is a
leading non-profit, non-partisan organization directed by
leaders from business and education that works through a unique
network of State councils that can relate to the circumstances
and standards of the individual States and university centers,
230 of those across the country, where we focus on teacher
training, that is, professional development for teachers.
Our mission is to help young people learn to think, choose,
and function successfully in a changing and challenging global
economy, to develop the real-world, practical decisionmaking
skills they will need as consumers, savers and investors,
productive members of the workforce and responsible, ethical
citizens.
The National Council on Economic Education, NCEE, believes
that the best way to make a real difference in the lives of
young people and indeed of all Americans is to get to them
effectively while they are in school by teaching the teachers
how to make economics and personal finance come alive in the
classroom and then to equip those teachers, even at their
earliest grade levels, with excellent standards-based materials
and resources to do that work with good and measurable effect.
Our core program is called EconomicsAmerica for the
Nation's schools. Last year, NCEE, through our network of
affiliated State councils and university centers, trained over
120,000 teachers who, in turn, get into the heads and hands and
hearts of over 7 million of our young people in school. But
much more needs to be done.
NCEE also conducts EconomicsInternational, an international
economics teacher training program, which carries our market
principles to the world. Congress has provided funding for
EconomicsInternational through the Cooperative Economic
Exchange Program, CEEP, which has been included in the Labor
HHS appropriations bill over the last several years. This
program has been a tremendous success story in international
education at home and abroad, serving 20 countries and reaching
well over a million students annually, as well as enriching the
classrooms of this country with publications and resources. So
NCEE is grateful for the continuing support for this important
program.
The need to strengthen, expand, and enhance effective
education in economics and finance in our Nation's schools has
never been more apparent. We have already heard today a number
of statistics and figures, starting with your introduction, Mr.
Chairman, that show us the critical nature of the need and the
call to action. We must prepare our students with the basics of
economic and financial literacy so that they can succeed. This
literacy, combined with reading and mathematics, is the key to
home ownership, managing credit, financing higher education,
saving for retirement.
We know or we are finding out what happens when individuals
leave school and begin their adult lives without economic and
financial literacy. Savings are neglected. An estimated 30
percent of Americans have not saved anything for retirement.
Credit card use leads to unmanageable debt and even personal
bankruptcy. People are maxing out their credit cards at younger
and younger ages. Consumers get into financial trouble.
Individuals do not make reasoned purchasing decisions because
they do not calculate the real cost of products and services.
For education reform, we must see that our elementary and
secondary schools do integrate standards-based economic and
financial education into the core curriculum. NCEE is
committed, with a growing number of partner organizations,
foundations and associations, to accomplishing this goal, with
a first-ever NAEP Assessment of Economics in 2006 as a key
benchmark.
For example, NCEE, working with the National Council of
Teachers of Mathematics, has just completed and rolled out a
comprehensive curriculum for grades 3 through 12 in Econ and
Math: Connections for Life.
This is a teaching learning tool with great potential for
getting financial literacy into mathematics. In turn, our
university centers are running workshops across the country at
the different grade levels for math teachers to be able to
incorporate and integrate economics into the mathematics; and
our Choices and Changes Program has proven to be the best
teaching tool in the Nation to encourage inner city and at risk
youth to stay in school. It develops an economic way of
thinking.
One of NCEE's outstanding products is Financial Fitness for
Life, a collection of interactive print and electronic economic
and financial literacy teaching materials. It provides
standards-based materials for grades K to 2, 3 to 5, 6 to 8,
and 9 to 12, and a Web site and a workbook for parents, How to
Talk to Your Kids About Money. I wish that had been available
when mine were growing up.
These prizewinning, standards-based, comprehensive, fully
integrated teaching and learning materials are also being
translated into Spanish. Financial Fitness for Life teaches
students how to make sound financial decisions involving
earning and spending, saving, managing credit and investing.
We know that we can make a difference in the lives of young
people while they are in school. I do not want to pass up this
opportunity, therefore, without making some suggestions
regarding legislation to enhancing and improving financial
literacy.
I commend to you a bill that has been referred to the
Education and Workforce Committee, H.R. 2990, which would
establish a commission to educate our Nation's teachers and
students on financial literacy. This bill, which was referred
to earlier and introduced by Representatives Biggert and
Hinojosa, would set up a bipartisan commission which would
include leading educators and academics as well as
representatives of the financial services industry, economic
and financial services organizations and Federal and State
government agencies.
Establishing such a commission, I believe, would give us
all--policymakers, advocates, service providers and educators--
a clearer picture of what is being done, what works, what
doesn't, and what needs to be done to ensure that all of our
students are well educated in economics and enter the real
world financially literate.
Dr. Duvall. I am acquainted with a number of other current
bills addressing the financial literacy issue. They are all to
the good. These initiatives could well become significant
elements in a comprehensive campaign to improve financial
literacy in the United States.
From the perspective of the NCEE, it is vital that any
legislation include basic principles of economics, not simply
personal finance narrowly defined. When handling a credit card
it is very useful, I would say essential, to understand basic
concepts like opportunity cost, supply and demand, compound
interest and scarcity.
Enhancing elementary and secondary education in economics
provides the grounding necessary for a lifetime of good
financial decisionmaking. Basic economics taught K-12 is the
irreplaceable foundation to such a lifelong learning process.
Just as basic math is an essential first step in learning
algebra and geometry, learning basic economics provides the
essential building blocks to becoming financially literate. And
a better educated group of individuals making better individual
financial decisions will add up to a more prosperous future for
this country.
So thank you again for allowing me to testify today.
Chairman Castle. Thank you, Dr. Duvall. We appreciate your
testimony.
[The prepared statement of Dr. Duvall follows:]
Statement of Robert F. Duvall, Ph.D., President and Chief Executive
Officer, National Council on Economic Education
Chairman Castle, Ranking Member Woolsey, and Members of the
Subcommittee on Education Reform--a subject dear to my heart!--thank
you for inviting me to testify today on the timely, critical, and vital
issue of improving financial literacy through effective economic
education.
Who We Are and What We Do
The National Council on Economic Education (NCEE), is a unique
nonprofit, nonpartisan partnership directed by leaders from education
and business, with the purpose of helping young people learn to think,
choose and function successfully in a changing and challenging global
economy.
NCEE was founded after the Second World War, by leaders in business
and education, who saw the GI's pouring back into the workforce, and a
growing number of high school graduates entering the workforce, and who
realized that many of these young people did not have a clue about how
the free market economic system that they were entering, worked.
Something needed to be done about the issue then; and that mandate
is before us today.
Fortunately, we've learned some things, both about the issue and
how to address it. One is that the best way to make a real difference
in the lives of young people--and, indeed, of all Americans--is to
teach the teachers how to make economics and personal financial
decision-making skills come alive in the classroom, and to equip those
teachers, even at the earliest grade levels, with excellent materials
and resources to carry out that worthy work with good--and measurable--
effect.
NCEE today is the premier source of teacher training and teaching
materials used to instill an understanding of basic, practical and
applied economic principles for students in kindergarten through 12th
grade.
Our core program is EconomicsAmerica--for the nation's schools.
NCEE also conducts EconomicsInternational, an international
economics teacher-training program, which carries our market principles
to the world. Congress has provided funding for EconomicsInternational
through the Cooperative Economic Exchange Program (CEEP), which has
been included in the Labor, HHS Appropriations bill over the last
several years. This program has been a tremendous success story in
international outreach and education, serving 20 foreign countries and
reaching well over one million students annually. NCEE is grateful for
the continuing support for this important program.
In the U.S., the NCEE operates through a nationwide Network of
state Councils, which can relate to the standards, requirements, and
circumstances of each state, and 230 university-based Centers for
economic education. This Network, which delivers NCEE's comprehensive
EconomicsAmerica program, makes NCEE the nation's leader in providing
professional development and training for K-12 teachers in economic and
financial education.
In addition to teacher training, NCEE publishes and distributes
books, electronic and interactive materials, teacher strategies and
resources for classroom use. NCEE's materials are the state-of-the-art
in the drive to improve economic and financial literacy.
Each year, NCEE, through our Network of affiliated state Councils
and university Centers, trains over 120,000 teachers, who in turn get
into the heads and hands and hearts of over 7 million of our children
in school. But more needs to be done!
Economic and Financial Literacy
The need to strengthen, expand and enhance education in economics
and personal finance in our nation's schools has never been more
apparent. We must prepare our students with the basics of economic and
financial literacy so that they can succeed in life. This literacy,
together with reading and mathematics, is key to home ownership,
managing credit, financing higher education, saving for retirement, and
citizenship.
What happens when individuals leave school and begin their adult
lives without a basic understanding of economics?
Savings are neglected. An estimated 30% of Americans have
not saved anything for retirement.
Credit card use leads to unmanageable debt and
bankruptcy. Individuals are maxing out their credit cards at younger
and younger ages.
Individuals do not make reasoned purchasing decisions
because they do not calculate the real cost of products and services.
In conjunction with the launch of its current Campaign for Economic
Literacy, NCEE commissioned the independent Lou Harris organization to
conduct a poll on Americans' understanding of economics and personal
finance. The poll surveyed a cross-section of adults and high school
students, asking a series of questions on basic economic concepts. The
results revealed a profound lack of understanding of these concepts:
Nearly two-thirds of American adults and students didn't
know that in times of inflation money loses its value.
Half of the adults and almost two-thirds of the students
didn't know that the stock market provides a venue for ordinary people
to buy stock.
One quarter confused ``budget deficit'' with ``national
debt.''
Only one third understood that active competition in the
marketplace lowers prices and improves quality.
In order to address such gaps in knowledge of economics and
finance, our elementary and secondary schools must integrate standards-
based economic education into their curricula. NCEE, through its
EconomicsAmerica program and network, and with other partners, is
striving to accomplish this goal--with the first-ever NAEP Assessment
of Economics in 2006 as a benchmark.
By teaching the teachers, NCEE helps equip educators to effectively
teach economics as a stand-alone subject in high school and to weave
economic concepts into the curriculum in other subjects, K-12. Our
network of councils and centers assists more than 3,600 school
districts across the country in developing and delivering economic
education. It is this ability to work directly with teachers to
integrate economics and financial education into the curriculum that
differentiates and distinguishes the NCEE.
For example, NCEE, working with the National Council of Teachers of
Mathematics, has just completed and rolled out a comprehensive
curriculum, grades 3-12, in Econ and Math: Connections for Life.
And our Choices and Changes has proven to be the best teaching tool
in the nation to encourage inner-city and at-risk young people to stay
in school. It develops an ``economic way of thinking.
One of NCEE's outstanding products is Financial Fitness for Life, a
collection of interactive print and electronic economic and financial
literacy teaching materials. It provides standards-based materials for
grades K-2, 3-5, 6-8 and 9-12, and a website, and workbooks for
parents: ``How To Talk to Your Kids About Money!'' These prize-winning,
comprehensive, fully integrated teaching and learning tools are also
being translated into Spanish.
Financial Fitness for Life teaches students how to make sound
financial decisions involving earning and spending, saving, managing
credit, and investing.
Financial Fitness for Life is one of many educational products and
programs developed and disseminated by the NCEE that make learning
about economics and finance both practical and experiential.
Another program for fostering education reform that builds
financial literacy, which NCEE conducts, sponsored by the Nasdaq
Educational Foundation, is the National Teaching Awards. These
exceptional, highly visible awards are presented every year to teachers
in grades 6-12 who have developed creative and effective methods of
bringing economic education into the classroom.
What Can Congress Do?
I do not want to pass up this opportunity without making some
suggestions regarding legislation to enhance and improve economic and
financial literacy education.
I would commend to you a bill that has been referred to the
Education and Workforce Committee, H.R. 2990, which would establish a
``Commission to Educate our Nation's Teachers and Students on Financial
Literacy.'' This bill, which was introduced by Representatives Biggert
and Hinojosa, would set up a bipartisan commission, that would include
leading educators and academics, as well as representatives of the
financial services industry, economic and financial literacy
organizations, and federal and state governments.
Establishing such a commission would give us all--policymakers,
advocates, and educators--a clear picture of what is being done, what
works, what doesn't, and what needs to be done to ensure that all our
students are well educated in economics and enter the ``real world''
financially literate.
The commission would accomplish this by focusing on such crucial
questions as:
How can economics and finance education be best
incorporated in the K-12 curriculum?
