[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
EMPOWERING CONSUMERS: CAN FINANCIAL
LITERACY EDUCATION PREVENT
ANOTHER FINANCIAL CRISIS?
=======================================================================
FIELD HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
AUGUST 24, 2010
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-152
U.S. GOVERNMENT PRINTING OFFICE
61-856 WASHINGTON : 2010
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Oversight and Investigations
DENNIS MOORE, Kansas, Chairman
STEPHEN F. LYNCH, Massachusetts JUDY BIGGERT, Illinois
RON KLEIN, Florida PATRICK T. McHENRY, North Carolina
JACKIE SPEIER, California RON PAUL, Texas
GWEN MOORE, Wisconsin MICHELE BACHMANN, Minnesota
JOHN ADLER, New Jersey CHRISTOPHER LEE, New York
MARY JO KILROY, Ohio ERIK PAULSEN, Minnesota
STEVE DRIEHAUS, Ohio
ALAN GRAYSON, Florida
C O N T E N T S
----------
Page
Hearing held on:
August 24, 2010.............................................. 1
Appendix:
August 24, 2010.............................................. 37
WITNESSES
Tuesday, August 24, 2010
Glendening, Hon. Kevin, Deputy Commissioner, Consumer and
Mortgage Lending Division, Office of the State Bank
Commissioner, State of Kansas.................................. 12
McKinney, Hon. Dennis, Treasurer, State of Kansas................ 4
Mitchell, Shawn P., President and Chief Executive Officer,
Community Bankers Association of Kansas........................ 27
Petty, Taylor, Master's in accounting student, University of
Kansas......................................................... 21
Praeger, Hon. Sandy, Commissioner of Insurance, State of Kansas.. 6
Smith, Hon. John P., Administrator, Kansas Department of Credit
Unions......................................................... 8
Tuttle, Kathryn Nemeth, Vice Provost for Student Success,
University of Kansas........................................... 23
Voyles, Gayle, Director, University of Missouri-Kansas City
Center for Economic Education.................................. 25
Wilson, Hon. Marc S., Securities Commissioner, State of Kansas... 10
Wolgamott, Chris, Community Development Liaison, Meritrust Credit
Union.......................................................... 29
APPENDIX
Prepared statements:
Moore, Hon. Dennis........................................... 38
Hinojosa, Hon. Ruben......................................... 39
Glendening, Hon. Kevin....................................... 41
McKinney, Hon. Dennis........................................ 46
Mitchell, Shawn P............................................ 51
Petty, Taylor................................................ 56
Praeger, Hon. Sandy.......................................... 61
Smith, Hon. John P........................................... 65
Tuttle, Kathryn Nemeth....................................... 73
Voyles, Gayle,............................................... 77
Wilson, Hon. Marc S.......................................... 81
Wolgamott, Chris............................................. 92
Additional Material Submitted for the Record
Moore, Hon. Dennis:
Written statement of the Financial Education and Counseling
Alliance................................................... 95
Letter from the National Association of Federal Credit Unions
(NAFCU).................................................... 102
Written statement of Dennis M. Dice, CEO, NavPoint Institute
for Financial Literacy..................................... 103
EMPOWERING CONSUMERS: CAN FINANCIAL
LITERACY EDUCATION PREVENT
ANOTHER FINANCIAL CRISIS?
----------
Tuesday, August 24, 2010
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:05 a.m., in
the Simons Media Room, The Robert J. Dole Institute of
Politics, University of Kansas, 2350 Petefish Drive, Lawrence,
Kansas, Hon. Dennis Moore [chairman of the subcommittee]
presiding.
Members present: Representatives Moore and Jenkins.
Chairman Moore of Kansas. Good morning. This field hearing
of the Subcommittee on Oversight and Investigations of the
House Financial Services Committee will come to order. Our
hearing today is entitled, ``Empowering Consumers: Can
Financial Literacy Education Prevent another Financial
Crisis?'' Inspired from the April 6, 2009, Time magazine cover,
``The End of Excess: Why this Crisis is Good for America,''
this is the third and final hearing in a series where we look
at key issues that may not be receiving enough attention
following the recent financial crisis so we can learn more and
work towards a stronger and more stable financial system.
Before we begin with the formal proceedings, I want to take
a moment of personal privilege to first thank Dole Institute
Director Bill Lacy and the staff here for hosting today's field
hearing, as well as my alma mater, the University of Kansas
Chancellor, Chancellor Bernadette Gray-Little, and all the
students, faculty, and staff who make this one of the finest
places for higher education in the country.
I also want to thank the other member, Representative Lynn
Jenkins from the 2nd District of Kansas, who has taken time to
be here today. I really appreciate that.
This is our second hearing. As some of you know, we had one
yesterday.
We will begin this hearing with members' opening
statements, up to 10 minutes per side. Then, we will hear
testimony from our witnesses. For each witness panel, members
will each have up to 5 minutes to question our witnesses. The
Chair advises our witnesses to please keep your opening
statements to 5 minutes to keep things moving so we can get to
member questions.
Without objection, members' opening statements will be made
a part of the record and I now recognize myself for 5 minutes
for an opening statement.
Our economy continues to slowly recover following the worst
financial crisis we have seen in generations. Everyone knows,
whether you are a Democrat or a Republican, that lax oversight
and poor regulation of our financial system for too many years
sowed the seeds of a near collapse of our entire economy, the
worst of its kind since the Great Depression.
And who paid the price for these mistakes? Unfortunately,
it was not those ``too-big-to-fail'' firms on Wall Street, but
rather our constituents and businesses here in Kansas and
across the country. American households lost about $14 trillion
in net worth over the course of 2 years--$14 trillion.
Retirement accounts saw an over 20 percent decline in value,
forcing many Americans to delay their retirement. Millions of
Americans lost their homes through foreclosure. Bernie Madoff's
Ponzi scheme defrauded $65 billion from investors.
Given the economic damage we did suffer, it is not
surprising that many Americans have lost their faith in our
financial system. This is why I was proud to work with my
colleagues on the House Financial Services Committee and in
Congress in drafting the Dodd-Frank Wall Street Reform and
Consumer Protection Act that the President recently signed into
law.
A key lesson that we have learned from the financial crisis
is that we need to do a better job across sectors--local,
State, and Federal Governments, private industry, nonprofits--
to utilize scarce resources to better promote financial
literacy education.
That is why I am glad the Dodd-Frank Act includes some
less-noticed provisions that will aid in this effort. A key
provision creates an Office of Financial Education--imagine
that, an Office of Financial Education--within the newly
created Bureau of Consumer Financial Protection. This office
will be responsible for ``developing and implementing
initiatives intended to educate and empower consumers to make
better informed financial decisions.'' The new law also
establishes in the Department of Housing and Urban Development
an Office of Housing Counseling, which will conduct activities
relating to homeownership and rental housing counseling.
Additionally, the Financial Literacy and Education
Commission recently announced the launch of its redesigned
financial literacy education Web site, which can be found at
www.mymoney.gov. The new Web site provides new calculators and
checklists to assist individuals and families with savings and
various life events with financial implications.
There are other examples of what is happening to promote
financial literacy on the Federal level, but today we will hear
from State regulators here in Kansas and efforts they are
taking to promote financial literacy. We will also hear from
representatives in the education and local financial community
to learn what projects work best to strengthen financial
literacy. I look forward to hearing from our witnesses on this
very, very important issue.
Will better financial literacy, on its own, prevent the
next financial crisis? Maybe not, but I know if we do not do a
better job of promoting financial education, we only increase
the likelihood of another crisis. I hope that with today's
hearing, we can begin to explore ways in which the Federal
Government can be a better partner with State and local
governments, and others, to provide the education and resources
everyone needs to make better financial decisions.
I now recognize for up to 10 minutes Representative Lynn
Jenkins, a member of the House Financial Services Committee;
and thank you for being here with us today, Lynn.
Ms. Jenkins. Thank you, Chairman Moore, and thank you for
holding this hearing on a very important topic. I, too, would
like to thank KU and our panelists and the individuals who have
taken the time to come out this morning.
And I would like to welcome everybody to the 2nd District,
even if it is by just about 100 yards.
[laughter]
Ms. Jenkins. Financial literacy is such an important issue
and I am proud of these elected officials and the industry
professionals represented here today for their good work in
partnering with one another in an effort to better educate
Kansans on their financial health.
As a certified public accountant, a former lawmaker, and a
former State Treasurer, I understand firsthand the significance
of financial literacy. It is an issue that is near and dear to
my heart and one that I continue to have a personal passion
for. CPAs have a long history of helping people take control of
their financial future, and it was during my tenure on the
Board of Directors of the Kansas Society of CPAs that I
received my initial introduction to the critical importance of
educating the public on fiscal issues through programs like one
called ``360 Degrees of Financial Literacy'' and the ``Feed the
Pig'' initiative which was originated by CPAs across the
Nation. We created programs in which individuals might increase
their financial literacy.
My interest was further peaked when I was elected to the
legislature where Jill Dawkin and a group of folks brought the
issue of financial literacy to our attention in our education
committee. Their good work raised awareness among individuals
in the State House on the importance of education and financial
skills. And finally, during my time in the State Treasurer's
office and as president of the National Association of State
Treasurers, we had the privilege of learning even more about
the needs of cradle-to-grave financial education and that
approach.
It was such a thrill to see organizations like the Kansas
Credit Unions step up to the plate in a big way to help us
create programs that addressed the needs of Kansans. And upon
my election to Congress, I immediately joined the Financial and
Economic Literacy Caucus, whose goal is to promote financial
education. And I co-sponsored legislation promoting Financial
Literacy Month.
I look forward to learning of additional ways that the
Federal Government can encourage this panel working together
with us to continue the good work that has been started. And I
believe we must continue to promote strong financial literacy
programs that are aimed at educating individuals and helping
them take control of their financial destiny.