What are the best practices in economics and finance
education today?
How can the varied and numerous existing federal and
private sector initiatives be better coordinated?
How can public-private partnerships be used to improve
economics and finance education?
By establishing a bipartisan entity tasked to answer these
questions, with a tight but sufficient report deadline, H.R. 2990
ensures that this commission will make a real difference on this vital
issue.
NCEE strongly supports timely committee hearings and congressional
action on H.R. 2990.
I am acquainted with a number of other current bills addressing the
financial literacy issue. They are all to the good! These initiatives
have a great deal of merit. For example, S. 1470, the ``Financial
Literacy and Education Coordinating Act of 2003,'' introduced by
Senator Sarbanes, would inventory and coordinate the numerous federal
efforts to promote financial literacy. Congressman Dreier recently
introduced a bill--H.R. 3924, ``The Financial Literacy Enhancement Act
--to implement a multimedia campaign to promote awareness of the
financial literacy issue. If enacted, such complementary proposals
would be significant elements in a comprehensive campaign to improve
financial literacy in the U.S.
From NCEE's perspective, it is critical that Congress include in
any financial literacy legislation the core concepts embodied in H.R.
2990. First, such legislation should include a comprehensive review of
government and private sector efforts to promote economic and financial
literacy education. It is crucial to include the private sector because
they are important partners in the economic and financial literacy
effort.
Second, it is vital that any legislation include basic economics,
not simply personal finance, narrowly defined. When handling a credit
card, it's very useful--I would say essential--to understand basic
concepts like ``opportunity cost'' and ``supply and demand'' and
``compound interest.
Enhancing elementary and secondary education in economics provides
the grounding necessary for a lifetime of learning and financial
decision-making. Basic economics, taught in grades K-12, is the
irreplaceable foundation to this lifelong learning process. Just as
basic math is an essential first step in learning algebra and geometry,
learning basic economics is the essential first step to becoming
financially literate.
Conclusion
I am very pleased that the Subcommittee is focusing on financial
literacy education. Effectively teaching economics and finance is not
only vital to an individual's success and well-being, but it is crucial
to ensuring the success of our national economy.
Better educated individuals making better individual financial
decisions will add up to a more prosperous future for the entire
country.
Thank you again for inviting me to testify today, and I will be
happy to answer any questions that you have.
______
Chairman Castle. Dr. Lyons, the ball is in your court.
STATEMENT OF ANGELA LYONS, ASSISTANT PROFESSOR AND EXTENSION
SPECIALIST, DEPARTMENT OF AGRICULTURE AND CONSUMER ECONOMICS,
UNIVERSITY OF ILLINOIS - URBANA/CHAMPAIGN, URBANA, ILLINOIS
Dr. Lyons. Mr. Chairman and members of the Committee, I
appreciate the opportunity to share with you today some of my
research findings as well as my thoughts on what I believe
students need to know to plan for their financial futures. I
recognize that the primary focus of the Committee is to develop
a better understanding of the financial education needs of
students in grades K-12; however, in order to develop effective
financial education initiatives and programs for students in K-
12, it is critical that we develop a better understanding of
what exactly it is that we are trying to prevent.
That has been my focus. Over the last 3 years, I have been
working to develop a number of research-based programs that
focus on promoting and providing financial education to high
school and college students, their parents. I have also
conducted a number of studies related to credit usage and
financial education needs of college students.
The most recent study was conducted this past spring. An
online survey was launched to investigate the credit usage and
financial education needs of college students in the Midwest.
Over 150,000 students on 10 college campuses were invited to
participate, and over 30,000 responded.
So where are students at today? The findings from my
research indicate that there are a growing number of students
who are financially at risk, especially with respect to the
misuse and mismanagement of credit. Prior research had not been
able to clearly identify who these students are. However, my
research shows that there are identifiable groups on college
campuses that are more at risk than others for experiencing
financial difficulties.
Financially at-risk students are more likely than others to
be financially independent from their parents, to receive need-
based financial assistance, to borrow more in general, to have
acquired their first credit card before arriving on campus, and
to have acquired a credit card at a campus table, retail store,
or over the phone rather than from their parents. These
students are also more likely to have lower grade point
averages and to be working more hours. With respect to
demographics they are more likely to be female, African
American, and/or Hispanic.
So what are some of the consequences of financial
mismanagement? With respect to their ability to complete their
college degree, over 33 percent of financially at-risk students
reported having to reduce their course credit hours or drop out
for a semester due to their financial situation. With respect
to the impact on their health, over 50 percent of financially
at-risk students reported experiencing some type of physical
and/or mental discomfort as a result of their financial
situation compared to approximately 33 percent of the overall
sample of students.
In this same study students were also asked about how
important and how well they understood the topic of personal
finance and budgeting. Approximately 87 percent of financially
at-risk students indicated that they believed the topic of
personal finance and budgeting was important. However, only 58
percent reported that they felt that they had an understanding
of the topic. These findings held true for a number of other
financial topics including credit cards and terms, savings and
investing, and planning for retirement.
Interestingly, students who have taken a personal finance
course are significantly less likely to be financially at risk
as are those who have sought out or are willing to seek out
financial information from their parents rather than friends or
the media.
So what do students need to know? Following this online
study that I conducted in the spring, I held two advisory
sessions to further investigate the financial education needs
of students between the ages of 17 and 24. One of the meetings
was held in the State of Illinois, and the other was via
teleconference with national researchers, educators and
financial professionals who have been identified as leading
experts in the area of financial education for youth.
Within my written testimony I indicate primarily five key
areas that the experts identified that were needed to become a
responsible financial manager. I am going to focus on a couple
of those key points. One is that students need to understand
the bigger picture with respect to financial management, and
specifically the value in being financially responsible. When I
talk to students, I can talk about this topic for hours and
hours and hours, and it just goes right by them, but when I
start bringing up stories about how some of your fellow
students did not get jobs because credit checks were run on
them and employers didn't hire them, the lights start going
off. And so when we can start applying this to what is in it
for them and what is the value, that is where I think the key
is.
Also, in discussion with both the experts and the students,
a significant number of comments were made in regards to the
disconnect between parents and their children when it comes to
talking about finances. There is this belief that students will
get information through observation or osmosis, but it doesn't
happen. We talk to our children about sex, drugs, and rock and
roll, but we don't talk to them about money.
Also in regards to this I found that students are not
provided with enough opportunities to be financially engaged.
To obtain a driver's license a student typically has to take a
driver's education course. They need to get some practical
experience on the road, and then they have got to take a test.
Yet with little instruction or guidance, students can obtain a
credit card, a checking account or a mutual fund. Practical
experience can be critical to setting a student on a successful
path to financial independence.
With this, I would like to put forth three areas where I
feel there is an opportunity for the Committee to help support
and further financial education for students. First, resources
are needed to support the development of financial education
programs that specifically target students who are financially
at risk. These students typically come from demographic groups
that have historically been constrained by the credit markets
and who have had limited access to the financial markets,
namely minority and ethnic groups, women and students from
families with limited resources. There is evidence from my
research that financial education reduces the likelihood of
being financially at risk. There is further evidence that these
financially at-risk groups have specific financial education
needs with respect to programs and services. A one-size-fits-
all financial education program may not be effective for all
students.
Second, there is a need for educational outreach that
targets both students and parents. Good financial habits last a
lifetime. Communicating about financial responsibility is one
of the first steps parents can take to help students develop
long-term financial security. However, many parents are also
struggling with a number of financial challenges. A substantial
number are overextended with debt and struggling with how they
are going to pay for their students' college education. Some
also invested too aggressively in the market and now are having
to postpone retirement due to market fluctuations. Effective
financial education for students needs to address both the
financial education needs of the students and the parents.
Finally, greater effort is needed at the national level to
bring awareness to the fact that financial education is just as
important as reading and arithmetic. My research shows that
only 27 percent of college students have taken a personal
finance course. However, over 75 percent of college students
indicate that they would register for a financial education
course if offered, an indication that while the majority of
students have not taken a personal finance course, they
recognize the value and importance of financial education.
The bottom line is we have a good understanding of what
students need to know. The question now is how do we
effectively incorporate financial education into the classroom.
This is the challenge, and we have got to make it a priority or
it is not going to happen. Thank you.
Chairman Castle. Thank you, Dr. Lyons. We appreciate it.
[The prepared statement of Dr. Lyons follows:]
Statement of Dr. Angela C. Lyons, Assistant Professor, Department of
Agricultural and Consumer Economics, University of Illinois at Urbana-
Champaign
Introduction
Good afternoon Mr. Chairman and members of the Committee. My name
is Angela Lyons. I am an Assistant Professor of economics in the
Department of Agricultural and Consumer Economics at the University of
Illinois at Urbana-Champaign. I am also an Extension Specialist for
University of Illinois Extension and the Co-Director for the University
of Illinois Center for Economic Education.
I appreciate the opportunity to share with you today some of my
research findings as well as my thoughts on what I believe students
need to know to plan for their financial futures. I recognize that the
primary focus of the committee is to develop a better understanding of
the financial education needs of students in grades K-12. However, in
order to develop effective financial education initiatives and programs
for students in K-12, it is critical that we develop a better
understanding of what exactly it is that we are trying to prevent.
Over the last three years, I have been working to develop a number
of research-based programs that focus on promoting and providing
financial education to high school and college students in the state of
Illinois and nationally. The main objective of these programs has been
to identify and target ``financially at-risk'' students and their
parents and provide them with the skills and tools necessary to become
responsible financial consumers.
To support the development of these resources, I have conducted a
number of studies related to the credit usage and financial education
needs of college students. The most recent study was conducted this
past Spring. An online survey was launched to investigate the credit
usage and financial education needs of college students in the Midwest.
Over 150,000 students on ten college campuses were invited to
participate in the study and over 30,000 students responded.
Results--Where are Students At Today?
The findings from my research indicate that while the majority of
students are financially responsible, there are a growing number of
students who are financially at-risk, especially with respect to the
misuse and mismanagement of credit. Prior research has not been able to
clearly identify who these students are. However, my research shows
that there are identifiable groups on college campuses that are more at
risk than others for experiencing financial difficulties. These ``at-
risk'' groups have specific needs for financial education programs.
Addressing these needs insures that they are not at a financial
disadvantage after graduation and are able to make informed financial
decisions.
The results from my research specifically indicate that financially
at-risk students are more likely than others to be financially
independent from their parents, to receive need-based financial
assistance, to borrow more in general, to have acquired their first
credit card before arriving on campus, and to have acquired a credit
card at a campus table, retail store, or over the phone rather than
from their parents. These students are also more likely to have lower
grade point averages and to be working more hours. With respect to
demographics, they are more likely to be female, black, and/or
Hispanic.
The findings from this research further provide insight into a few
of the consequences of financial mismanagement. For example, with
respect to their ability to complete their college degree, over 33% of
financially at-risk students reported having to reduce their course
credit hours or drop out for a semester due to their financial
situation. With respect to the impact on their health, over 50% of
financially at-risk students reported experiencing some type of
physical and/or mental discomfort as a result of their financial
situation compared to approximately 33% of the overall sample of
students.
In this same study, students were asked about how important and how
well they understood the topics of ``personal finance and budgeting''
and ``credit cards and terms.'' Approximately 87% of financially at-
risk students indicated that they believed the topic of ``personal
finance and budgeting'' was important; however, only 58% reported that
they felt they had an understanding of the topic. The findings are
similar with respect to the topic of ``credit cards and terms 74%
believed the topic was important while only 61% felt they understood
the topic. Students were also asked about ``saving and investing'' and
``planning for retirement.'' For these topics there was an even greater
disparity between the percentage gaps between the level of importance
and level of understanding.
The findings from this research further reveal that there are
differences in the level of financial education of financially at-risk
students as well as differences in their preferences for how they would
like to receive financial education. Students who have taken a personal
finance course are significantly less likely to be financially at-risk
as are those who have sought out or are willing to seek out financial
information from their parents rather than friends or the media. In
general, at-risk students are more likely to seek out financial
information than students who are not at risk.
What Do Students Need to Know?
Given these general findings, what do students need to know?
Following the online study, I held two advisory sessions to further
investigate the financial education needs of students between the ages
of 17 and 24. One meeting was held in Illinois and the other was held
via teleconference with national researchers, educators, and financial
professionals who had been identified as leading experts in the area of
financial education for youth. Discussion focused on what students
needed to know to use and manage their finances responsibly.
The experts agreed that every student needed to know primarily five
key financial areas to become a responsible financial manager.
1. Students need to understand the power of their choices and be
able to set financial goals.
2. Students need to be able to develop a budget and know their
spending limits especially with respect to credit.
3. Students need to understand the basics of credit management and
the relationship between credit and savings.
4. Students need to know how to establish a good credit history,
check their credit report and protect themselves against identify
theft.
5. Students need to understand the ``bigger picture'' with respect
to financial management and the value in being financially responsible.
In discussions with both the experts and the students, a
significant number of comments were made in regards to the disconnect
between parents and their children when it comes to talking about
finances. There is the belief that students will get information
through observation or osmosis, but that doesn't happen. We talk to our
children about ``sex, drugs, and rock `n roll,'' but we don't talk to
them about money.
I have also found that students are not provided with enough
opportunities to be financially engaged. To obtain a driver's license,
a student typically has to take a driver's education course, get some
practical experience on the road, and then take a test. Yet, with
little instruction or guidance, students can obtain a credit card,
checking account, or mutual fund. Practical experience can be critical
to setting a student on a successful path to financial independence.
How Do We Provide Financial Education? Recommendations
The recent economic slowdown and the rise in the number of
bankruptcies for those under the age of 25 have generated concern that
students are financially ill-prepared to face today's complex financial
marketplace. Proposed legislation to privatize Social Security has
intensified these concerns. It is clear that students are facing a
significant number of financial challenges. Now, more than ever, there
is a need for financial education.
The findings presented in this testimony have implications for
educational outreach and policy for students nationally. I would like
to put forth three areas where I feel there is opportunity for the
committee to help support and further financial education for students
at the national level.
First, resources are needed to support the development of financial
education programs that specifically target students who are
financially at-risk. These students typically come from demographic
groups that have historically been constrained by the credit markets
and who have had limited access to the financial markets (i.e. minority
and ethnic groups, women, and students from families with limited
resources). There is evidence from my research that financial education
reduces the likelihood of being financially at-risk. There is further
evidence that these financially at-risk groups have specific financial
education needs with respect to programs and services. Thus, a ``one
size fits all'' financial education program may not be effective for
all students.
School administrators, educators, and policy makers need to
identify which students are most likely to be at financial risk and
which students may have specific financial education needs. This
information can be used to provide appropriate financial interventions
and to prevent these students from being at a financial disadvantage
when they graduate. Also, resources can be better allocated to develop
programs and services that specifically target those students who need
them most. These resources can better help students to build financial
knowledge, make informed financial decisions, use financial services
responsibly, and development a sense of financial independence.
Second, there is a need for educational outreach that targets both
students and parents. Good financial habits last a lifetime. One of the
most important and practical discussions parents can have with their
student is about how to manage money and use credit wisely.
Communicating with students about financial responsibility is one of
the first steps to helping them develop long-term financial security.
However, parents are also struggling with a number of financial
challenges. A substantial number are overextended with debt and
struggling with how they are going to pay for their student's college
education. Some also invested too aggressively in the market and now
are having to postpone retirement due to market fluctuations. Thus,
effective financial education for students needs to address both the
financial education needs of the students and their parents.
Finally, greater effort is needed at the national level to bring
awareness to the fact that financial education is just as important as
reading and arithmetic. My research shows that only 27% of college
students have taken a personal finance course. However, over 75% of
college students indicate that they would register for a financial
education course if offered an indication that while the majority of
students have not taken a personal finance course, they recognize the
value and importance of financial education. In the end, I believe that
we have a good understanding of what students need to know. The
question now is how do we effectively incorporate financial education
in the classroom? This is the challenge.
I thank you for the opportunity to appear today and would be happy
to answer questions.
______
Chairman Castle. And, Mr. Strong, you are the clean-up
hitter today.
STATEMENT OF ROBERT STRONG, EXECUTIVE DIRECTOR, SECURITIES
INDUSTRY FOUNDATION FOR ECONOMIC EDUCATION, NEW YORK, NEW YORK
Mr. Strong. Chairman Castle, Ranking Member Woolsey and
members of the Subcommittee, I am Robert Strong, vice president
and executive director of the Securities Industry Foundation
for Economic Education, and I appreciate the opportunity to
testify on this very important topic. We support and applaud
your efforts to improve Americans' financial literacy as well
as the recent initiatives undertaken by the administration.
Unprecedented education reform has swept across America
over the past decade as parents, teachers, legislators and
business leaders strive to improve instruction and curricula to
help students learn. These efforts have resulted in new
education standards, new performance indicators, and rigorous
standardized testing that in most States will determine whether
or not a student will be promoted or allowed to graduate. We
fully recognize that classroom time is at a premium and that,
above all, we must ensure that students learn, achieve and gain
the relevant skills to succeed in life.
America's strength lies in the cumulative knowledge of its
citizens, and that knowledge must include a basic and thorough
understanding of the economy and the role of the capital
markets. Additionally, we must find ways to instruct our
children, America's future, on how to manage their finances in
the short term and save and invest for the long term.
More than 25 years ago, a group of securities industry
executives formed a nonprofit foundation affiliated with the
Securities Industry Association to foster a better
understanding of the American economic system and the role of
the securities industry within that system. The cornerstone of
this foundation is the Stock Market Game program, a simulation
in which students in grades 4 through 12 learn the fundamentals
of investing through a hands-on experience, investing a
hypothetical $100,000 in real securities. Teachers receive
grade-level-specific curriculum guides, lesson plans, and
newsletters to incorporate into their activities.
Since the program began in 1977, with 1,600 students
selecting from around 2,400 listed companies, it has grown to
more than 500,000 students a year picking stocks from more than
7,500 companies on the New York Stock Exchange, NASDAQ and
AMEX.
SMG has been correlated to the national standards in
mathematics, economics, and business and marketing, as well as
to most States' individual standards of learning. The Stock
Market Game is not an add-on. Indeed we worked with teachers,
administrators and parents throughout the country to develop an
intensive standards-based curriculum that can be easily
assimilated and fully integrated into teachers' regular lesson
plans.
We are very proud of the fact that each school year we have
approximately 25,000 teachers that use the Stock Market Game
and value the program as one that contributes to student
achievement in a fun, interesting way, and we are proud that
our efforts to reach out to traditionally underserved
populations have been enormously successful.
The true value of the Stock Market Game is its ability to
capture the interest of students and teachers as the economy
comes alive. Events that occur in faraway places or neighboring
States, cities or towns take on a new meaning as students begin
to understand how a decision at Daimler-Chrysler in Michigan
may affect workers and their families in Newark, Delaware.
The skills and knowledge that SMG students acquire are more
relevant today than ever. In 1977, only 15 percent of the
population owned equities. By 2002, that number had jumped to
nearly 50 percent of households, or roughly 95 million people
owning equities, according to the SIA/ICI Equity Ownership in
America report.
Investors continue to tell us in our annual investors
survey that they do not feel knowledgeable enough about
investing, and that they want our industry's help in educating
them. I am pleased to share with the Subcommittee that
beginning November 6, SIA will launch an adult version of the
Stock Market Game on its investor Website SIA Investor. SIA
Investor Challenge will allow adults and families to research a
company, buy and sell stocks, and build and monitor their
portfolio just as students of the Stock Market Game do in
school. The SIA Investor Website also provides answers to real-
life financial questions and features industry experts
addressing a wide range of personal financial topics. Barron's
recently awarded the site honorable mention in its ratings of
investor education Websites for the second consecutive year,
and I encourage you to take a look at this highly rated,
informative site at siainvestor.org.
We believe that much in the same way that compound interest
brings great returns over time, so, too, does establishing
quality educational programs that provide a solid return for
our children. Thank you for your efforts to advance the goal of
improving Americans' financial literacy, and we look forward to
working with you to achieve this essential mission.
Chairman Castle. Thank you, Mr. Strong.
[The prepared statement of Mr. Strong follows:]
Statement of Robert Strong, Vice President and Executive Director,
Securities Industry Foundation for Economic Education
Chairman Castle, Ranking Member Woolsey and members of the
subcommittee, I am Robert Strong, Vice President and Executive Director
of the Securities Industry Foundation for Economic Education,
1 and I appreciate the opportunity to testify on this very
important topic. We support and applaud your efforts to improve
Americans' financial literacy, as well as the recent initiatives
undertaken by the Administration.
---------------------------------------------------------------------------
\1\ The Securities Industry Foundation for Economic Education
(SIFEE), an affiliate of the Securities Industry Association, was
established in 1976 to promote economic education and financial
literacy among children and adults. The Securities Industry
Association, established in 1972 through the merger of the Association
of Stock Exchange Firms and the Investment Bankers Association, brings
together the shared interests of more than 600 securities firms to
accomplish common goals. SIA member-firms (including investment banks,
broker-dealers, and mutual fund companies) are active in all U.S. and
foreign markets and in all phases of corporate and public finance.
According to the Bureau of Labor Statistics, the U.S. securities
industry employs nearly 800,000 individuals. Industry personnel manage
the accounts of nearly 93-million investors directly and indirectly
through corporate, thrift, and pension plans. In 2002, the industry
generated $222 billion in domestic revenue and $356 billion in global
revenues. (More information about SIA is available on its home page:
www.sia.com.)
---------------------------------------------------------------------------
Unprecedented education reform has swept across America over the
past decade as parents, teachers, legislators, and business leaders
strive to improve instruction and curricula to help students learn.
These efforts have resulted in new education standards, new performance
indicators, and rigorous standardized testing that in most states will
determine whether or not a student will be promoted or allowed to
graduate. We fully recognize that classroom time is at a premium and
that, above all, we must ensure that students learn, achieve, and gain
the relevant skills to succeed in life.
America's strength lies in the cumulative knowledge of its
citizens. And that knowledge must include a basic and thorough
understanding of the economy and the role of the capital markets.
Additionally, we must find ways to instruct our children--America's
future--on how to manage their finances in the short-term and save and
invest for the long-term.
More than 25 years ago, a group of securities industry executives
had a vision: that individuals throughout the United States would
understand the fundamentals of investing in the capital markets and
improve the management of their financial affairs. Their idea took form
as a non-profit foundation affiliated with the Securities Industry
Association, the purpose of which would be to foster a better
understanding of the American economic system and the role of the
securities industry within the system. The cornerstone of this
foundation would be the Stock Market Game'', a simulation in which
students in grades four through 12 would learn the fundamentals of
investing through a hands-on experience investing a hypothetical
$100,000 in real securities. Teachers would receive grade-level
specific curriculum guides, lesson plans, and weekly newsletters to
incorporate into their classroom activities.
Since the game began in 1977 with 1,600 students selecting from
around 2,400 listed companies, it has grown to more than 500,000
students a year picking stocks from more than 7,500 companies on the
New York Stock Exchange, NASDAQ and the AMEX.
SMG has been correlated to the national standards in mathematics,
economics, and business and marketing, as well as to each state's
individual standards of learning. The Stock Market Game'' is not an
add-on; indeed, we worked with teachers, administrators, and parents
throughout the country to develop an intensive standards-based
curriculum that can be easily assimilated and fully integrated into a
teacher's regular lesson plans.
We are very proud of the fact that each school year we have
approximately 25,000 teachers that use the Stock Market Game'' and
value the program as one that contributes to student achievement in a
fun, interesting way. And we are proud that our efforts to reach out to
traditionally underserved populations have been enormously successful.
The true value of the Stock Market Game'' is its ability to capture
the interest of students and teachers as the economy comes alive.
Events that occur in far-away places or neighboring states, cities, or
towns take on a new meaning as students begin to understand how a
decision at Daimler-Chrysler in Michigan may affect workers and their
families in Newark, Delaware. Students begin to understand economic
relationships between government, businesses, and individuals.
The skills and knowledge that SMG students acquire are more
relevant today than ever. In 1977, only 15 percent of the population
owned equities. By 2002 that number had jumped to nearly 50 percent of
households, or roughly 95 million people owning equities (either
directly or indirectly) according to the Securities Industry
Association//Investment Company Institute Equity Ownership in America
report.