I look forward to hearing from today's witnesses on
successful programs that they have used to promote financial
literacy and other ideas our witnesses might have for tying
together the patchwork of programs at the local, State, and
Federal level to ensure Americans are receiving the information
that they need.
With that, I thank you, Mr. Chairman, and I yield back the
balance of my time.
Chairman Moore of Kansas. Thank you to my colleague.
And I am now pleased to introduce our first panel of
witnesses: Dennis McKinney, Treasurer, State of Kansas; Sandy
Praeger, Commissioner, Kansas Insurance Department; John P.
Smith, Administrator, Kansas Department of Credit Unions; Marc
Wilson, Securities Commissioner, State of Kansas; and Kevin
Glendening, Deputy Commissioner, Consumer and Mortgage Lending
Division, Office of the State Bank Commissioner, State of
Kansas.
Without objection, your written statements will be made a
part of the record.
Treasurer McKinney, you are now recognized for up to 5
minutes to provide a brief summary of your written statement.
STATEMENT OF THE HONORABLE DENNIS McKINNEY, TREASURER, STATE OF
KANSAS
Mr. McKinney. Thank you, Mr. Chairman. I know to a great
extent, I am preaching to the choir here, because some of these
programs in our office were started by my predecessor, then-
State Treasurer Lynn Jenkins.
As State Treasurer, I believe financial literacy is a
national priority. And as a result, my office provides a
variety of financial literacy programs to Kansans of all ages.
Among other initiatives, we offer an in-school savings program
and financial management workshops for grade school and middle
school aged students. We also host financial seminars and
online resources for adults. These programs are a great
resource to Kansas teachers, students, and families. Our goal
is to help hard-working Kansans save, invest, and grow to
create more opportunities to improve families and communities
across Kansas. I might add that in doing this, we try to
partner as often as we can with other organizations such as in-
State agencies, as often as we can, to get connections within
the communities. Our largest partner has been the Kansas Credit
Unions.
The Save@School program provides the early education that
is critical in shaping young minds in financial management.
With the leadership of educators and the cooperation of local
financial institutions, this program is reaching thousands of
students across Kansas. The curriculum for the Save@School
program is designed to make students aware of the benefits of
saving, encourage good habits relating to saving and spending,
and carry over to the student's family as a way to make
positive changes in their own financial lives.
The Save@School program joins the State Treasurer's office,
local financial institutions, and schools with the common goal
of teaching children so that they become educated consumers who
will make responsible financial decisions in the future.
Participants open savings accounts and make deposits to their
accounts on scheduled savings days at their school. The
students learn the importance of savings through hands-on
experience and classroom exercises with the guidance of an
employee of the financial institution and the curriculum
provided by the State Treasurer's Office. This curriculum
aligns with current Kansas State mathematics standards.
The Treasurer's LIFE reading list provides lessons on cost-
benefit analysis, barter and exchange, having a job, having and
earning money, and saving techniques for kids from preschool
through high school. This list is designed to get kids to begin
thinking about and engaging in dialogue on some basic financial
concepts.
As State Treasurer and as a parent myself, I recommend that
parents talk to their children about finances early and often.
Reading these books to kids is a great way to communicate the
message of financial responsibility and get those conversations
started. I appreciate the important role that parents and
caregivers play in shaping our children's future. I would just
quickly add that some of us like Congresswoman Jenkins and
myself had the advantage of 4-H experience, which many of our
students do not have today.
Another initiative at the Treasurer's office for parents
and children is the Kansas Investments Developing Scholars
programs. This is a unique opportunity for Kansas families who
want to begin planning for their child's education beyond high
school but may need some assistance to make the goal of saving
a reality.
The K.I.D.S. matching grant program will match the first
$600 that participants contribute to a Learning Quest 529
Education Savings Program account each year that they are
eligible. K.I.D.S. was developed for families with incomes less
than 200 percent of the Federal poverty level. To be eligible,
participants must be Kansas residents. Whether it is community
college, technical schools or university, the challenge of
paying for a child's education will only increase in the
future.
We reach the middle school students through a one-day
workshop called Money$mart Financial Management. This event was
created specifically for Kansas middle school students.
Money$mart is designed to offer middle school students training
in sound personal financial philosophies.
The ABCs of Credit Card Finance is a program aimed at
educating high school seniors and young adults entering
college. It was created by the Center for Student Credit Card
Education and instructs students how to wisely choose and
responsibly use a credit card.
The Treasurer's office provides seminars specifically for
women and for seniors. In 2009, we were a strong partner on the
Women & Money Coalition and we sponsored an 8-week series for
90 women to gain control over their finances. This was hosted
at Washburn University in Topeka.
Partnering with a number of organizations, we have offered
financial literacy programs in Topeka starting with State
employees as a pilot project. Based on the success of these
pilot sessions, we have decided to expand these opportunities
to other people in Kansas.
You asked the question, what kinds of programs have worked
well in promoting greater financial literacy? The best programs
are the ones that can entertain the participants as well as
educate them. Students of all ages consider finances a boring
topic. But money is fun to talk about. Once the word finance or
budget is mentioned, eyes start glazing over. So our folks work
hard to try engage the students and make the topic fun and then
it is easier for the learning to take place.
That is one of the goals in the Money$mart Program where we
also engage college age students in helping with the program
because college age students quite often find it easier to get
the interest and attention of middle school students and talk
to them about what they need to do to prepare for college as
well as prepare for better financial management.
You also posed the question, how can we coordinate efforts
at the local, State, and national levels? The Jump$tart
Coalition is a big step in the right direction. The national
Jump$tart encourages public and private entities to come
together with the purpose of promoting and teaching financial
education. Their primary audience is children, pre-kindergarten
through college age youth. In Kansas, the Jump$tart Coalition
for Personal Financial Literacy has taken that a step further
to include Kansans of all ages (pre-kindergarten through senior
citizens). The Coalition efforts encourage partners to work
together, combining resources and creating win-wins for the
citizens of our State. I would also add the Kansas State
Department of Education has been a great partner and is
expanding their efforts and we are working with them to be sure
that we are coordinated to provide all the resources our office
has to offer as they seek to increase financial literacy
through our public schools in Kansas.
Thank you.
[The prepared statement of Mr. McKinney can be found on
page 46 of the appendix.]
Chairman Moore of Kansas. Thank you, sir.
Next, the Chair will recognize Commissioner Praeger for up
to 5 minutes.
STATEMENT OF THE HONORABLE SANDY PRAEGER, COMMISSIONER OF
INSURANCE, STATE OF KANSAS
Ms. Praeger. Thank you, Mr. Chairman, and members of the
House Financial Services Oversight and Investigations
Subcommittee, and especially Congresswoman Jenkins,
distinguished guests and audience members, and my fellow panel
members. I am Sandy Praeger, the Insurance Commissioner for the
State of Kansas, and I have served in that capacity since being
elected in 2002. I am pleased to testify before the committee
on empowering consumers with financial literacy education in
order to prevent another financial crisis, and especially on
the necessity of including insurance information for consumers
in any such initiative.
The Kansas Insurance Department's mission is threefold: to
regulate insurance companies; to educate consumers about
insurance issues; and to advocate for consumers when needed. So
it is the educational aspect of our mission that I am here to
promote and talk about today.
The need for financial education, especially among youth,
is always important. However, the earliest segments of those
activities often focus on saving and spending wisely, both
parts of financial freedom.
These are tangible financial ideas. They teach a child to
save his or her money early, and then the money will be
available for them when he or she needs it. By teaching them to
shop wisely and compare quality, price, and the need for those
particular items, when you do that, the money-saving cycle is
repeated and extended.
It has long been my belief that any educational component
of financial literacy has to contain a segment on insurance.
The idea of spending money to avert risk is a more abstract
concept and sometimes harder to convey. It is hard for young
people to understand that you spend money buying insurance
without receiving any kind of immediate gratification for your
expenditure. Probably the best example is when they want to own
a car and then have to understand that buying the car is just
the first price, it is also the gasoline, the maintenance and
the insurance. So that is a little tougher concept to get
across. The need for immediacy in our youth carries over into
adulthood, with unfortunate consequences when it comes to
understanding insurance.
Surveys from our National Association of Insurance
Commissioners, the NAIC, have shown that 60 percent of adults
cannot answer even basic questions about insurance correctly.
Add to that the ever-increasing bombardment of financial
offers to the general public and it is no wonder that money
management skills, especially when it comes to insurance
topics, are misunderstood and misused.
The NAIC, which I am a member of, has responded to the need
for increased consumer insurance awareness through its Insure U
program. Insure U is an online educational curriculum
customized for consumers in eight different life stages
beginning with young adults with young families, progressing to
mature families and empty nesters on into grandparents as
parents, military--a whole variety of questions and answers
that relate to those different life stages.
At InsureU.org, the program includes a basic introduction
to the four major types of insurance--auto, home, health, and
life--as they pertain to people at different ages and in these
different life situations. Consumers can test their knowledge
about insurance by taking an online quiz. Since its inception
in 2006, Insure U has achieved national media and Web site
attention and is promoted heavily by State insurance
departments.
Our own Kansas Insurance Department, as part of our
continuing consumer education priority, has made its insurance
experts available throughout the State through speaker
presentations and exhibits. We have been to more than half of
the State's counties in just the last 2 years, making
presentations on insurance issues to a variety of audiences.
Annually, our State fair booth in Hutchinson gives our
department instant access to fairgoers and Kansans from across
the State.
Our Assistant Commissioner, Bob Tomlinson, who is a former
teacher, has made understanding insurance for young people a
personal project. He has developed many presentations for high
school youth on insurance, and has spoken to dozens of high
school classes.
And finally, our Government and Public Affairs Division
with the department is responsible for producing and
maintaining more than 30 publications and brochures on all
aspects of consumer insurance information. We even make an
educational coloring book available that explains basic
insurance concepts to kids.
The Kansas Insurance Department and the NAIC are working to
help Kansas consumers of all ages become literate in insurance
matters. But, there is still more work to be done. If we can
collaborate with other agencies--and we have done that--and
organizations in getting the word out, then we are certainly
open to doing even more.