I am pleased to share with the subcommittee that beginning November
6, SIA will launch an adult version of the Stock Market Game'' on its
investor Web site: SIA Investor. SIA Investor Challenge will allow
adults and families to research a company, buy and sell stocks, and
build and monitor a portfolio just as students of the Stock Market
Game'' do in school.
The SIA Investor Web site also provides answers to real-life
financial questions and features industry experts addressing a wide
range of personal finance topics. Barron's recently awarded the site
honorable mention (3.5 out of a possible four stars) in its ratings of
investor education Web sites for the second consecutive year. The site
was praised for its ``lengthy, thorough dictionary'' and how ``experts
bring educational tools to investors'' on the site. I encourage you to
take a look at this award-winning, informative site at
www.siainvestor.org.
In addition, SIA produces Your Guide to Understanding Investing, a
comprehensive handbook for new and experienced investors, as well as a
series of educational brochures available in print or online.
Thank you for your efforts to advance the goal of improving
Americans' financial literacy. We believe that in much the same way
that compound interest brings great returns over time, so too does
establishing quality educational programs that provide a solid return
for our children. We look forward to working with you on the essential
mission of improving financial literacy for all Americans.
______
Chairman Castle. We will go to the question and answer
phase now, and I will yield 5 minutes to myself. I am going to,
I think, ask one question and ask you each to try to answer it,
which means you each have about a minute or maybe less by the
time I get through talking; so be thinking about a fairly rapid
answer.
All of you, particularly when we started to look at the
film clip, but you all talked about age factors in this, and I
asked the question earlier of the earlier witness about this.
At what age is it most effective to start the educational
process? And to me the educational process has become
infinitely more complicated, and obviously you don't educate
everybody at age 3. It is a matter of evolution. But indeed in
the Sesame Workshop has there been a realization that this is
truly working?
For example, Dr. Duvall, you talked about a program that
was grades 3 through 12, as I recall, and, by the way, we can
talk about it earlier than kindergarten, even though that is
the jurisdiction of our Subcommittee. I am interested if that
has changed. Your operation has been going on for some time
now. With all the new changes in the economy, has that changed?
And I am very interested also as an add-on, as you go through
all this and educate these young people in the various ways you
all spoke about, does this make a connection to their economic
goals? When they begin to understand this, do their economic
goals begin to become more realistic? Do the 12-years-olds
realize that maybe they aren't going to be ballplayers and they
are going to have to do something else? Are we educating them
not just in terms of what to do with their money, but in terms
of how to make money?
Let us start with Mr. Knell.
Mr. Knell. I think, Mr. Chairman, you need an educational
program that tracks different age groups. I mean, there are
appropriate things to talk to preschoolers about that a 10-
year-old will have no interest in it and vice versa. We believe
at the Workshop that there needs to be a much better nexus
between formal and informal education with the underlying
belief that children do not learn only between 9 o'clock and 3
o'clock. When Mom takes that preschooler to the grocery store,
that is an enormous learning experience, and there are probably
ways to begin to build in a better direct educational
experience for that preschooler, even making a day-to-day life
experience like that more relevant to financial education.
There are things that grocery stores could do to make them more
kid-friendly to understand those things, et cetera.
So it is about a partnership between the informal community
on television and in retail with more formal school settings.
Chairman Castle. And I meant to mention that in my
question, but I didn't. I talked about that earlier. I believe
the media-cultural connection is an extraordinary connection in
all of this. Frankly, I am glad you brought that up.
Dr. Duvall?
Dr. Duvall. Yes. We know that after 60 years of experience,
that you can teach young people. Our focus is on kindergarten
through 12th grade, and we know that young people in
kindergarten, first and second grade can learn some basics
about saving, borrowing, lunch money and paying it back through
games, interactive activities that begin to deepen their
experience.
One of the problems we face in our schooling, I think, is
that it is piecemeal, and one of our hopes is that through the
attention that this Committee and others are addressing to the
issue, we will begin to see in this country more of a focus on
an incremental approach to financial education.
Chairman Castle. Thank you, Dr. Duvall.
Dr. Lyons, what does your research show you about all this?
Dr. Lyons. My research is primarily focused on college
students, but I am familiar with the research that Dr. Duvall
is talking about, and I completely agree. I think to just add a
little bit to what he said is the fact that we need to be
thinking about if we are talking about the younger kids, who
are they having the contact with? The teachers and parents. And
I know a lot of times what I hear from the teachers is that I
don't feel comfortable incorporating this stuff in because I
don't have a grasp of how to do it. I have got to think more
about my lesson plans.
I think if more readily available materials can be there
for them to easily incorporate things in--and also I am very
aware that the national council holds parent workshops in
conjunction with their student curriculums, and I have been
very involved and had contact with the University of Illinois/
Chicago, their center up there. They have been incredibly
effective with their parent workshops, tying that in with the
students and the teacher workshops as well.
Chairman Castle. Thank you.
Bob, as I recall, the Stock Market Game is grades 4 through
12, but do you see a difference in the way you have to approach
this in fourth grade versus later years or in terms of the way
the kids absorb?
Mr. Strong. I think, yes. It is a difficult subject for
most Americans, much less students, but it is an interesting
subject, and the language at the 4th grade is the same as the
language for a 12th-grader or an adult. And the language of
investing and the language of saving and the language of
understanding personal responsibility, financial
responsibility, is constant. And I think what we have tried to
do is build through the core academics that lesson so it is a
long-term sustainable initiative that you can build on over the
years.
In the earlier grades, using the Stock Market Game, there
are many options. You could buy on margin, you could short-
sell, you can buy long, you can earn interest on cash balances.
You don't have to buy any stocks. But the trick is that the
kids understand that and they begin to understand that the
money begins to work for them. So through the teacher training
that we do and the workshops that we do for the earlier grades,
we limit the lessons, and we help the teachers understand what
it is they can teach to the standard and identify the indicator
of success in that individual State's standards of learning.
So, you know, it's more of a ramp-up approach to building a
nice solid foundation for understanding what it means to save
and invest long term.
Chairman Castle. Thank you. I thank all of you.
I turn to Ms. Woolsey for 5 minutes.
Ms. Woolsey. Thank you, Mr. Chairman. Thank you, Mr. Knell,
for not bringing Elmo. I couldn't sit here with my 3-1/2-year-
old grandson in California if he were in this room and my
grandson wasn't. It would have been impossible.
I keep thinking of the 1970's and recycling. I mean, that
is when my kids all went to school. They brought the lesson of
recycling home to our family, and believe me, they are all in
their late thirties and early forties, all four of them, and
they know to recycle. It was inbred in them. Of course, we are
from California, Sonoma County, I give you all of that.
But this is what we want to do with what we are talking
about today. In fact, these kids can go home and actually pass
on some of their learning experience to their parents, who want
to ignore it because there is so much that they are dealing
with. But I have one question for all of you, and it is looking
at wanting to prepare our kids and make sure that we are
successful in getting them where they need to be, can we do it
by integrating, or do we need to insist on a dedicated program?
I mean, it would be at different levels throughout the
curriculum, but can we do it piecemeal, or must it be done by
dedicating the real time and making it a priority?
So starting with you, Mr. Knell.
Mr. Knell. Well, I think obviously we are dealing with
preschoolers, so it is probably less of a specific program, but
it certainly could be integrated as part of a basic whole child
preschool education.
And I just want to reemphasize the power of media in
educating kids. And there was a big event this morning that the
Kaiser Family Foundation released a major study about media
usage for very young children, we are talking about zero to 6-
year-olds, and you will be astounded at the results out in
America. The media has become ubiquitous in this country and
being able to use it in such a way as a teaching tool--parents
actually view educational television as a very important part
of raising preschoolers today. It is just second to books in
terms of educational value.
We need to harness the power of television and other things
to include financial literacy as one of those things, again,
not teaching how Elmo can sell derivatives, but in teaching
basic values about patience, like Cookie Monster showed and
responsibility and things like that. So beginning to work those
things into a basic preschool curriculum I think is something
that we could do, and then I will hand it off to my colleagues
to talk about kids in school.
Dr. Duvall. I think we need to work to have both the
opportunity to have stand-alone courses in economics and
personal finance, but where that is not possible or even
complementary to those stand-alone courses, to be able to
infuse it into other disciplines.
The fact of the matter is, as was earlier stated in
testimony, there are many schools and school districts where
talking about an add-on is just impossible. So we are not going
to make very much progress if we try to do that. On the other
hand, our studies at the NCEE have shown that students who take
advanced placement economics, particularly students in inner-
city schools and underserved populations who take advanced
placement economics, get into better colleges and get better
jobs. So we want to be able to multiply that, but also at the
same time to be able to infuse it into mathematics, language
arts so that some business economics and the principles of good
financial management of your resources are being taught.
Dr. Lyons. I think integration at the very minimum is
great. I would like to see us go for the full curriculum, and I
think where I am coming from as a researcher is I see these
numerous programs and narratives out there, and we see studies
like the jump-start study that says, OK, we have got all this
stuff out there, but yet they are still really doing poorly on
these tests. Why is this? And in many of the schools, at least
in the State of Illinois, I mean, we have got a pretty good
integration going on because we have got a State mandate for
consumer education.
So I guess where I am coming from is maybe before we can
address that issue, taking a step back and saying, why is it
that what we have got now is not working, because they are
still doing poorly on these tests?
Mr. Strong. I think it would be great if there were stand-
alone courses, but I think given the restraints and the demands
on the classroom teacher to work to help each student meet or
exceed the standard that is evidenced by a State test begs us
to consider other ways to teach the same core content in a
unique, fun and interesting way.
I think historically the Stock Market Game was used in the
social studies strand in economics, civics for seniors or
something like that, but we are finding our largest growing
group of teachers that are now using the Stock Market Game
program are math teachers because of the mathematical concepts
that the students now have to--they have to calculate, compute,
project. They are doing an awful lot of different things, and
by the Foundation correlating the game to the standards both at
the State and national level, and being able to demonstrate for
the teacher how easily this can be incorporated into their core
lesson planning by demonstrating the indicator of success that
each individual State has identified as what each student must
know, we find that that works, and for us it is a very exciting
prospect. And I think that, you know, the time constraints and
the demands on student achievement are what is going to dictate
this conversation, but the financial literacy discussion is
paramount.
Ms. Woolsey. Mr. Chairman, can I ask Mr. Strong just a
really short question?
Chairman Castle. Sure.
Ms. Woolsey. I am assuming that your company doesn't donate
this game to schools. How do you get it in the budget?
Mr. Strong. In many places the game is made available at no
charge. In some cases my partner Bob Duvall here, we are
affiliated with many of the councils, the State Council on
Economic Education and Centers for Economic Education, and the
game is managed by their staff at the local level, and there is
a charge. But we also work with local firms around the country
to sponsor the program, and we also work with State regulators
as well.
Ms. Woolsey. Thank you very much.
Mr. Strong. You are welcome.
Chairman Castle. Thank you, Ms. Woolsey.
The Chair yields 5 minutes to Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman.
Mr. Knell, I just wanted to say thank you for all that you
did for my children who grew up on Sesame Street and loved
every minute of it. And I also learned from Sesame Street. The
first year of Head Start I was a volunteer in the program one
summer, and I was in Chicago at Hull House in a Hispanic
community, and I spoke French and read Latin, but had no idea
about Spanish. So I would rush home after being a day at the
center and turn on Sesame Street so that I could learn to count
and use the few words of Spanish so that I could communicate
with the students. So I have some feeling that maybe counting
was some financial literacy that I was able to impart to them.
But I appreciate all you did.
Dr. Duvall, Dr. Lyons mentioned your parents' workshop, and
I know you have a workbook for parents. Could you expand on--a
little bit on that and how parents gain access to that and how
it is used?
Dr. Duvall. As others have testified, we are seeing more
and more in our work the importance of connecting what happens
to the students in school with what they take home and what
happens at home. One of our studies showed that the place most
young people go to for financial advice through their college
years is their parents. The question is what kind of advice are
the parents giving the students, their children? On the other
hand, in school one of the challenges we face is that there are
not enough teachers who themselves are comfortable talking
about economics and personal finance. There is a standing joke
in our national network that a lot of high school economics
teachers have the same first name: Coach. They are people who
have been drafted into doing an economics course, and they come
to our centers for help in doing that well.
But the connection between school and home is very
important so we are trying to add that dimension to all of our
materials, to have take-home materials that they can share with
their parents and in doing that electronically, too. There are
some excellent Websites that we have helped to develop with
corporate sponsorship like It All Adds Up and The Mint, which
can be used by parents to talk with their children about money
matters.
Mrs. Biggert. But how does this get out? If teachers are
trained, they don't know to tell the children--do you
distribute the materials to the school, and then they take it
home?
Dr. Duvall. Yes. It is distributed through the schools,
through the teachers as take-home materials. But we also are
working all the time to get the word out, the advocacy role, to
let parents and school districts and teachers know what is
available. There is such a wealth of materials available that
one of the challenges is being able to help people sort it out
and know how to use it. But increasingly as we are able,
through our national network and other means, to get the word
out about these Websites that can be helpful and about the
educational programs that are available, we are finding that
the calls are increasing from parents, what have you got for
us, and that we are able to give a good answer.
Mrs. Biggert. I would suppose so that many of these parents
could probably use it to be the most helpful don't have access
or don't have computers yet, although we think that most people
are involved.
Dr. Duvall. That is why the core of our work is still the
print publications.
Mrs. Biggert. Mr. Knell, you had talked in your testimony
that you used the network of child care resource and referral
agencies to help distribute your financial literacy materials
to the underserved communities. Was this an effective method of
distributing them?
Mr. Knell. It is actually being rolled out as we speak. It
started in September. We are going to go back and do some
testing as we like to do. Again, these are parent-directed
materials; so we want to make sure that parents are the ones
who are gaining from this knowledge. It is more of an awareness
that you can have a big impact as a parent or a child care
provider in a group setting or as an individual. So we will be
going and testing those, and we will be happy to report back to
the Committee how that turned out.
Mrs. Biggert. It would be interesting to have your results.
Dr. Lyons or Mr. Strong, do you have anything other to add
on the awareness or how we get the word out as far as financial
literacy?
Dr. Lyons. I think it just comes down to the fact that we
really do need more national awareness on this. Even at the
State level, I mean, it is hard to push things in the
classroom, but if there is national backing on this, that
really helps. And I think also--I think--you know, I mentioned
this before, but we have got so many programs and initiatives
out there. Let us take stock of what we have got and evaluate
it, what is working and what is not working. I don't think we
have a good grasp on that yet. And then let us take that to the
national level and say, here are the success stories, let us
run with this and do this.
Mrs. Biggert. Thank you.
Mr. Strong?
Mr. Strong. I think that is true. We work with the
councils, and we work with many newspaper and education
programs throughout the country, and we do advertising and
print mailings. We attend many of the conferences, national
Council of Teachers of Mathematics, social studies. We work
with a lot of vocational student organizations like DECA, and
Future Business Leaders of America, and professional teacher
groups to sort of demystify what financial literacy is, and the
way we can demystify that is by showing them that they can
teach it, and they can also learn by doing some of those
things. And I think that is one way to do it for sure, and I
think Dr. Lyons touched on something a minute ago about finding
some champions.
In Chicago we have a wonderful champion for the Stock
Market Game. We have a young man. His name is Martin Cabrera,
who played the game 20 years ago at a high school in the south
side. He lost his father when he was 12, and he was hooked onto
the Stock Market Game from a teacher. We met Martin when I was
in Chicago for a dinner at the Illinois Council on Economic
Education dinner, and the bottom line is that Martin, through
his participation in the Stock Market Game, now owns Cabrera
Capital Management in Chicago, and there isn't a week that goes
by that I don't have Martin calling me to do something in
Chicago or somewhere else.
Those sort of--I will call them heroes, they recognize the
value of the game. They recognize the value of the alternative
learning, while still the teachers recognize the value of
taking something that is such a necessary life skill and
finding a way to fit it into the core content area. And that is
where I think we are the most proud is that we do everything we
can to support the teacher, and if we can help the teacher
understand the material through teacher training and workshops
and online tutorials, et cetera, then we win, and then the kids
win.
Mrs. Biggert. Thank you.
Thank you, Mr. Chairman.
Chairman Castle. Thank you, Mrs. Biggert.
Mr. Hinojosa is recognized for 5 minutes.
Mr. Hinojosa. Thank you, Mr. Chairman.
Mr. Knell, my two youngest daughters, one 7 and one 10,
love Sesame Street, and I took them on our family vacation this
last August in the summer to Mexico, and neither had been
practicing Spanish; so this was an opportunity for them to take
a few classes. And so we would ride a bus from where we were
staying to the school, and I made the youngest one, the 7-year-
old, the cashier and be responsible every morning for coming up
with enough currency to pay the bus driver for the whole
family. And in 2 weeks she became an expert in speaking to the
bus driver and controlling the money part as a cashier. So it
is amazing how much children can learn even at the age of 7.
So just 2 weeks ago there was a function in front of our
home, a garage sale that they called it, for the block party,
and she set up a booth, and she sold doughnuts, Cokes, and
coffee, and made $32 in about 4 hours, and it was amazing how
she could handle the change and everything that was going on.
So there is no doubt that your programs are working.
And to you, Dr. Lyons, I think that you are addressing a
group that is of great interest to me, and that is the college
students, high school graduates and college, because that is
where I am getting so much feedback that they want help, they
want the education.
Dr. Lyons. I think it is an issue of remedial versus
prevention, and with the college students it is the prevention.
Mr. Hinojosa. I agree.
And for you, Mr. Strong, I am going to ask you a question
because I think that the Stock Market Game that you described
is one that is being played in my congressional district by
some of the schools with the help of the newspaper the Monitor
that is in this area, and all the students who play the game
and compete with teams from other schools are enjoying
themselves.
So tell us how does the program operate; No. 2, how does
the Stock Market Game fit in with the curriculum being taught
today? And the last question is how does the Stock Market Game
fit in with overall student achievement?
Mr. Strong. Thank you, Congressman.
The way the game operates, and we work with teachers around
the country in school districts, there is an 8- to 15-week
window that students can participate, and depending on the
school district or block scheduling, we can adapt to that local
school district's needs. And the kids operate in teams of three
to five, teachers--it is suggested that they pick different
levels of student achievement for the kids and develop these
teams. And the students receive a portfolio with a hypothetical
value of $100,000, and they are tasked with developing--doing
research and developing companies that they may like to invest
in.
For example, in Wilmington, Delaware, a few years ago we
did a program with the Stock Market Game at Wilmington High
School, and the students were required to pick three companies
from the State of Delaware out of their portfolio because they
have to pick a minimum of five stocks. We want them to build
basically a mini mutual fund, and we want them to understand
risk and diversification and the value of long-term savings and
investing. Those are the core concepts right there, and the way
we do that is through the core academics, but as they are
developing this portfolio, we are trying to give them an
understanding and a taste for what goes on in their community.
So, for example, one thing we know anecdotally and we hear
this around the country is that students will go home and talk
over the dinner table about their stocks, and parents will tell
us, my son came home and asked me, Daddy, you and your 401(k)
or you and your 403(b). And that is an exciting conversation.
We hear that from brokers, and we hear that from teachers as
well.
So over the course of 3 weeks, they compete, and they are
competing against other schools, same grade in a specific
geographic region, and at the end of the 8 weeks or 15 weeks,
there is a winner, and there is a winner based on the value of
the portfolio. But I will strongly suggest that the students'
portfolio that has the least value, they win just as well. The
opportunities that they are offered, speakers in the classroom
from member firms' brokers where possible, trips to exchanges
like the New York Stock Exchange or Cincinnati, or trips to
Federal Reserve banks. So we work with a lot of different
groups to reinforce all the components that comprise the
economy, and the capital markets are one big piece of that.
Mr. Hinojosa. I like that competition and the fact that
there will be a winner at the end of that program, but I hope
that you would consider expanding the program to include
programs such as the Federal Deposit Insurance Commission's
Money Smart. That program is one that I have been trying to
promote in my area both in English and in Spanish, and it is
one that possibly could help us enrich this financial literacy.
I think that there is a lot to be said about that Money Smart
that FDIC is promoting and would like to see you consider that.
Mr. Strong. We are looking--there is a competition, and the
kids do get excited about the competitive nature of it.
One of the things we have done with two other groups for
various other themes has been with DECA, which is the
vocational student organization, and with the National Academy
Foundation, and in both those instances, with NAF, for example,
NAR Academy of Finance, we have taken the Stock Market Game and
inserted it into the securities course, which is a semester-
long course in the school. So at the end of that semester, the
students will have to demonstrate their competency not by
dollar value of portfolio, by depth and breadth of
understanding of what it means to save and invest in long term.
And with DECA, what we did with DECA as well was we created
a competitive event for their students to participate at the
national level. Last year we had our first national winner. But
the students in a blind pick from regions presented their
strategies, and it had nothing to do with dollar value.
Mr. Hinojosa. Thank you, Mr. Strong.
Chairman Castle. Thank you, Mr. Hinojosa.
Mr. Osborne is recognized for 5 minutes.
Mr. Osborne. Thank you.
I would like to thank the panel for being here. I find this
very interesting. I used to work with young people in a college
setting, and I found that even though you could present a lot
of information to them, that sometimes there is almost a
visceral emotional reaction to money, and there is a mindset
that if you have it, you spend it, and that somehow you are
going to hit the lottery. So some folks, even though they
intellectually know it, rather than taking $100 a month and
investing it, will buy lottery tickets, and they realize
probably intellectually that they will come out ahead investing
$100, but they will still do it.
The National Football League Players Association indicates
that 50 percent of the players coming out of the National
Football League are broke, and most of these guys have had
hundreds of thousands, if not millions of dollars, in salary.
So this is a very difficult question. It is a very broad
question, but have you given any thought as to how to change
this mindset? Because it seems like we sort of have a mentality
on the part of a large part of our population today that they
are going to have it all now, instant gratification, and in the
end the government will take care of you, and we all know that
that may not happen.
So it is a concern of mine because I saw a lot of lives, I
think, somewhat wrecked by that type of thinking, but it is so
prevalent, and it is prevalent even among educated people who
have been taught the theory of compounding, who have been given
classes that have shown them the consequences of that type of
thinking.
So it may be an impossible question, but have you given any
thought as to how you sway such ingrained cultural or almost
emotional ways to dealing with money?
Mr. Knell. We certainly believe starting early is what you
have to do, and it is really about values education at the end
of the day, and it is building in values about patience and
responsibility, to have small children understand that you
can't always have what you want, and being able to extend that
to older children, even adults, eventually; right? And we think
building in values education is a very important part of a
young child's experience and building that kind of a base, and
make certain that parents are also reinforcing that at home to
their children. Parents have an enormous sway over what their
children learn, and I think by making this connection for them,
which we can do through the media and through leadership in
Washington and elsewhere, that will go an enormous way toward
beginning to build those values in, Congressman. And I
completely agree with your concern, and we would like to help.
Dr. Duvall. I think it is a matter of education, and we are
seeing some trend lines that would suggest that we are gaining
some ground in the very issues that you are articulating,
Congressman. The job is never done. There is always a new
generation. There is always a new set of challenges, but I
think cumulatively we are beginning to be able to be more
effective in teaching the teachers and in reaching the parents,
getting into the homes with the kind of values education that
was just mentioned and with a sense of responsibility.
In a way perhaps some of the hard times that we have been
going through in the last couple of years help encourage
questioning, encourage an awareness of the need to have a
better understanding of how the real world works and to try to
get that understanding through education. It says that--real
estate people say location, location, location. I think it is
education, education, education. We just keep chipping away at
it, trying to do a better job all the time with new approaches,
with innovative ways of getting the message across like the
Stock Market Game, and getting some of these basic concepts
into the heads of young people so that they do use them and
apply them.
Dr. Lyons. I think before we even start trying to think
about a solution to that question, I think we need to think
about what might be the causes of that. I mean, I don't think I
am that old, and I think about all the financial changes that
have occurred in the last 10 years. And we gave a lot of--threw
a lot of new financial innovations at people that did not have
access to that before, and we didn't really give them financial
education about how to use that, especially credit, especially
for low-income minority groups and women, who historically did
not have that access to credit.
So, you know, one of the things that come to mind is just
thinking about the fact that we had all these technological
challenges, there is so much more. It is not just balancing a
checkbook anymore that we are teaching. It is like the Stock
Market Game, investing and mutual funds and all these
complications.