Successful financial literacy education needs to be
available through designated lifelong learning environments.
Emphasis on basics in the elementary school classroom, followed
by advanced high school curriculum and continuing refresher
courses in adult life would be ideal. Increased public/private
partnerships should be emphasized. There are many insurance
education foundations in the United States, but they need more
of a coordinated effort to be really successful.
So thank you, Congressman Moore and Congresswoman Jenkins,
for the opportunity to be part of this subcommittee hearing.
Please call on me or our department and staff any time to
assist you in promoting financial literacy.
[The prepared statement of Commissioner Praeger can be
found on page 61 of the appendix.]
Chairman Moore of Kansas. Thank you, Commissioner Praeger.
Mr. Smith, Administrator Smith, you are recognized for 5
minutes, sir.
STATEMENT OF THE HONORABLE JOHN P. SMITH, ADMINISTRATOR, KANSAS
DEPARTMENT OF CREDIT UNIONS
Mr. Smith. Chairman Moore and Representative Jenkins, I am
John P. Smith, the Administrator for the Kansas Department of
Credit Unions. I appreciate the opportunity today to appear
before the subcommittee. My credit union background includes 21
years as a volunteer credit union board member prior to
appointments as a credit union regulator; first, in 1993, by
Governor Joan Finney, as Administrator of the Department of
Credit Unions and then in 1999, I was appointed by Governor Mel
Carnahan as Director of the Missouri Division of Credit Unions.
I returned to Kansas in 2006 to accept the appointment as
Administrator again from Governor Sebelius.
The Kansas Department of Credit Unions is the State credit
union financial regulatory agency authorized by the Kansas
legislature to provide for management, control, regulation, and
general supervision of State-chartered Kansas credit unions.
The department is fully funded as a fee fund agency,
operating solely on the revenue produced through fees collected
from State-chartered credit unions examined and returned by the
agency.
The department supervises and examines 82 natural person
credit unions and one corporate credit union. As of March 31st
of this year, total assets in Kansas chartered credit unions
were about $3.9 billion. Total credit union membership is
538,983 or roughly 21 to 22 percent of Kansas' population
belongs to a credit union. The largest Kansas chartered credit
union has $659 million in asset; the smallest has $160,000. The
5 largest credit unions make up about 44 percent of the total
assets while the 10 largest make up 64 percent of the assets.
I quote these statistics to point out that most of our
credit unions are small in assets and, therefore, they have to
follow generally the same regulations that the larger credit
unions do.
I should also mention that Kansas has 21 federally-
chartered credit unions regulated and examined by the National
Credit Union Administration, or NCUA.
Share deposits in Kansas credit unions are federally
insured up to $250,000 per account through the National Credit
Union Share Insurance Fund, which is an arm of the NCUA.
In addition to examinations, the statutes and regulations
provide for the department to grant new charters, merge and
liquidate credit unions when necessary, and handle consumer
complaints.
Most importantly, credit unions are member-owned
cooperatives. Their boards and committees are non-paid
volunteer members.
As a regulatory agency, the department has no mandate by
law to provide financial literacy education, nor have we been
asked to do so. However, we do recognize the importance of
financial literacy in a variety of ways. The consumer resources
section of our Web site has links to the consumer protection
laws and a brief description of each law. As these are listed
in my written testimony, I will not take the time to go through
them, but they are there for the use of consumers.
I want to next turn to financial literacy. In preparation
for the testimony today, since we do not have a mandate, I did
contact some of our credit unions and asked them what they are
doing as far as financial literacy and I included a synopsis of
what was reported to me from a sampling of our credit unions in
our written testimony. Many of them are involved with the
programs by the State Treasurer's office that began when
Representative Jenkins was State Treasurer and continue on
under the current State Treasurer. Several credit unions as
well as the Kansas Credit Union Association are involved in
those programs. The Jump$tart Coalition is another program and
as far as the department, I attend meetings and am involved
with the Jump$tart Coalition.
I want to turn now to promotion of financial literacy
outside of schools. Credit unions with close ties to companies
that are experiencing effects of the economic conditions often
provide financial counseling to their members. A recent example
of this is the sponsor company of Cessna Credit Union recently
reduced its workforce by over 55 percent. Cessna Credit Union
made a concerted effort to buffer the impact of job loss by
deferring payments, restructuring loans, offering a safe place
to deposit severance or early retirement funds, and offering
financial education and counseling programs.
We have observed similar efforts in other credit unions.
Two years ago, I recall a cement plant closing in southeast
Kansas. The credit union is still functioning today because
they took the appropriate steps so that they could continue,
even with the loss of their members' high paying jobs, at least
for that community. We encourage credit unions to become
proactive if an economic downturn may affect their members'
financial ability to handle their financial obligations.
Encouraging financial literacy in this group goes beyond
schools--again, as I stated earlier, as we have no mandate
under the law to promote or provide financial literacy
education, I do support a role for the department in that.
The financial literacy of credit union members enhances the
department's position as a safety and soundness regulator.
Fewer delinquent loans and bankruptcies improve the financial
performance of a credit union, which influences the ability of
that credit union to loan money at a competitive rate and pay
improved dividends. So it is a win-win solution; if you have
financial literacy, you should have a good credit union member.
I want to conclude with a few suggestions. To be
financially literate is a life-long venture. New financial
products such as individual retirement accounts or IRAs, debit
cards, different types of home mortgages and home equity
loans--these new products continue to be developed. While
financial literacy education is part of the K through 12
educational system, in my opinion, more could be done to
promote life-long financial literacy, to keep informed about
new products and how to budget for their proper use. With the
current focus on the recent financial crisis, public
policymakers have an opportunity to support and encourage
financial institutions to provide financial education regarding
consumer safeguards such as overdraft protection for their
members/customers and the general public. While another crisis
may not be prevented, the general public will be better
prepared.
As a caveat, Federal agencies should not preempt State
consumer protection laws that offer greater protection than
Federal laws.
In adopting Federal regulations implementing the Dodd-Frank
Wall Street Reform and Consumer Protection Act, Federal
agencies must not overregulate and must allow the marketplace
to function. Additional regulations are a difficult burden to
our smaller asset size credit unions. As I pointed out, we have
a number in our State.
I thank you for allowing me to present the testimony today
on this important topic.
[The prepared statement of Mr. Smith can be found on page
65 of the appendix.]
Chairman Moore of Kansas. Thank you very much, Mr. Smith.
Commissioner Wilson, you are recognized, sir, for 5
minutes.
STATEMENT OF THE HONORABLE MARC S. WILSON, SECURITIES
COMMISSIONER, STATE OF KANSAS
Mr. Wilson. Thank you, Mr. Chairman, Congresswoman Jenkins,
distinguished panelists, and especially I would like to thank
the University of Kansas for hosting us today. It is fantastic
to be back on the campus of my undergraduate alma mater.
As Kansas Securities Commissioner, I am responsible for
protecting and informing Kansas investors, promoting integrity
and full disclosure in the marketing of financial services, and
fostering capital formation. As you may know, in 1911 Kansas
became the first State to regulate securities, predating the
Federal securities acts by over 20 years and forming the basis
for the system of registration and disclosure that we have
today. Like the SEC, the Office of the Kansas Securities
Commissioner, or KSC, examines both investment advisers and
broker-dealers located in Kansas. Unlike the SEC, KSC also has
trained and duly sworn law enforcement officers who investigate
allegations of illegal and unregistered activities.
Additionally, in cooperation with district and county
attorneys, KSC prosecutes its own cases. We are not reliant
upon local, State, or Federal prosecutors to take and try these
cases. Consequently, securities fraud receives the specialized
attention it deserves from law enforcement in Kansas.
As I mentioned, one of the goals of our office, statutorily
mandated, is to educate Kansas consumers. And that is what I am
going to focus on today.
We have found that because of our mission of fraud
prevention, one of the target groups for education are senior
citizens and those nearing retirement. They are often the
target of people who are attempting to defraud them of their
nest eggs that they are building for retirement. This
population also has very specific investment needs as far as
the reduction of risk in their portfolio. Therefore, we do many
outreach activities to senior citizens throughout the State.
Our staff goes to senior meetings, our staff will visit Rotary
Clubs, student groups and just about anybody else who invites
us to come and give a presentation.
But I think one of the things that we do that is especially
relevant to the hearing today is our outreach to younger people
through the Kansas Council for Economic Education. We have an
investor education fund. The Kansas legislature set up this
fund in the early part of the decade. And those companies and
individuals who pay fines for breaking the law or violating
acceptable business practices, those funds go into the fund,
which we then can turn around and use for investor education.
Some of it funds the travel and expenses for our own staff when
they do outreach, but we also provide grants to organizations.
Some of them have been mentioned by other panelists.
The largest grant that we give is the Kansas Council for
Economic Education to fund a game called the Stock Market Game.
This game targets students in grades 3 through 12 and what it
does--and it is certainly more complicated for the older
students who can understand better, but what it does is it
allows students to manage a hypothetical portfolio of $100,000
in an actual stock market situation. And far from the kids eyes
glazing over, I hear reports back of kids who are cutting class
so they can go make trades. So I think this particular program
is very special in that regard. Once kids do it, they very much
want to participate and their interest really is peaked in what
happens with financial services.
And really, despite our mandate of fraud prevention and
despite our targeting of an older population, despite the need
to do that outreach, the integration of financial literacy in
the school curriculum from an early age gives consumers a
foundation from which they can update their knowledge
throughout their lifetime as their financial needs change. I
think targeting those young people is a very important thing
and I know that Mr. Glendening is probably going to address
this as well, because they are even larger financial supporters
of the Kansas Council for Economic Education.
Our funds--we increased our donation and support of the
Stock Market Game so that every Kansas student who wants to
participate can do so regardless of their financial situation.