I think another thing we need to think about is just when I
talk to all these different groups at the different levels,
whether it be researchers on a university campus,
administrators for elementary schools and high schools,
teachers in the classroom, students, parents, there seems to be
some sort of disconnect between all of these groups. And I am
not sure what exactly is going on or how we can kind of bring
everybody together on the same page, but I think everybody
might be coming at this from a slightly different angle and
trying to get everybody more connected on this. And also I
think it is just more the bottom line is, you know, fast-paced
lives. Everything now is so fast, so quick and so easy, and I
think that is carried over into the financial setting not just
of how students see things, but they do what they see, and, you
know, the parents are in--households are in so much debt now
themselves that they do what they see, so-- .
Mr. Strong. I think we will all agree that children model
what they see, their experiences. And the statistics speak for
themselves about the number of households that are in trouble
and how many adults are in trouble. So the children, that is
where they are going to get--the majority of their information
they are going to receive at home anyway.
And I think that that is one of the good things about the
new SIA investor Website for adults is that we are now going to
provide a place for adults to participate in a simulated
investment account and begin to understand why you need to save
and invest for the long term, and I think that will have some
spill-over effect onto the students.
And as we continue to build the program for the students--
and we have talked about a lot how to do this, stand-alone
classes, integration, but we are looking at accountability, we
are looking at State testing, we are looking at No Child Left
Behind. And I think it is important that we find a way, and I
sort of call it stealth learning, where we are able to take
difficult concepts like economics, for example, or savings and
investing and incorporate it into the core academics. You are
able to help a student understand in real terms something that
they probably wouldn't do if you just stood there and told them
you need to open a bank account or you need to save or you need
to invest.
Here there is applied learning. We know that applied
learning works. We know that contextual learning works. The
whole movement out of Brown was about if a student can teach
another student, they win, they have mastered it, and I think
that is what we need to be doing. We need to be demystifying
these subjects that probably don't get a whole lot of time at
home or even on the job and find a way to incorporate it into
the core academics.
Mr. Osborne. My time is up, Mr. Chairman, but I might offer
just an observation. I know part of Head Start is to involve
parents, and it may be that even this part of the Head Start
program, maybe if parents are given some information that they
can use, it might develop some attitudes in children that--and
I really like your comments about values because basically that
is what it comes back to. So I yield back. Thank you.
Chairman Castle. Thank you, Mr. Osborne. We appreciate your
questions and your comments.
Ms. Majette.
Ms. Majette. Thank you, Mr. Chairman, and I thank the
witnesses for being here this afternoon, and if Elmo is
available--I serve on the Budget Committee. If he is available
to come and talk to us about deficit spending and balancing the
budget, I would really enjoy that.
Mr. Knell. That is the Count.
Ms. Majette. I am sorry. The Count.
I agree with just about everything that all of you have
said, but my concern is that we have really gotten away from
basics, and I was disturbed to see in the National Council on
Economic Education their survey that was published in April of
2003 that their 2002 survey findings showed that only 17 States
out of 50 plus the District of Columbia, only 17 States
required an economics course to be offered, and then only 14
States required students to take an economics course. So even
if 17 States offered it, only 14 States required students to
take it.
And, Dr. Duvall, you talked about students taking AP
economics and how we can integrate this kind of education with
that, but if you are looking at only 14 States that have
students--that require students to take an economics course,
and I think we can see that the majority of States, the
majority of students aren't even getting that basic training.
So I am very concerned about how we are going to actually
really educate our citizens so that they can know what they
will need to know and be able to integrate the information that
you all have talked about. And certainly having parents that
can teach children is very important. I learned a lot about
balancing a checkbook and managing money from my parents, and I
know my children have learned a good deal from me and my
husband.
But what are we going to do about this lack of basic
education, or do you see that having the kinds of programs that
you have talked about will supplant or can supplant that basic
education in terms of economics?
Dr. Duvall. You referred, and thank you, to this report
card on the Nation, what the States are doing in terms of
setting standards, State-by-State requirements, the mandate
that it be taught and taken, and testing and assessment that is
being done in economics and in personal finance, and copies of
this have been made available to the Committee. I think, as I
said earlier, that our essential challenge is to keep working
with you to effect education reform, reform in the direction of
making economics and financial education part of the core
curriculum rather than just an elective, an add-on, and I think
we do that by, as some of my colleagues have indicated,
demystifying economics. Too many people think of it as to what
they do at MIT, not what you do around the kitchen table when
you are making basic decisions as a consumer, saver and
investor and so forth.
We are making some progress in that direction of being
advocates and calling public awareness to the need for
improving economic and financial literacy, as this meeting
today indicates. But we have got to make some deliberate moves,
and that is why I would urge the formation of a national
commission that would take a look at best practices and make
some recommendations for how that could be pushed in the
future.
Ms. Majette. Dr. Lyons?
Dr. Lyons. I just want to say I love the point that you
made about 17 States offering an econ course and then 14
requiring it, because I think this is kind of the bottom line.
The burden of this is on the teachers, and we are not there
when they close the door and teach them. And if they don't have
the incentives--I mean, the incentives that are there now, at
least from the State of Illinois, and I think this is fair to
say nationally, is that they have got the pressure of whatever
State exams there are, that they have got to be making sure
that they teach those things so that they are covered when the
students take those State exams.
And then the other thing is, and this is an observation I
have made in my research, is that those students who tend to
get this information the least are those that are college-
bound. The community college students are doing much better.
They typically tend to take the personal finance course, and
the reason is because there is all this--they need to have this
for college, this for college, this for college. We don't see
personal finance or, you know, some type of financial
management on that list.
Mr. Strong. In education, we speak of paradigms; and it is
very difficult to change the ways we approach a given subject
in schools.
I think that one of the ways that we have been successful
with the stock market game is that it is not limited to a
particular course but rather it is available through the
curriculum. I think by having correlated the game to the
standards in mathematics, which is our largest group of
teachers, to economics, to business and marketing--and we are
working on the English language arts standards as we speak,
because that is another way students can do extemporaneous
research in business. Time is the issue, but this is a subject
that transcends the curriculum, and I think you can find places
almost across the board where you can include the discussion
about financial literacy and savings and investing long term.
Mr. Knell. If I could just have one word, as media use
grows, kids are getting targeted younger and younger. Their
spending habits are being set at an extraordinarily young age.
Do not wait until they are in middle and high school to start
teaching these values. It is critically important we start very
early.
Ms. Majette. I agree.
Thank you.
Chairman Castle. Well, on that word of caution, great words
of wisdom throughout the day, we appreciate this panel being
here, sharing with us your thoughts.
I think there is a long way to go in this area, and I think
you have given us a good base for it all, and we appreciate
that. If there is nothing further, with that we stand
adjourned.
[Whereupon, at 4:35 p.m., the Subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Response of Dr. Robert Duvall to a Question Submitted for the Record
To: The Honorable Judy Biggert
Committee on Education and the Workforce
From: Robert F. Duvall
President & Chief Executive Officer
The National Council on Economic Education (NCEE)
Date: November 4, 2003
NCEE: Leading the charge for economic & financial literacy for 54 years
Subject: Follow-up Question from Testimony Given to the Sub-Committee
on Education Reform, October 28, 2003:
What do you see as the relationship between economics education and
financial literacy?
The question about what we mean when we use the terms ``economic
literacy'' and ``financial literacy'' received considerable attention
in the first National Summit on Economic and Financial Literacy, which
the National Council on Economic Education (NCEE) convened and
conducted, together with the Federal Reserve, in May 2002. The
consensus of the symposium at that time--and, I believe, the growing
common practice today--is that Financial Literacy serves as the
umbrella term for referring to useful knowledge of concepts and
principles of applied economics and personal financial decision-making
skills.
Too many people think that Economics is what the academics do at
MIT or Harvard, not what they do when making decisions about managing
resources, planning for retirement, or how to vote on public policy
issues.
But practical, applied Economics is already for the most part
included in the accepted core curriculum in our nation's schools. All
but two states include Economics in their standards.
The Voluntary National Content Standards in Economics (published in
1997 by the NCEE, a non-profit, non partisan foundation), include what
students ought to learn in Personal Finance as a sub-set of basic
Economics, integrated with knowledge of concepts such as ``scarcity,''
``comparative advantage,'' and ``opportunity cost.''
The first-ever NAEP Assessment of Economics, scheduled for 2006,
will use the Voluntary National Content Standards in Economics as the
framework for its tests. The NAEP Assessment treats Personal Finance as
a component of effective education in Economics.
The educational goal--the goal of the NCEE--is not to make all
citizens economists, but to make them financially literate.
Financial literacy means that people have an
understanding of economics that informs personal finance and public
policy decisions.
Financial literacy is a two-step process that begins with
personal finance and leads to broader economic issues that all of
society faces.
Economics education leads to ``the economic way of
thinking,'' where personal planning, saving and investing, and issues
of citizenship, responsibility, and ethics are joined.
Financial literacy, therefore, is not simply a matter of
balancing one's checkbook, or paying off one's credit card, or avoiding
predatory lenders--important as these concerns are. It is knowledge--
like ``literacy'' in language and mathematics--that puts such matters
into a context and enables one to evaluate them.
Financial literacy is the result of economics education. And
because we are seeing more and more the dire consequences of financial
illiteracy, we are coming to recognize the critical importance in real
education reform of more and better sound, basic, applied, practical,
sustained, and incremental education in economics.
Respectfully submitted,
Robert F. Duvall
______
Additional Statement of Dr. Angela Lyons
In my October 28, 2003 testimony at the subcommittee's hearing
entitled, ``Financial Literacy Education: What Do Students Need to Know
to Plan For the Future,'' I stated that ``a greater effort is needed at
the national level to bring awareness to the fact that financial
education is just as important as reading and arithmetic.'' With
respect to this testimony, you have requested that I provide a written
response to the following question: ``Do you think that a national
outreach campaign and Presidential Commission would accomplish this?''
The recent economic slowdown and the rise in the number of
bankruptcies for those under the age of 25 have generated concern that
students are financially ill-prepared to face today's complex financial
marketplace. Proposed legislation to privatize Social Security has
intensified these concerns. It is clear that students are facing a
significant number of financial challenges. Now, more than ever, there
is a need for financial education. The challenge is how do we
effectively incorporate financial education into the classroom and into
students' everyday lives?
Efforts to launch a national outreach campaign and Presidential
Commission related to financial education would be welcomed by the
financial education community. However, without having a proposal to
review, it is difficult for me to make recommendations as to whether
these efforts would be effective. Numerous programs and initiatives
currently exist that promote and provide financial education to
students at the local, state, and national levels. Yet, studies such as
the one recently released by the Jump$tart Coalition indicate that
students continue to do poorly when it comes to financial education.
Thus, while interest in financial education is welcomed at the
national level, I am concerned that a national campaign may not
``trickle down'' to changes at the local level in terms of
incorporating financial education into the curriculum. If a national
campaign were launched, it would first need to take stock and
critically examine the efforts that are currently underway to determine
what is working and what is not. An effective national campaign would
also need to move beyond brochures, press releases, and websites and
focus on 1) placing resources in the hands of local teachers and
community-based organizations and 2) providing support to current
educational programs with proven results.
We need to remember that curriculum decisions and educational
programming are primarily made at the local level. At the beginning of
the day when the school bell rings and the classroom doors close, it is
up to the teachers to insure that financial education has been
effectively incorporated into the classroom. Right now, teachers are
under a tremendous amount of pressure to focus on reading and
arithmetic. They have the pressure of making sure that their students
score well on state exams and that their students are adequately
prepared to pursue opportunities at the post-secondary level.
Efforts at the national level are needed to provide incentives at
the local level for teachers and administrators to insure that
financial education is effectively being taught as individual courses
and/or integrated into current curriculum. Incentives are also needed
to encourage community-based organizations to provide financial
education to both students and parents (i.e. after school programs,
parent workshops, programs through faith-based organizations).
School administrators, educators, and community leaders are aware
that financial education is important. However, the challenge for them
is finding ways to incorporate financial education into the classroom
and community given limited time and resource constraints. In
situations such as these, curriculum and programming decisions are made
according to where incentives and resources are currently available.
Specifically, what is needed right now are financial resources at the
local level to send the message that financial education is just as
important as reading and arithmetic.