And when we did that, the participating teams rose from 443 to
over 1,300 and that includes 701 teams that came from teachers
who were new to the program. So what I am hoping to do is work
with the Kansas Council for Economic Education and get the word
out to teachers that there is this curriculum that is
available, not just the Stock Market Game, but many others that
are free, they are ready-made, they take very little
preparation time, and they fit very well with the mandates for
consumer education and mathematics that Kansas schools must
comply with.
I see that I am running out of time, I will leave certain
matters to my written testimony. I do agree with you, Mr.
Chairman, and some of the other panelists that there is no
guarantee that financial literacy by itself will prevent
another financial crisis. But it would certainly make a
financial crisis less likely.
Financial literacy is the key to creating or recreating, as
the case may be, an American economy that is not driven by
consumption, but instead balances consumption with savings and
investment. Were Americans as prodigious savers as they are
consumers, the United States would have an alternative path out
of the recession, the same path that throughout its history,
the United States rode to greatness. That approach is to make
capital available to the private sector, not by purchasing
unneeded or unnecessary goods, but instead by placing excess
cash into bank deposits, commodities, equities and government
and corporate bonds, as did our forefathers.
Transforming consumers into investors through financial
literacy is a goal that is greater than preventing hardship or
fraud. It is also the path toward turning our Nation from the
world's largest debtor into once again the world's largest
creditor nation.
Thank you for the opportunity to be here today.
[The prepared statement of Mr. Wilson can be found on page
81 of the appendix.]
Chairman Moore of Kansas. Thank you.
The Chair will next recognize Deputy Commissioner
Glendening. You are recognized, sir, for 5 minutes.
STATEMENT OF THE HONORABLE KEVIN GLENDENING, DEPUTY
COMMISSIONER, CONSUMER AND MORTGAGE LENDING DIVISION, OFFICE OF
THE STATE BANK COMMISSIONER, STATE OF KANSAS
Mr. Glendening. Thank you, and good morning, Mr. Chairman,
and Representative Jenkins. I am Kevin Glendening, Deputy Bank
Commissioner and Administrator of the Kansas Uniform Consumer
Credit Code.
In my position, I have the primary responsibility for
supervision, regulation, and enforcement of Kansas Consumer
credit and mortgage lending laws. In that capacity, I have
witnessed the often devastating consequences the absence of
financial literacy can have on consumers. These consequences,
including unmanageable debt levels, poor credit, repossessions,
and foreclosures can have severe effects on both the
individual's personal and family life. These outcomes are
sometimes a result of illegal or deceptive actions on the part
of an unscrupulous lender or broker, but are frequently simply
the result of a lack of understanding of basic financial,
credit, and borrowing issues.
Aware of the relationship between informed consumers and
lowering the incidence of predatory or deceptive lending
practices, in 1999, my office was successful in adding
provisions to the Kansas Uniform Consumer Credit Code which
allowed us to fund financial literacy programs by utilizing
monies received through fines levied against lenders who engage
in illegal activities. The advantage of this approach was to
avoid reliance on tax dollars and place that responsibility
more centrally on that small percentage of lenders who engage
in deceptive and illegal activities.
Once a potential source of funding for these programs was
in place, our attention turned to what types of financial
literacy programs were out there. At that point, several issues
became clear to us. Among them, there was a significant amount
of financial literacy materials available although with varying
degrees of quality and accuracy. Second, one of the primary
challenges with any financial literacy programs or material is
getting someone to use it in a meaningful way. Third, the
method by which financial literacy is both effectively
presented and delivered depends greatly on the target audience.
Lastly, the realization that, at least in my case, I am
primarily a regulator, not an educator, and that partnering
with groups who have expertise in working with the target
audiences you wish reach can be an effective way to leverage
available resources.
Our financial literacy initiatives generally fall into two
groups, those targeted toward school age children and those
geared toward the needs of adults. Two of our most successful
programs directed at school age children involve partnerships
with nonprofit organizations. As Commissioner Wilson mentioned,
the Kansas Council on Economic Education is one of those
groups. It has as its mission the enhancement of curriculum for
school teachers to facilitate economic and personal finance
education. My office has been the primary sponsor of the KCEE
for several years, including the development and distribution
of a computer-based financial literacy curriculum called
``Financial Foundations.'' This interactive courseware is
designed to help kindergarten through 8th grade teachers and
students understand personal finance issues and is made
available free of charge to all elementary and middle schools
in Kansas. Last year, nearly 7,000 students participated in the
online program in 246 schools, representing 92 school districts
in Kansas.
More recently, our office has partnered with a nonprofit
organization known as Communities in Schools of Wichita and
Sedgwick County. This organization attempts to bring
businesses, schools, and community groups together to assist in
meeting student and family needs. Our office sponsors one
component of their work known as ``Reality University,'' a
financial literacy exercise that provides a hands-on learning
experience for students to help prepare them for life after
high school and the responsibilities of adult life. Students
plan their budget, pay bills, and apply decision-making and
problem-solving skills within a level of income based on a
predetermined level of education. The goal is to develop the
skills needed to make good decisions in practical, real-life
situations involving the use of money and show how life choices
can affect financial well-being. This past year, over 5,000
students in middle and high schools participated in Reality
University in 17 schools in the Wichita/Sedgwick County area.
We hope to expand this financial literacy program across the
State in the future.
To the extent possible, we have made an effort to take
financial literacy information to the consumer rather than
making the consumer seek us out. This may take the form of
presentations in the workplace, on college campuses or
participation in financial fairs or other community meetings
and neighborhood events. This is I believe a critically
important aspect of a successful adult financial literacy
program. Unlike school-based programs, where you generally have
a captive audience, financial literacy programs geared toward
adults can be considerably more challenging.
Many of the problems and behaviors that can contribute to
an individual's financial distress are the same issues that can
make delivering financial literacy information to adults
difficult. Participating in events that also provide other
information of interest to adult audiences, for instance home
purchase or tenant/landlord issues, parenting and child care
issues, or specific community interest areas can create a value
added element and attract more interest. In 2009, more than
11,000 individuals attended one of our sponsored adult
programs.
While our own financial literacy initiatives have had a
measure of success, it is difficult to quantify the extent to
which these and other programs may ultimately contribute to the
stability of our financial future. This, however, should not
deter additional efforts at both the State and Federal level to
invest in greater financial literacy efforts. The benefit of
these programs, particularly those aimed at children, will not
be fully apparent until those children enter adulthood and
become the primary users of financial products and services.
The recent financial crisis has generated more interest and
awareness of financial literacy issues; however, it is
important to remember this must be an ongoing long-term
educational goal. Ultimately, encouraging more aware and better
informed consumers is at least part of the solution to ensuring
the financial crisis is not repeated.
Again, thank you for the opportunity to appear before the
committee today and I would be happy to answer any questions.
[The prepared statement of Deputy Commissioner Glendening
can be found on page 41 of the appendix.]
Chairman Moore of Kansas. Thank you to our witnesses for
your testimony. I will now recognize myself for 5 minutes for
questions.
The FDIC conducted a nationwide survey last year, and that
study showed that roughly 8 percent of U.S. households,
approximately 9 million, are unbanked, meaning those households
do not have a checking or savings account. And roughly 18
percent of U.S. households, roughly 21 million, are
underbanked, meaning those households have a checking or
savings account but rely on alternative financial services.
Treasurer McKinney, is that something we should be
concerned about? And if so, what can be done about it?
Mr. McKinney. Thank you, Mr. Chairman. We agree that is a
major problem and there are several organizations in different
communities that are working with families to help them become
banked and have and understand banking services and utilize
banking services on a regular basis. But we agree that is a
problem and there are a number of groups, particularly in the
urban areas in Kansas, that are working on that issue.
Chairman Moore of Kansas. Thank you, sir.
Administrator Smith or Deputy Commissioner Glendening, any
comments?
Mr. Smith. I agree that this is a problem and I think those
numbers are accurate. Again, as Commissioner McKinney pointed
out, there are a number of organizations working with those, as
well as I think individual credit unions are working in their
communities to try to provide services to non-banked
individuals.
Mr. Glendening. Mr. Chairman, my only comment would be that
we have interviewed fairly extensively individuals who
frequently utilize small loan products, payday loans, title
loans, those type products, and one of the key factors that we
hear over and over again is that rapid accessibility to the
credit, which to me, that is one of the major stumbling blocks
for the more traditional methods, the bank model so to speak,
of obtaining credit, is the time involved to fill out the
applications and do the underwriting. That is not to say there
should not be underwriting, there certainly should be, but what
attracts consumers to that type of product is that rapid
ability to get cash quickly.
Mr. McKinney. If I might add, Mr. Chairman, the BEST
Coalition in Wichita is working extensively on this as well as
the Kansas Partnership--
Chairman Moore of Kansas. Excuse me, the what coalition?
Mr. McKinney. BEST Coalition, ``B-E-S-T,'' Building
Economic Stability Together, is working on collaborative
relationships in that regard as well as Kansas Partners for
Asset Development is active. And that one is also supported
extensively by the Kansas Action for Children.
Chairman Moore of Kansas. Thank you, sir.
The FDIC conducted a nationwide survey last year and that
study--I'm sorry, excuse me. I'll ask this question of the
whole panel, starting with Treasurer McKinney. Is there good
coordination between various State offices here in Kansas, and
how would you describe the level of coordination or cooperation
with your counterparts at the Federal level? Also, what
suggestions should Congress consider in supporting efforts to
better coordinate and cooperate so we do not have redundant
efforts and maximize limited resources in promoting financial
literacy?
Mr. McKinney. I would say we have had excellent cooperation
among State agencies, the ones here, with the Attorney
General's office. Just recently, in a meeting with senior
citizens, we were distributing some of the publications from
Commissioner Praeger's office, and the Kansas State Department
of Education has also taken steps in this direction as well.
And we have had extensive cooperation with the Commissioner's
office.
Chairman Moore of Kansas. Any other comments from
panelists?
Ms. Praeger. I would just agree with Treasurer McKinney. We
do try to coordinate our efforts and then our National
Association, that is the main function of the National
Association of Insurance Commissioners, is to coordinate among
the States and with other entities at the Federal level. We
have lots of opportunities after 2008 to collaborate with the
whole AIG and financial meltdown, which required everybody
coming together and talking about ways to avoid that going
forward. And I think obviously those discussions continue.
Chairman Moore of Kansas. Mr. Smith?
Mr. Smith. I would agree. We meet, we share information.
Also as far as our Federal insurer, the NCUA, we meet
periodically. We have good communications with them, we may not
always agree on regulations and we feel sometimes they need to
have a better overreach, but we do have good communications and
cooperation.
Mr. Wilson. With all my vast experience of 2\1/2\ months on
the job, I would agree also.
[laughter]
Chairman Moore of Kansas. How long on the job?
Mr. Wilson. Two and a half months, sir.
I think that we must cooperate. Some of us have better
access to expertise or personnel or financial resources than
others, but working together, there is no reason why we cannot
reach every Kansan we need to. We just need to take some time
and make a point of it.
Mr. Glendening. I concur with that, Mr. Chairman.
Chairman Moore of Kansas. And my final question for this
panel, this question is for Commissioners Praeger and Wilson: I
think most people think about financial literacy in terms of
checking and savings accounts, but it would seem to me that
learning about investments for purposes of saving for college
or retirement as well as learning about car or life insurance
is just as important. Commissioner Praeger, I will start with
you, do insurance issues get left out of this conversation too
much and how do we make sure financial literacy efforts cover
insurance issues? And Commissioner Wilson, next to you, the
same question with respect to securities, how do we ensure
securities are covered in financial literacy?
Commissioner Praeger?
Ms. Praeger. I do think that has been the reason we have
really tried to step up our efforts on education on insurance
issues, because I do think too often insurance does get left
out of the equation. Insurance is a product you buy to ensure
that when you have any sort of financial stress in your family,
you are able to use the insurance and pick up and move on,
whether it be a house fire or a car accident, or an unexpected
illness. So it definitely--I think it is cornerstone to
financial security for families and it should be incorporated.
We do work closely with our counterparts, the other financial
services areas in Kansas, to ensure that we have appropriate
regulation so that things do not fall through the cracks, but
yes, I think insurance, as I said, is the cornerstone of
financial security.
Mr. Wilson. I would agree with those statements because
before one starts investing in securities or amassing a
retirement nest egg, if you have a car or a spouse or children,
insurance has to be the first thing you think about. Knowing
what level and what type of insurance you need is a very
fundamental financial issue that people should understand.
Hopefully once you have crossed that threshold and one begins
earning enough money to think about putting some away for a
rainy day, retirement or funding education, hopefully programs
like the Stock Market Game will at least provide young people
with basic information about what an equity is, what risks are
involved with investing in those particular types of
investments, and what others are out there that they can put
their money into that is not only tax advantaged but also
reduces their investment risk.
Chairman Moore of Kansas. Thank you to our panelists. My
time has expired and I will now recognize Representative
Jenkins for 5 minutes for questions.
Ms. Jenkins. Thank you, Mr. Chairman.
I think we can all agree here that we have some work to do
in this area and I am very impressed by the good work that you
all are doing to improve the situation. But I would be
interested to hear what each of you might believe is the most
significant impediment to improving America's financial
literacy and maybe why. And if you believe there is a way that
Congress or those of us at the Federal level can help to
overcome that impediment.
Mr. McKinney. I will start, I guess. We have found--it is
our belief that as schools had to move more to focusing on what
they had to do to meet testing standards, then financial
education was somewhat dropped from curriculums. That is being
reversed now, we believe. We have new interest in that at the
Kansas State Department of Education, because we believe that
financial literacy can be incorporated with lessons on math
that are designed to meet the standards. If you are studying
math, you can obviously incorporate--this particular type of
math problem can be built around a financial literacy education
problem. And that is where we are receiving more cooperation
from the Department of Education. So we think that barrier is
being overcome.
And then at the Federal level, which goes back to the
question that Congressman Moore asked, what would we like
Federal agencies to do; number one, we would like the Federal
Reserve Bank to continue their efforts with their Money$mart
week, which works in the greater Kansas City area, maybe expand
that to more areas in the 10th District. I think in fact they
are having a meeting on that today, which we have personnel
attending that meeting.
And the second thing I would like to see is the new office
of Financial Education that was created by the Dodd-Frank bill,
we would like for them to come out and talk to us first before
they start anything to see how we build a cooperative
relationship instead of respond to what they start, because
like I said, we already have, I think, excellent cooperation at
the State level among various State agencies; if they would
come out and see how can they plug into this effort and build
on it instead of coming out with an initiative that we would
then have to respond to and work around.
Ms. Praeger. I think even some of our Federal regulatory
entities oftentimes overlook insurance as well and I know the
Treasury several years ago had a financial literacy forum in
Washington and we had to, through our national association,
remind them that perhaps it would be important to have a
component in that day-long seminar on insurance, which they
did. And since then, they have included insurance. So I think
even some of our Federal agencies sort of forget insurance and
part of that I think is because insurance has been, as you all
know, traditionally regulated at the State level. But the Dodd-
Frank bill does include a provision for a Federal insurance
office, the FIO. And I think it will be interesting to see how
we can use that office in a way that can help coordinate
activities between the Federal entities and State entities. I
still am a passionate believer that Federal insurance
regulation should be avoided and that it should remain at the
State level, because insurance is a product that we all buy to
use in the future, as has been pointed out, and the services
that our department provides in terms of assisting consumers is
just invaluable. We are a small State, and we answer 20,000 to
25,000 calls a year. I cannot imagine what a congressional
office would have to do to expand if we were not there to
answer those consumer questions.
So I think working more collaboratively, and I think the
FIO, this newly created office, gives us the opportunity to
build on what we do best, which is be there for the consumers
and advocate for consumers, and educate. But also create a
greater awareness in Washington, in our Nation's Capitol, of
the important role insurance plays in the whole financial
services area.
Mr. Smith. I think the new office not only should listen
but perhaps they should fund too, maybe at the State level.
Kansas is a strong State-chartered State as far as credit
unions and banks too. It is obvious that Kansans have selected
the State charter and I think they believe that our examiners,
our departments are the ones who know the economy, know the
situations and the services are better delivered at the local
and State level rather than the Federal level.
Mr. Wilson. Send money.
[laughter]
Chairman Moore of Kansas. Pardon me?
Mr. Wilson. I see in the Dodd-Frank bill that there were
funds made available, grant funds made available for States
that have adopted certain securities policies and certain
insurance policies and I know that my staff has had staff level
conversations with Commissioner Praeger's office about seeking
those funds. So we greatly appreciated that. I think the
provision of funds, even in small amounts, can go a long way
toward alleviating this problem.
Mr. Glendening. I think obviously the coordination of the
State and Federal efforts is critical. The CFPB, the Consumer
Financial Protection Board's education component, I would think
a mandate to at least engage the State regulators through their
associations, for instance NACCA, National Association of
Consumer Credit Administrators, which I am a board member of,
it would be I think worthwhile to take the financial literacy
programs that the States have developed, oftentimes fine-tuned,
and incorporate that perhaps on the larger scale rather than
building a new bicycle. I think that would be a far more
effective way to go about it.
Ms. Jenkins. Thank you. Does that mean I am yielding back
zero time or do I have time?
Chairman Moore of Kansas. Go ahead.
Ms. Jenkins. Maybe just one more then. I agree with our
Treasurer that schools are a great place to start to address
this issue, but so many times our teachers are feeling
overwhelmed that we are just throwing one more thing on them to
teach within the same amount of hours every day. And so that's,
I think, the need for all of the different programs outside of
a regular school day that you all do. But I am concerned that
perhaps the people who need the information most might not be
accessing many of the programs. And I wondered if just finally
you might have any thoughts about how to get to those kids who
cannot go to a Money$mart camp or a senior who does not go to
Rotary Club, or how we can better get the information to
perhaps those people who need it most.
Ms. Praeger. In the education area, I know Emporia State
has a financial literacy education component where they train
teachers. And I think one of the goals there is to incorporate,
so that you are not having a separate section on financial
literacy or how to manage your money. But you can incorporate
those skills and those lessons into probably just about every
aspect of education. So I think finding more creative ways to
build it into the curriculum rather than having it be separate
or where it is more difficult. So that would be one approach
from an education standpoint, just to find ways to build it
into existing curriculum.
Mr. Wilson. I agree with that and none of us obviously have
any authority over curriculum in Kansas. However, I can tell
you that just looking at what our increased support for the
Stock Market Game did, when you go from 443 teams to 1,304,
that is between 3,000 and 5,000 students who participated,
extra students who participated in that activity. And reaching
the teacher certainly had a much greater impact than if we
would send personnel out on a road trip to various parts of the
State to try to reach young people individually. There just are
not those sorts of groups out there who have the impact that
the schools can have.
Regarding outreach to seniors, that is something where we
can simply learn working through area agencies on aging and
various other groups who have contact with seniors around the
State. They are a lot easier to reach with specific useful
information.
Ms. Jenkins. That Stock Market Game is a perfect example. I
had to limit little Hayden Ross Jenkins' 6th grade computer
time when he was back at that stage because he was so obsessed
with his portfolio, and he was doing far better than his
parents at the time.
Chairman Moore of Kansas. You should have listened to him.
Ms. Jenkins. I should have listened to him. It was just
such a fabulous experience, but I am afraid that only some of
the special education students were able to be exposed to that
and it just would have been nice for the entire population
there at Jay Shideler Elementary, to have had that experience
and to peak their curiosity. So we will just continue to work
on that.
I will yield back, Mr. Chairman.
Mr. McKinney. Mr. Chairman, there are two programs in
greater Kansas City--Bank on America Saves program and as I
mentioned the Kansas Partnership for Asset Development that are
targeting exactly the populations that you mentioned need to be
addressed, particularly to help move those families and
children from being unbanked into a banking environment and
learn those basic concepts.