I would encourage the committee to consider a single federal
government entity that would pool resources to aid in the delivery of
community-based educational programs through a competitive grants
program. One agency that is currently is place that would be adept at
providing this service is CSREES (the Cooperative State, Research,
Education, and Extension Service). Historically, CSREES has a proven
track record of helping to put resources in the hands of state and
local organizations to deliver effective, performance-based
programming.
If a national campaign is launched, I would also encourage the
committee to think about moving away from using the term ``financial
literacy'' and instead using ``financial security.'' A number of groups
at the state and national level have made this switch. The reason being
that financial literacy simply means that you are more knowledgeable
about your finances where as financial security implies that knowledge
has been translated into financial action (increased savings, reduced
debt levels, etc.).
Thank you for the opportunity to provide additional testimony.
Please do not hesitate to contact me if you need further assistance. I
commend the committee for its efforts to address this issue at the
national level. A difficult challenge lies ahead, and I would welcome
the opportunity to provide whatever assistance I can to aid in the
development of a national campaign or Presidential Commission.
______
Statement of John Bryant, Founder, Chairman and Chief Executive
Officer, Operation HOPE Inc.
First and foremost, thank you for inviting me to give testimony on
the vital importance of economic literacy in our country to the U.S.
House Committee on Education, Subcommittee on Education Reform.
I am also honored to be here representing the only national urban
delivery system for economic literacy in the nation today; Banking on
Our Future.
Even as I prepare this important testimony for leaders in the
United States Congress, I am literally traveling across America
promoting the vital importance of economic literacy in our 21st Century
American economy.
From Los Angeles, California co-teaching with California Insurance
Commissioner John Garamendi, Watts, California with superstar singer,
actor and model Tyrese, to Oakland, California with Donald McGrath,
president and chief executive officer of $25 billion asset Bank of the
West, to Portland, Oregon with Tom Perrick, president of the Oregon
Bankers Association, to Cleveland, Ohio with Federal Reserve Bank of
Cleveland President Sandra Pianalto, to New York City with New York
State Banking Superintendent Diana Taylor, to Kansas City just today
with Federal Reserve Bank of Kansas City President Tom Hoenig, I and
Operation HOPE have embarked our 3rd Annual Banking on Our Future
Across America economic literacy marathon; covering 12-cities over 60-
days, with more than 1,000 volunteer banker-teacher HOPE Corps members,
teaching inner-city and low-wealth youth the basics of checking,
savings, credit, investment and the history of banking.
In the coming weeks I will co-teach celebrity Banking on Our Future
economic literacy educational sessions in Chicago, Il, with Chicago
City Treasurer Judith Rice, Roberto Herencia, president of Banco
Popular and others, in Boston, Mass. with popular Boston Mayor Menino,
the Boston superintendent of schools, Lynn Pike, managing director of
consumer banking for Fleet Bank, Robert Mahoney, vice chairman of
Citizens Bank and others, in Baltimore, Maryland with Maryland Lt.
Governor Michael Steele and Donn Weinberg of the $2 billion asset
Weinberg Foundation, a foundation focused on poverty eradication, and
our nation's capitol, Washington, D.C., where Mayor Anthony Williams,
like the mayors of Los Angeles, New York and Boston, respectively, will
proclaim it BANKING ON OUR FUTURE DAY IN THE DISTRICT OF COLUMBIA and
co-teach a culminating economic literacy session on December 11th,
2003, along with FDIC Chairman Donald Powell, the national honorary
chairman of Banking on Our Future Across America, and myself.
At the end of this marathon we will have taught approximately
20,000 youth economic literacy, building upon our year-round, national
program and economic literacy movement Banking on Our Future, which has
taught more than 112,000 youth, grades 4-12, in hundreds of partner
schools, faith-based institutions, Boys & Girls Clubs, after-school
programs and wherever else we find youth.
And why all of this effort around economic literacy, and youth?
Because approximately 80% of the energy driving our
national economy is provided by you and me, the U.S. consumer.
Because we have a President that wants each of us to
manage our own Social Security accounts, when the facts suggest that
most of us, today, cannot manage our own checking account.
Because Wells Fargo Bank, just a few short years ago,
changed its name to simply Wells Fargo--dropping the work BANK; thus
stressing their new focus on becoming a leading, diverse and
sophisticated provider of a broad range of ``financial services.'' And
with this change came the need for us--their customers--to understand
MORE, not less.
Because the number one cause of divorce in America, still
today, is money.
Because there were 1 million non-business bankruptcy
filers in America in 2000.
Because there were 1.5 million non-business bankruptcy
filers in 2001, and more than 1.7 million (filers) in 2002. Almost a
100% increase in just two-years time.
Because the LARGEST GROUP of bankruptcy filers in
America, according to a report by the Jump$tart Coalition, is youth
between 18-24 years of age! Those are not Black kids, or Latino kids,
but mainstream (read White) middle class young adults.
Because the average junior in college has approximately
$3,000 in consumer dept, and the average senior in college has
approximately $7,000 in consumer dept, (4) four credit cards, and no
job.
Because recent studies have confirmed that more than 1/
3rd of all graduating college students have no clue how they will make
their FIRST payment on student loans!
Because the tragedy of 9/11 was not only a human and an
emotional disaster for America, but in the three months following 9/11,
it also devolved into an economic disaster in communities, cities and
states clear across America. American consumers--the drivers of our
economic engine--became dear caught between economic headlights.
Because a good deal of our economic stability relies on
confidence--our personal, individual confidence. In short, in order to
make good decisions for our families, and ourselves and in order to
ultimately become not only good consumers, but good savers, borrowers,
clients and customers--America needs to be economically literate. AND
WE ARE NOT.
We live in the largest and fastest growing economy in the world
today, yet no one is teaching our kids to be economically literate. No
one is teaching our kids what I call Life 101 skills; the basics of a
checking account, a savings account, and the importance of credit and
investment in their young lives.
And while Operation HOPE, a national 501 3 non-profit charitable
organization, has 9 non-profit companies under its umbrella, my legacy
leaver is Banking on Our Future; teaching every child in a major urban
city in America economic literacy by the time they reach 8th grade.
My Phase II vision for the Banking on Our Future movement includes:
25,000 volunteer banker-teacher HOPE Corps members.
A 5-year campaign.
5 million youth educated.
And just like our nation's educational system cannot accomplish
this Herculean goal of economic literacy education by themselves, or at
least not within the next 5-8 years, we at Operation HOPE have learned
that we cannot do this alone. We need partners, and increasingly, we
have them.
Banking on Our Future--the Movement. The Work. The Partners.
Last year Beacon Books published my book, BANKING ON OUR FUTURE,
teaching adults and their children about economic literacy, which is
fast becoming a resource staple for school libraries across the
country.
In 2002 and 2003 I have had the pleasure of co-teaching landmark
Banking on Our Future feature sessions with national and international
leaders, including former U.S. President William Jefferson Clinton,
U.S. Federal Reserve Chairman Alan Greenspan, FDIC Chairman Donald
Powell, U.S. Secretary of Housing & Urban Development Mel Martinez,
amongst of others.
Banking on Our Future is the official economic literacy after-
school program for the Los Angeles Unified School District's ``Beyond
the Bell'' Program, the New York City Department of Youth and Community
Developments Beacon Schools, and the citywide economic literacy program
for the Boston Public Schools.
Banking on Our Future was selected in 2003 to receive a one of a
kind innovations in education grant from the Office of the Secretary
for the U.S. Department of Education, focused on our on the ground work
in New York and California.
Banking on Our Future, the on-the-ground program, has more than
1,000 active volunteer banker-teacher HOPE Corps members, working year-
round in 9 states across America.
Banking on Our Future has a powerful national online partnership
with $400 billion asset Wells Fargo & Co., where
www.bankingonourfuture.org - providing 100% free economic literacy
education online--has registered more than 2.8 million hits to its
website from January to August, 2003.
Banking on Our Future is honored to be a national partnership for
economic literacy with the Federal Reserve System, the FDIC's Money
Smart Program, the America's Community Bankers, the American Bankers
Association Education Foundation, the Consumer Bankers Association, the
Independent Community Bankers Association, as well as Citibank, Fleet
Bank, Wells Fargo (online) and Banco Popular.
Important regional partners include the Williams Jefferson Clinton
Foundation in Harlem, the New York Bankers Association, the Department
of Banks and Financial Institutions for the District of Columbia, E
Trade Bank and others.
Tested Results: The best reflection on the ultimate effectiveness
of our work around economic literacy, with youth, is summarized in a
pre and post-test conducted by the Federal Reserve Bank of Boston on a
pilot program for Banking on Our Future. The Federal Reserve's report
found a 700% improvement in economic literacy comprehension and
understanding by the students tested.
And aspects of our work are now even being incorporated within our
nation's strategy for homeland security. Recently Michael D. Brown,
FEMA Director and Under Secretary for Emergency Preparedness and
Response at Homeland Security, in announcing our HOPE Coalition
America, emergency economic triage program partnership with FEMA and
the U.S. Department of Homeland Security said, ``Operation HOPE is the
nation's leading force in promoting economic literacy and we are
excited that John Bryant is making his special expertise available to
the people of California at a time of their greatest need.''
And recently Operation HOPE has announced our intention of
introducing what we refer to as The HOPE Accord.
The HOPE Accord asks the following of and from our nation's
private-sector financial services leaders;
1. CEOs to stand with Operation HOPE in support of a national
economic literacy agenda.
2. CEOs agree to personally co-teach a Banking on Our Future
economic literacy course with me, as founder of Operation HOPE and
Banking on Our Future.
3. CEOs agree to encourage their employees to volunteer in their
local community.
4. CEOs agree to compensate their employees up to (4) four hours
per month (the Wachovia Bank model) to volunteer in their local
community.
5. CEOs agree to incorporate community service as a line item in
EVERY EMPLOYEES annual employee performance reviews.
And so, as you can see, Operation HOPE is on the move across the
nation with its powerful and effective economic literacy movement. As
Federal Reserve Chairman Alan Greenspan has said, ``the only
irreversible asset in America today is education and access, and
information and access.'' Translation: once you have education, no one
can take its benefits and wisdom away from you.
At Operation HOPE Inc. we believe that education is the ultimate
poverty eradication tool, and accordingly, we strongly believe that
this issue of economic literacy education, in a capitalist country, is
of vital importance and relevance to the American public as we move
into this new economic era. In fact, THIS was the issue (economic
empowerment) that Dr. Martin Luther King, Jr. had taken up as his last
movement before his untimely death; and it was called the Poor People's
Campaign. Dr. King realized that you could not legislate goodness, nor
could you pass a law to force someone to respect you. That the only way
to achieve social justice in a democracy rooted in capitalism, was
through economic parity. Ownership.
At Operation HOPE Inc. we believe that if the 20th century was
defined by race and the color line (the Civil Rights Movement), all
over the world, then the 21st Century will be defined by wealth and
poverty (the Silver Rights Movement).
Economic literacy lies at the very core of what we at Operation
HOPE see as THE movement of the wealthless and the under-served in and
for the 21st Century; the Silver Rights Movement.
And so, on behalf of all of us here at Operation HOPE, I thank the
Committee for taking up this issue for substantive debate.
______
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Statement of Visa U.S.A. Inc.
Visa U.S.A. Inc. applauds the efforts of the House Committee on
Education and the Workforce Subcommittee on Education Reform for
addressing the importance of financial literacy education for our
nation's youth. Congressional focus on this subject is essential to
building the national awareness that will benefit all Americans.
We thank you for the opportunity to submit a written statement for
the record outlining our efforts to address many of the specific issues
raised during your hearing on ``Financial Literacy Education: What Do
Students Need to Know to Plan for the Future?'' held October 28, 2003.
Financial literacy education is a priority for Visa U.S.A., which
is why we are especially honored that Visa U.S.A.'s Practical Money
Skills for Life program now reaches more than 37 million students in
more than 100,000 schools across the country.
Many of America's youth are graduating from secondary school or
even college today without the vital skills necessary to enable them to
have a successful financial life--skills like how to create a budget
and how to develop a savings plan for retirement and other future
needs.
In a recent national survey conducted by Visa, 77 percent of
American adults surveyed said young people are learning money
management skills in the ``school of hard knocks.'' Nearly half of the
adults surveyed said today's youth believe they are more likely to
become millionaires by starring in a reality TV series than by learning
how to budget and save wisely.