Ms. Praeger. Can I just give you a quick example of the
kinds of things that can be built into the curriculum?
Chairman Moore of Kansas. Absolutely.
Ms. Praeger. Taking the Stock Market Game approach, instead
of actually doing investing which I think in the younger grades
they probably do not, but you can build teams within the math
program and pair up a really strong math student with one who
is not as strong and work on averages. And so the average in a
sense becomes their market value. And it is team building, it
helps both of them, you learn more when you teach than I think
kids realize. But there is an example of using the concepts,
some financial literacy concepts, but just using them within
the existing math curriculum.
Chairman Moore of Kansas. I thank our panel of witnesses
here who testified and I really truly believe that this is a
very, very important topic that we need to continue talking
about in the future because I think there is a lot of lack of
understanding of our financial system out in the country at
large and I think it would be a great gift to future
generations in this country if we educate our children and
grandchildren about this and people have a better understanding
overall of how this system works. Because there is just a lot
of just lack of understanding and I just do not think we can
underestimate--I think all of us understand how important that
is and I think we owe that to future generations of our
country.
So I want to thank our panelists for being here today and
you are excused at this time.
I will invite the second panel, if you will come up, we are
going to take about a 3-minute break while we change panelists
here. But thank you all.
[recess]
Chairman Moore of Kansas. If I could ask the people in the
room, please, to take your seats. We are going to start the
second portion of our hearing this morning. I appreciate the
people who have come to hear the witnesses' testimony, and I
appreciate especially our witnesses who are here today, our
second panel of witnesses, to testify.
I am pleased at this time to introduce our second witness
panel: Taylor Petty, Master's in Accounting Student at the
University of Kansas, welcome; Kathryn Nemeth Tuttle, Assistant
Vice Provost for Student Success, University of Kansas; Gayle
Voyles, Director, University of Missouri-Kansas City Center for
Economic Education; Shawn Mitchell, President and CEO,
Community Bankers Association of Kansas; and Chris Wolgamott,
Community Development Liaison, Meritrust Credit Union.
Without objection, the written testimony of each of the
witnesses will be made a part of the record, and you will each
have up to 5 minutes to summarize your written statements.
Mr. Petty, sir, you are recognized for up to 5 minutes for
your statement.
STATEMENT OF TAYLOR PETTY, MASTER'S IN ACCOUNTING STUDENT,
UNIVERSITY OF KANSAS
Mr. Petty. Thank you, Chairman Moore, and Representative
Jenkins. I appreciate the opportunity to testify today about
how the University of Kansas partnered with the Wichita School
District in providing financial literacy education.
I want to begin by saying that it is hard to care about
something that you do not understand. We found this to be the
opinion of many high school students. National assessments show
that high school students, American high school students, are
only scoring at less than half correctly on assessments of
their understanding of basic financial topics.
We have already seen the consequences of that lack of
understanding. The credit crisis and mortgage meltdown are
largely because many American consumers do not understand their
financial decisions.
Evidence shows that we are failing our youth. Eighteen to
25 year olds are the fastest growing age group of bankruptcy
filers. One in five bankruptcy filers are college students. So
we see that particularly in this age group of young Americans,
making not only necessarily core bad financial decisions, but
also not really understanding financial basics.
With this background, we partnered with the Wichita School
District to develop a financial literacy curriculum that was
going to be implemented in all of the high schools, eventually
in all the high schools in the State of Kansas.
The State of Kansas authorized in a bill the addition of
questions involving financial literacy on State assessments. In
order to meet these assessments, the Wichita School District
partnered with the University of Kansas to develop this
financial literacy curriculum.
We were responsible for authoring financial literacy
curriculum on five topics: budgets and savings; identity theft;
credit; home mortgages; and taxes. It was interesting that
these five topics were actually ones excluded from the
financial literacy curriculum because they did not feel like
they had adequate material to cover these topics.
So we began by examining existing financial literacy
curriculums to see what was being taught in these areas. And we
found that for a large part, financial literacy curriculum is
not designed to appeal to high school students. I know that we
have already had testimony to this, but what we found was that
there is not really an appeal to high school students because
the curriculum are not designed around situations and decisions
that high school students will face.
What we found was that education made practical motivates
students. And so in developing our curriculum, we really looked
at these five areas and ways in which we can appeal to their
interests. In some of the areas, for instance in the area of
credit, we looked at a credit card application. And we
literally walked the students through a credit card application
so that they could look and see the interest rate that they are
going to be charged and other factors that they need to
consider. We also have them decide what they want to learn
about. So in the area of credit, they can choose whether they
are going to examine things such as saving for a car or saving
for college, depending on what really is of interest to them at
that time.
Another important area that we focused on was home
mortgages. Obviously, the home mortgage crisis that we have
seen was precipitated in large part by consumers not
understanding financial information. And so in this area, we do
not start with the idea that everyone is going to own a home
because the simple reality is not everyone will own a home.
So we provide them with access to tools such as calculators
where they can look at making the decision to rent versus buy
and also understanding basic terms that come with home
mortgage.
Another area that we considered in the curriculum is that
much existing curriculum tends to only emphasize learning
definitions and this simply is not adequate to train students
in making real decisions that they will be faced with in just a
few years. So our curriculum emphasizes practical applications
in real-life decisions that they will make. So in many ways,
they are not just learning that the definition of interest is
something--a charge for lending money, but they are learning to
apply an interest rate to decisions such as owning a home and
the interest rate that they will be charged on their home
mortgage.
We consulted with the Wichita School District for this
curriculum, and in developing it, we realized that not all
teachers in the State of Kansas are proficient in these topics.
And so in our curriculum, we included not only teaching notes
that provide the teachers with references to materials from
financial publications such as the Wall Street Journal, but
also just access to resources from the Federal Government and
also from State agencies that provide information on financial
literacy.
In partnering with the Wichita School District, we really
became aware of the fact that teaching financial literacy is
difficult because it does not appeal to students and also that
there really is a lack of financial literacy within the
schools. That includes teaching faculty as well. So in
providing this curriculum, it was important not just to provide
handouts for the students, but also to provide information so
that the teachers themselves can become informed about these
topics.
I want to thank the two co-authors in the graduate program
who helped me author it--Rebecca Feickert and Kristen Hageman,
both of them helped in authoring it and I also want to thank
the Wichita School District as well as the Office of Dennis
McKinney for partnering with us on our project.
Five minutes is a short period of time to cover a
curriculum that we developed that covers 9 weeks of schooling,
but what we really hope is that this curriculum will start--
Chairman Moore of Kansas. We do not have 9 weeks.
[laughter]
Mr. Petty. We really hope that we can start, not only in
the State of Kansas, but also use this curriculum to really
spur other programs throughout the United States.
[The prepared statement of Mr. Petty can be found on page
56 of the appendix.]
Chairman Moore of Kansas. Thank you very much for your
testimony.
Ms. Tuttle, you are recognized for 5 minutes.
STATEMENT OF KATHRYN NEMETH TUTTLE, VICE PROVOST FOR STUDENT
SUCCESS, UNIVERSITY OF KANSAS
Ms. Tuttle. Thank you. Chairman Moore and Representative
Jenkins, I appreciate this opportunity to testify today about a
new financial literacy program for KU students at the
University of Kansas.
Financial literacy for college students is a significant
concern across the country. Not only does it affect students'
financial lives, but it also affects their ability to persist
and graduate, another nationwide issue.
KU students returning to campus this week were greeted with
a new way to improve their financial literacy and their ability
to graduate, when Student Money Management Services opened its
doors in the Kansas Union. It is dedicated to improving KU
students' financial situations by empowering them to analyze
their finances, develop a budget, manage funds, make sound
decisions, and commit to controlling their financial lives at
KU and into the future.
The need for this service is clear and convincing. We are
in the midst of a financial crisis. The average debt for KU
graduating seniors is $22,478, and this is an increase of
$4,200 in just 6 years. So we have an increasing loan
indebtedness for our graduates. Interestingly, we have evidence
of both KU students' lack of financial knowledge and their
understanding that this education is important. The evidence is
from research from the KU Financial Task Force where they found
the average literacy score in a study of KU students was 3.26
on a scale of 1 to 6, probably about a C+, where 1 indicated no
understanding and 6 indicated complete understanding. However,
82 percent of these students said that it is important to learn
about money management and credit and debt management and 84
percent said they want to learn about saving and investing.
Leticia Gradington, a KU alumna with extensive experience
in financial planning and with teaching college students, has
been hired as our new program coordinator. And right now, we
are in the process of hiring several peer educators. These will
be very well trained KU students who will do one-on-one work
with students, give class presentations, and do outreach to
student groups and organizations. As has been mentioned in some
of the comments about having students teach students, I think
this peer educator part could be one of the most important
parts of our program. Information will also be provided through
publications, Web sites, and other electronic communication
methods.
The staff will provide the information to students, as
mentioned, on personal finances, developing budgets, tracking
expenses, understanding credit cards and loan indebtedness, and
planning for life after graduation. We are also very fortunate
at KU that we can refer them to very specific offices to help
with those things, such as Financial Aid and Scholarships, we
have Legal Services for Students that can deal with issues like
landlord/tenant, Bursar's Office for payments and the School of
Business Personal Finance 101 course that I will tell you a
little bit more about in a minute.
This program is important to us too because it is
collaborative, we are working with the Office of the Vice
Provost for Student Success, the School of Business, Student
Senate which is our student governance entity and they played a
leadership role in this in the past and a new initiatives
program fund. We also have an advisory board that will have
campus members in terms of faculty, staff and students, as well
as community members to help guide us in our future
development.
Student response has already been enthusiastic. We had a
job fair last week and hundreds of students stopped by our
table to find out more about our center.
Let me mention just a couple of other things that are
available to KU students along this line. We have an excellent
financial literacy guide that is on our Financial Aid and
Scholarships Web site which provides information on a wide
range of these topics. Cash Course is a free, online personal
finance course developed by the National Endowment for
Financial Education, which includes budgeting and financial
planning and debit and credit cards and economic survival tips.
It is quite good. And we have a new program this fall that we
are very excited about. It is called Financial Aid TV for the
U2 generation. It is short online videos on a variety of topics
including money basics, saving and borrowing money, credit
cards, and credit scoring. Also, all the range of financial aid
information. And that is on our Financial Aid and Scholarships
Web site.
Interestingly, in the task force that we did, students
indicated that their preferred way to get information was via
the Web site. So I think for today's college students, we need
to think about other electronic media such as social media.
Facebook should be considered for utilization to connect with
students on this important issue.
I want to talk for a moment about the School of Business
Finance 101 class, a three credit semester long course open to
all KU students. It provides some of the more in-depth
information that has been discussed already today. For example,
mortgages, renting and leasing, savings, investments, and
insurance. About 140 students take that course every semester,
and I really think this in-depth education is almost a
necessity for getting to that next level of financial literacy.
We are going to be choosing from the students who got A's in
this course for our peer educators.
Barriers to greater financial literacy--many have been
discussed today. I do think coordination between the K-12
efforts and higher education is crucial and we have already had
discussion about how KU is doing that today. Efforts should be
made with faculty members on the college level to integrate
financial literacy more in their courses. Special attention
should be paid to better help low-income and first generation
college students in this area. And I think another point could
be when students are employed in campus jobs but also in their
first professional employment. This is when questions about
insurance, withholding--we could do much more with employers
perhaps in educating students and young adults at that point.
Mr. Chairman, I appreciate this opportunity to provide
information on the efforts made by the University of Kansas to
improve the financial literacy of our students. Improving the
education, the financial education, of our citizens is a vital
issue for the University of Kansas, our State, and our Nation.
Thank you.
[The prepared statement of Ms. Tuttle can be found on page
73 of the appendix.]
Chairman Moore of Kansas. Thank you.
Ms. Voyles, you are recognized for 5 minutes.
STATEMENT OF GAYLE VOYLES, DIRECTOR, UNIVERSITY OF MISSOURI-
KANSAS CITY CENTER FOR ECONOMIC EDUCATION
Ms. Voyles. I also would like to thank Chairman Moore and
Representative Jenkins for the opportunity to testify today.
The views I am expressing are my own personal beliefs and they
are not the views of the University of Missouri at Kansas City.
I would like to talk to you a little bit about the Council
for Economic Education Web site which points out that in coming
years, young people will face unprecedented economic
opportunities and challenges. They also ask whether young
people will be ready to meet the economic opportunities and
challenges head on. And then they answer it and say yes,
provided they understand the economic way of thinking.
I know there has been a lot of discussion about the
division between economics and personal finance, how do they
all fit together. In the State of Missouri, we have been very
active in the Missouri Council on Economic Education in trying
to promote a K-12 spiraling curriculum that would integrate
economics and personal finance across the curriculum. However,
what really transpired was a half credit personal finance
course that is State-mandated for every student before they
graduate from high school.
The Missouri Council led the movement to try and at least
make sure that students, before they graduate, will have some
economic and personal finance experience. But we decided that
was not really enough. To have a class with a half credit
course for so many things that everyone has talked about today
is really hard. And then when you look at--we heard so many
people say the teachers do not always feel comfortable. Who is
going to teach the course? How do we make sure that it is a
quality course and that our students are really learning?
I personally have been an elementary and high school
teacher for 7 years as well as teaching at the college level
for the past 15 years. My experience has taught me that it is
much easier to teach and influence student behavior at a
younger age in developing this economic way of thinking. When
students are not introduced to economics and personal finance
concepts prior to entering high school, the broad range of
knowledge and skills that the students bring to class make it
very difficult for a high school teacher to know where to
start.
I had written in my testimony that the Stock Market Game
and the Personal Finance Challenge that the Missouri Council on
Economic Education runs helps motivate students to actually
take an interest and get involved. I think we have heard a lot
of testimony today on how important it is to get the students
actively engaged. There are three national studies out that
prove that the Stock Market Game does increase academic
achievement in math, economics, and financial skills.
What I wanted to share is what was said by the teachers in
Missouri who have been teaching personal finance courses for 3
years. I have two master personal finance educators from the
Blue Springs School District, Mike Hagerty and Kevin Clevenger,
who highlighted for me the importance of personal finance
education. They start by saying, ``Can the Missouri required
Personal Finance Course prevent another financial crisis? In
our opinion; no. However, if one is asking whether the personal
finance course can make a substantial difference for the future
of citizens in our State and our country; absolutely yes.''
There is not a day that goes by that we do not have a
parent or an adult tell us that they only wished they had taken
a course like Personal Finance when they were in school.
Our youth are starting to get it, they are asking the right
questions and seeking answers to the economy's current issues.
We feel strongly that the classroom forum and in particular
Personal Finance class will continue to allow students to seek
out the answers.
I also wanted to quickly share some of the data that came
from the Missouri Department of Elementary and Secondary Ed.
Because we do have this required course, there has been a State
test, but the problem is that not every district has to
register their students and have them take the course, because
if they have a standalone personal finance class, it is up to
the district to decide how they decide mastery level. However,
the students in the State who have embedded the personal
finance competencies into another course are required to take
the test. So the data that is in my written testimony and a
little of it that I will share with you in my remaining minute
shows that only 23 districts' students who were enrolled last
year's second semester course participated in the State level
personal finance pre- and post-tests.
The overall gains between the pre- and post-tests were
reflected for the following areas of personal finance from
highest gains to lowest: spending and credit, approximately a
16 percent gain; money management, a 15.3 percent gain; saving
and investing, a 14.19 percent gain; and income, an 11.99
percent gain.
So we know that we are making a difference.
Now, if you look at how many students overall have taken
the pre- and post-test in the 3 years, Missouri has had 15,094
students. How did they do? How many are an A? Eight percent.
B's, 17 percent. C's, 20 percent. D's, 18 percent. F's, 36
percent.
The rest of my written testimony really attests to the fact
that I believe in K-12 spiraling curriculum and I do believe
that these are habits and skills that are developed young,
practiced throughout life that will really have the highest
chance of helping us have stronger communities in our nation.
I did mention children's literature, which someone else
mentioned, is a great way to start young children. They really
make the connection. KU's Center for Economic Education hosts a
Web site that provides over 600 annotated book suggestions for
teaching economic concepts.
The School of Economics in Missouri is a community
involvement Economic Education and provides K-5 economic and
personal finance simulations. Over 11,000 students visit that
school per year on one-day simulations.
There are all kinds of financial literacy programs.
One other one I wanted to mention, ``Yes You Can''
Financial Education from American Century Investments, provides
a wealth of resources.
I also am aware that Representative Cleaver introduced a
bill referred to as the ``Financial Literacy for Youth Act of
2009'' and I have read the bill and I am very much in support
of it.
Thank you very much.
[The prepared statement of Ms. Voyles can be found on page
77 of the appendix.]
Chairman Moore of Kansas. Thank you, Ms. Voyles.
Mr. Mitchell, you are recognized for up to 5 minutes.
STATEMENT OF SHAWN P. MITCHELL, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, COMMUNITY BANKERS ASSOCIATION OF KANSAS
Mr. Mitchell. Thank you, Chairman Moore and Representative
Jenkins. I am Shawn Mitchell, President and CEO of the
Community Bankers Association of Kansas. CBA represents
currently 298 banking locations through Kansas. We are also the
Kansas State affiliate of the Independent Community Bankers of
America. IBCB represents 5,000 community banks across the
country and has an ongoing commitment to promoting financial
literacy throughout the nation. I speak on behalf of both
associations.
I have personally been a community banker in Kansas for the
last 15 years. I currently serve as the CEO for CBA, which I
have been for the last 20 months. Previously, I was president
and CEO of the Farmers & Merchants State Bank in Wakefield.
Managing money wisely and making effective financial
decisions is critical to excelling in life and enjoying a
secure financial future. Unfortunately, too many Americans lack
the skills and knowledge to make those appropriate financial
decisions. Our Nation's mounting consumer debt, falling savings
rates, skyrocketing personal bankruptcies, and the
proliferation of high-cost non-bank fringe providers point to a
need for better financial education.
Community banks engage in a wide range of financial
educational efforts, many in conjunction with local schools and
civic groups. Whether showing students how to manage credit
responsibly, helping a family understand the home buying
process or teaching foreign-born residents the benefits of
having a checking account, financial literacy programs build a
strong future for all.
I did bring a few examples of some different initiatives by
Kansas banks. One example is the First National Bank of
Frankfort. They have purchased textbooks for the consumer
family science teacher for use in that classroom. This specific
textbook leads students through a lesson in which they write
checks and balance their own checkbooks. The checks are used
then in the community for real life items such as gas,
groceries, etc. The students are able to know their balances
and track their expenses as part of the class.
Another example is the First Option Bank in Osawatomie and
Paola. They supply check balancing kits for business classes
where they learn how to also balance checkbooks, how to
interpret and reconcile monthly bank statements as well as
information about debit cards, ATMs, credit cards, and online
banking. During Community Bank Week, which is held every April,
First Option Bank is present in five area schools touching over
1,100 students with information and encouragement to begin
saving during Community Bank Week that is done all over the
entire State by the community banking institutions.
What are some of the barriers to greater financial
literacy? Financial literacy is a complex issue with many
variables. We are constantly bombarded with the message that we
deserve--no, that we are entitled to that new car, new house,
new clothing, newest electronic gadget, etc. What we do not
hear is that those things have to be paid for from what we
earn.
We have a responsibility to teach prudent money management
skills to our children so that they will create good financial
habits and carry them into their adult life. We see too many
examples of good people who have made themselves victims of
poor financial management simply because they do not understand
what they can truly afford.