It is critical that children learn these important financial facts
of life before leaving home. Money skills are lessons a student can
take from the classroom to the boardroom. Visa U.S.A. is proud to bring
teachers, students and consumers our educational program, Practical
Money Skills for Life, free of charge online at
www.practicalmoneyskills.com. This cutting-edge Internet-based personal
finance curriculum program is designed to educate consumers of all ages
about a number of key personal finance subjects, including budgeting,
saving and investing.
Practical Money Skills for Life has customized material for
parents, teachers, students and general consumers, including lesson
plans, interactive calculators, games and budgeting worksheets. In
addition to the Practical Money Skills for Life online material, the
following at-home and in-class resources are available:
A 14-chapter lesson plan book with overhead projection
materials, activities and exercises covering budgeting, saving,
investing and how to recognize financial trouble, along with resources
to find solutions.
An interactive CD-ROM, which includes a fun interactive
game about financial decision making, a quiz show to test students'
fiscal savvy, and a loan and credit card calculator, as well as a
series of budget worksheets.
A teaching video that corresponds with the lesson plans,
designed to illustrate a variety of financial situations and spark in-
class conversation.
These financial literacy tools--developed by teachers for teachers
are available in English, Spanish and traditional Chinese. Teachers and
college professors can integrate the curriculum directly into their
lesson plans for a one-time course or a year-long program. Visa U.S.A.
is working to make sure Practical Money Skills for Life meets each
state's standards for academic curriculum so that teachers may easily
incorporate the program into their classrooms.
Additionally, Visa U.S.A. has partnered with the Council for
Exceptional Children to provide a version of the Practical Money Skills
for Life curriculum for children with special needs.
Practical Money Skills for Life has received the stamp of approval
from educators at the 2001 National Education Association's Expo. More
than 94 percent of the educators surveyed graded the program an ``A''
or ``B'', and 98 percent said they would recommend it to fellow
educators. This ``educator developed and educator approved'' program
has received a ``four star'' rating from The Detroit News and Free
Press, hailed for offering ``a great mixture of educational and fun
activities that can help teachers, parents, students, and consumers
manage money.'' Additionally, Practical Money Skills for Life has been
recognized by Teacher.com as a Teacher Information Network Gold Award
winner, and is also the recipient of the prestigious Golden Web Award
presented by the International Association of Web Masters and
Designers.
Visa U.S.A. is proud to partner with the Jump$tart Coalition for
Personal Financial Literacy to bring financial literacy to the
forefront of the national agenda. Visa actively supports their efforts
to promote April as Financial Literacy for Youth Month.
To more directly engage teachers in incorporating financial
education in the classroom, Visa U.S.A. co-sponsors the annual
Practical Money Skills for Life Educator Challenge with Future Business
Leaders of America. Winning participants show how their students have
increased their financial literacy using elements of Practical Money
Skills for Life. This past year, more than 900 high school teachers
from all 50 states went to www.practicalmoneyskills.com to enter for a
chance to win computers and school supplies.
Beyond providing a free personal finance curriculum, Visa U.S.A.
continues its efforts to bridge the digital divide. Working with
Members of Congress, Visa U.S.A. donates computer equipment to schools
in need and provides free Practical Money Skills for Life training for
teachers. During the 2003-2004 school year, Visa U.S.A. plans to donate
computer labs and introduce our educational program to 10 more high
schools across the United States. To date, Visa U.S.A. has donated more
than 40 computer labs nationwide.
Visa U.S.A. is proud of each of these achievements and strives to
make every American teacher, parent, student and consumer aware of the
availability of Practical Money Skills for Life in order to do our part
to promote financial literacy. Visa U.S.A. appreciates the opportunity
to submit a written statement on this very important matter.
______
Statement of David F. Woods, CLU, ChFC, Chief Financial Officer,
National Association of Insurance and Financial Advisors and President,
Life and Health Insurance Foundation For Education
Chairman Castle, Ranking Member Woolsey and Members of the
Subcommittee on Education Reform, thank you for permitting me to submit
testimony in connection with your recent hearing on ``Financial
Literacy Education: What Do Students Need to Know to Plan for the
Future?'' I commend you for focusing on this issue, which is so
important to the well-being of individual Americans and to the Nation's
economy as a whole.
My name is David Woods. I am the Chief Executive Officer of the
National Association of Insurance and Financial Advisors (NAIFA). NAIFA
is a federation of approximately 800 state and local associations
representing over 225,000 life and health insurance agents and advisors
and their employees. Originally founded in 1890 as the National
Association of Life Underwriters, NAIFA is the nation's oldest and
largest trade association of life and health insurance agents and
financial advisors. NAIFA's mission is to improve the business
environment, enhance the professional skills and promote the ethical
conduct of agents and others engaged in insurance and related financial
services who assist the public in achieving financial security and
independence.
I also currently serve as the President of the Life and Health
Insurance Foundation for Education (``LIFE''). LIFE, a non-profit
organization founded in 1994 by six life and health insurance agent
organizations in the United States, was formed to address the growing
need to educate the public about the essential role of life and health
insurance in a sound financial plan and the value added by insurance
agents and other financial advisors. LIFE is not a legislative advocacy
organization.
The need for financial education--always important--has become
increasingly critical in recent years. As we hear often in the news,
bankruptcies are up, credit card debt is skyrocketing, and personal
savings are at historic lows. In addition, the financial services
marketplace is more complicated than ever. Individuals not only have
the basic financial services tools with which we are familiar--personal
savings and checking accounts, basic life insurance and, perhaps,
stocks--but they also have the opportunity to take advantage of
numerous other products designed to appeal to their specific needs and
goals. The strength and diversity of the financial markets help make
our economy strong and the ``American Dream'' attainable for all
Americans. Without proper financial education, however, the benefits of
these vast financial opportunities will go unused for many Americans,
and may become liabilities for others, resulting in the debt and
bankruptcies that have become all too common.
I am heartened to see the efforts being made to encourage financial
literacy among our young people. As the Subcommittee heard at its
recent hearing, the public and private sectors are working--together
and separately--to educate children so they will not be confronted with
the ``money problems'' many face as adults. The Treasury Department's
Office of Financial Education has developed standards for financial
education programs and is helping states and schools integrate
financial education into their core curricula. Non-profit organizations
and trade associations are also sponsoring programs to assist educators
in preparing students with basic financial knowledge, realizing that
financial literacy, like reading, writing and arithmetic, is key to a
successful future.
I would like to take this opportunity to give you a view of
financial literacy from an insurance sector perspective. Specifically,
I would like to make three points: (i) insurance is critical component
of financial literacy education; (ii) financial education is a life-
long process; and (iii) the insurance agent community is actively
engaged in financial education programs.
Insurance is a critical component of financial literacy education.
Insurance is an integral part of the financial sector and any
discussions of financial literacy should include insurance as a
critical component. Life, health, disability income and long term care
insurance provide basic financial security for consumers in times of
need. In addition, numerous other insurance products, such as variable
annuities, include investment components. These products provide
consumers with the security of basic insurance coverage.
My goal here is not to ``sell'' insurance. Rather, it is to point
out that financial literacy is not limited to knowledge of bank
accounts and stock portfolios. Although those are clearly part of
financial education, knowledge of risk and insurance forms the base of
a well rounded financial education. Basic financial risks should not be
overlooked when we teach our young people how to manage their finances
and invest. People and families need to understand how to provide for
their immediate financial needs and long-term financial security. It is
important to know how all these financial products fit and work
together to avoid financial disasters and ensure a safe and sound
financial future.
Financial education is a life-long process.
The title of this hearing is ``Financial Literacy Education: What
do Students Need to Know to Plan for the Future?'' and its focus is
rightly on young people. It makes sense to start early and mold good
financial habits for a lifetime. It is important to point out, however,
that financial education is a lifelong process. Particularly with
insurance, continued education and ``literacy'' is critical as needs
change over time.
Earlier this year, I testified before the House Financial Services
Subcommittee on Capital Markets, Insurance and Government Sponsored
Enterprises on the life insurance needs of senior citizens. My
testimony pointed out how important it is for seniors to understand
their insurance needs and choices. Seniors often face a terrifying
prospect--the inability to generate new income at a time when their
life spans are uncertain and their health needs are inevitably going to
grow. Therefore, it is critical that every financial decision be based
on as much information as possible and be flexible enough to address
current and potential needs. Financial education for seniors (and other
adults, for that matter) need not be limited to insurance. Indeed,
seniors'' potentially vulnerable financial positions make literacy in
all aspects of personal finance very important.
The insurance agent community is actively engaged in financial
education.
There are two aspects to the agent's role in financial education.
First, financial education is an everyday part of an agent's job. An
insurance agent is the essential link between the consumer and
insurance company, providing and servicing the products of the insurer
while educating the consumer as to how to manage their financial needs
and make informed choices regarding their insurance purchases.
Second, agents are involved in coordinated outreach to educate
consumers. As I mentioned previously, in 1994, six insurance agent
groups, representing 160,000 agents, founded the Life and Health
Insurance Foundation for Education (``LIFE''). LIFE's founding members
saw a strong and growing need to inform and educate the public. In the
decade since it was created, LIFE has developed a diverse educational
program which educates consumers and empowers them with the knowledge
needed to make informed insurance decisions.
LIFE's education programs include:
Next Generation: Next Generation is a multimedia
insurance educational program designed to education high-school
students about the basics of insurance. This program is provided to
teachers free-of-charge and is incredibly successful with teachers and
even students give it high grades.
Insurance Matters: Insurance Matters is a multimedia
community education kit designed for insurance professionals to teach
consumers, in adult education settings, about insurance.
Life-line.org: This award-winning education website
provides everything from basic information about different types of
insurance, to tips on what to look for in an agent, to interactive
calculator features that help consumers determine their own insurance
needs.
realLIFEstories: To help people get a better
understanding for the need for sound financial planning, LIFE promotes
an annual award to uncover the best ``realLIFEstories --real stories of
real people that illustrate how the benefits of insurance helped them
get through very difficult financial times.
Public education advertising: ``Life insurance isn't for
the people who die. It's for the people who live.'' LIFE's national
advertising is a reminder of the crucial role of life insurance in
financial planning, and reminds consumers how important it is to make
sure your loved ones are financially taken care of in your absence.
What can Congress Do?
It is my belief that Congress can play an invaluable role in
encouraging and enhancing financial literacy education. This hearing is
an excellent tool for helping to spread the word about the critical
need for increasing financial literacy. In addition to its ``bully
pulpit,'' there are specific steps Congress can take to promote
financial literacy education. There are currently several measure
pending in the Congress on the issue:
S. 2660, the Fair Credit Reporting Act reauthorization
legislation recently passed by the Senate includes a provision
(sponsored by Sens. Debbie Stabenow and Mike Enzi) creating a Financial
Literacy Education Commission, which would have broad authority to
streamline, improve or augment financial literacy education programs,
grants and materials of the federal government;
H.R. 2990, introduced by Rep. Judy Biggert, would create
the Commission to Educate Our Nation's Teachers and Students on
Financial Literacy Skills. The commission would make recommendations on
integrating economic and personal financial education into primary,
secondary and post-secondary curricula.
H.R. 3294, sponsored by Rep. David Dreier would require
the Secretary of the Treasury to establish a pilot national public
service multimedia campaign to enhance the state of financial literacy.
The Secretary would work with nonprofit, public or private institutions
to develop a multimedia campaign aimed at target audiences.
S. 1470, introduced by Senator Paul Sarbanes, would
establish the Financial Literacy and Education Coordinating Committee.
The Committee would develop a national strategy to promote basic
financial literacy among consumers through the development of methods
to increase the general financial education level of consumers and
enhance the general understanding of financial services and products.
Although NAIFA does not have a position on these bills, the
proposals have a great deal of merit and should be studied closely.
Congress is in a unique position to foster financial literacy education
across the country and we encourage you to take a thorough look at
these and any other financial literacy initiatives that are proposed.
Conclusion
Thank you again for holding this hearing on the important issue of
financial literacy education, and for the opportunity to share my views
and the views of NAIFA with you. Financial literacy education is the
key for all people--students, young adults and seniors--to a successful
future and the opportunities of sound credit, home ownership,
retirement savings and a safe and sound financial future. Insurance is
an important aspect of that sound future. NAIFA and LIFE have actively
sought to improve the financial literacy of insurance consumers and
look forward to working with you to further that goal.