One banker observed that our children are extremely
technologically literate, but they are very financially
illiterate when it comes to dealing with real world financial
concepts. Due to the structure of current curriculums, which
are geared for preparing students for college and passing
assessment tests, our educational system has neglected to teach
our young people real life skills. The importance of these life
skills classes is being overlooked and undervalued. We are
sending our children out into the world with a PC and the
latest checkbook software and assuming that they are smart
enough to become financially literate on their own.
There are actually two key initiatives that I believe need
to be considered--financial literacy and appropriate government
regulation of the financial sector. Banks have seen a massive
wave of regulatory restructuring and increased government
intervention. An unfortunate side effect of the massive
regulatory push is that financial products are becoming more
difficult to understand, even by the savviest of consumers.
What was once a 1-page loan contract is now a 25-page document
full of government-required disclosures. Instead of reading--
Chairman Moore of Kansas. Of course, people read that, do
they not?
Mr. Mitchell. Oh, absolutely.
[laughter]
Mr. Mitchell. Instead of reading the entire document,
consumers look at the payments and where do I sign. Does this
help? Or do we just make it easier for the unscrupulous non-
bank firms to victimize our consumers? Increasing regulatory
burdens on community banks is not a substitute for an educated
consumer. Overregulation hurts banks and consumers alike.
In conclusion, American consumers were abused by many of
the non-bank financial firms of Wall Street as well as
unscrupulous mortgage brokers pushing the ``American dream''
without consideration for the consumer's actual welfare. We
will recover from this crisis, and community banks will
continue to serve a vital role in their respective communities.
Increasing financial literacy protects consumers, fosters
financial stability and benefits individuals, communities, and
our Nation as a whole.
Thank you.
[The prepared statement of Mr. Mitchell can be found on
page 51 of the appendix.]
Chairman Moore of Kansas. Mr. Wolgamott?
STATEMENT OF CHRIS WOLGAMOTT, COMMUNITY DEVELOPMENT LIAISON,
MERITRUST CREDIT UNION
Mr. Wolgamott. Good morning, and thank you, Chairman Moore
and Representative Jenkins.
I am Chris Wolgamott, Community Development Liaison at
Meritrust Credit Union. For the past 5 years, I have been
working as the financial literacy provider for our credit
union. It just goes to show how our credit union values
financial literacy, that they have hired a full-time individual
to do nothing but financial literacy. I am the only financial
literacy representative who is hired full time to do my job in
the State of Kansas for credit unions, so I consider it an
honor to talk to you today.
Financial literacy encompasses a broad range of topics and
spans a lifetime of learning. Learning how to save, share,
spend, invest, and protect money have become key components to
financial literacy curricula around the Nation and around the
State of Kansas.
In 2003, the Wall Street Journal reported that 70 percent
of Americans lived paycheck-to-paycheck and also the Harris
Interactive Study in 2009 for financial literacy reported that
about 50 percent of Americans do not live on a budget and 20
percent of Americans regularly pay bills late and receive late
payment fees due to that.
The credit union movement is founded on the principle of
people helping people. From July 1, 2009, to June 30, 2010,
credit union employees and volunteers around the Nation
conducted more than 13,500 presentations reaching over 413,000
young individuals as reported by the National Youth Involvement
Board, which is a support organization for credit unions
nationwide, to provide financial literacy.
Credit unions in Kansas are also extremely involved in
financial literacy across the State. This year, just in the
State of Kansas, over 6,000 students were reached by credit
union staff members and volunteers, including myself. Meritrust
Credit Union is also very involved. I have been able, with the
support of my credit union, to reach over 2,200 students in the
State of Kansas, spanning from Dodge City out to Atchison,
Kansas, using a variety of curriculum, both provided by the
State Treasurer's Office as well as what we have written on our
own.
I want to quickly highlight three different curriculums
that are very important that I deem very educational for
students. One of them you have already heard talked about, so I
will refrain from comment on that. First of all, the Money$mart
Financial Camp provided by the State Treasurer's Office was
originally started with a partnership by former Treasurer Lynn
Jenkins and is now endorsed by Dennis McKinney and the KCUA
Credit Union Association here in the State of Kansas. We have
reached over 600 students in the State with this curriculum,
teaching over 7 camps in the past 2 years. We have 3 more camps
scheduled for the next 3 months, September, October, and
November, that will reach a potential of 200 more students. By
the end of this school year, we are hoping to have reached
about 1,000 students in the State of Kansas over the past 2
years.
Chairman Moore of Kansas. How old are these students?
Mr. Wolgamott. They are geared toward middle school
students, so 6th to 8th grade students.
Communities in Schools was talked about earlier, the
Reality U that they run in the high schools in the Wichita
area. Students are given an income based on their GPA. So if
they have a high GPA, they usually receive a higher income; if
they have a low GPA, they receive a lower income. If they
wanted to be an athlete, a professional athlete and they have a
lower GPA, they are a high school PE coach or maybe a middle
school PE coach. So the income they receive is structured very
closely to the grades that they earn, and that is a really
great teaching point to bring their grades up.
Many, many organizations in the Wichita area sponsor and
support the Communities in Schools effort with the Reality U. I
have been invited with Reality U to go into the schools, in a
couple of the schools, while they are not in Reality U, I have
gone into the classrooms and taught a budgeting exercise to
kind of broaden the scope of what they are able to teach.
As I mentioned, Meritrust Credit Union is very involved in
our community. We have partnered with organizations such as
Youth Entrepreneurs of Kansas, Gear-Up, Upward Bound,
Americorps, various Wichita State University classes, classes
at Butler County Community College, VanGo which is an
organization here in Lawrence, TRIO, ComCare and we partnered
with the Kansas State Attorney General's Office for National
Consumer Protection Week.
Some struggles that we have with financial literacy, first
of all, it is a struggle to provide financial literacy to
adults. Most adults see financial literacy as a very positive
thing; yet, in the 2009 Harris Interactive Financial Literacy
Survey, 41 percent of adults gave themselves a C, D or F letter
grade when it came to financial literacy, but only 12 percent
say they are likely to seek financial help from a financial
professional, which means they are going to other places or
they are not going to seek help for financial literacy at all.
Another weakness I see is the ability to reach students in
the classroom. Teachers are placed under tremendous pressure to
fulfill the requirements asked of them within a school year.
Because of this strain, it is difficult for some schools to
invite guests to come into their classrooms because of the
constraints that they have. They feel like they need to get
everything in that they can get in and so it is hard for them
to invite outsiders to come into their classroom.
To conclude, the need for financial literacy is large, not
just for adults, but those soon to be adults. Current
statistics point to an increased personal debt and continued
``spend first and ask questions later'' mentality. A consistent
focus on programs involving policymakers, educators, and
financial institutions will strengthen what is currently being
provided by financial institutions and social organizations.
Thank you for your time.
[The prepared statement of Mr. Wolgamott can be found on
page 92 of the appendix.]
Chairman Moore of Kansas. Thank you. I now recognize
myself, and I am going to ask--I guess make a statement and ask
a general question to all the panelists here, because I think
this is a very, very important topic that we are discussing
today.
Number one, and some of the panelists have already spoken
to some of these questions, but I am just going to throw these
out for general discussion by the whole panel if we can for
just a couple of minutes. And then we will let Representative
Jenkins talk and ask questions.
When, ideally, should we start and how young should we
start to educate students about financial literacy? How young
can that start? And number two, how do we reach out to the
adult population? And again, some of you have spoken to this
already, but I would like to hear more general discussion. How
do we reach out to the adult population, how do we teach
financial literacy and personal finance to adults and Members
of Congress even? I am being a little facetious but I am being
very serious too because there seems to be, by virtue of some
of the statements made by some of my fellow Members of
Congress, a lack of understanding about some of this. I tell
people all the time, our Nation needs to start living within a
budget like most American families do. Not all American
families by any means, but most American families. Those are
the observations I guess I would make.
How young can we start teaching students? I have heard
some--the last witness here spoke about some very young
students. Do the rest of you agree with that? And how do we get
this ingrained in our public education system so when they
start in elementary school and it goes clear up through college
and again, how do we reach the adult population.
Any of you, please?
Mr. Wolgamott. If you do not mind me going first?
Chairman Moore of Kansas. Sure.
Mr. Wolgamott. I have two suggestions to reach adults. The
first one is we partner with organizations that adults are
already part of. Instead of the adults coming to us, we go to
them, where they are.
Secondly, we started the Dave Ramsey Financial Peace
University program in our credit union. Just because we work at
a credit union does not mean we are any better with money than
anybody else out there. So we had 19 employees and their
spouses come in and we paid for them, as an employee benefit,
to receive that financial literacy. Because of that, we were
able to, as a group, pay off $40,000 in debt and save $12,000
in an emergency fund, just in the 13 weeks of the program. We
are going to be starting that for a new round of students who
are employees at our credit union.
So I think you have to go where the adults are; you cannot
rely on them to come to you necessarily in order to receive
that.
As far as how young to start, we are starting to teach our
two year old about money, about putting money into a piggy bank
at home, giving an offering at church. There are some very
basic things you can do starting very young. Money and finance
is very much habit forming and if you do not start those
financial habits early in life, then you are continually trying
to break them throughout the course of life.
Chairman Moore of Kansas. What a radical notion that is.
[laughter]
Chairman Moore of Kansas. Mr. Mitchell?
Mr. Mitchell. I agree. I come from the unique perspective
of being a community banker. I have had to educate adults on
loan products and all that. It is amazing what people do not
know about basic finance, and it goes all the way. My wife is a
literacy coach which is a reading literacy. But I have also
looked at that and the age of kids that she can touch, and she
teaches teachers to teach literacy. It is amazing how young
they can start learning these things. And I agree, the sooner
we start this, it becomes part of who they are, they learn it
and then it is not a big deal as they grow older. We teach them
young and just make it simple, make it fun. Those kids will in
turn also teach their parents. You bring the parents in there
and make them responsible for it. It is going to take years,
but I think that is a good way to get started and then
eventually we will work ourselves out of this situation.
Chairman Moore of Kansas. Ms. Voyles?
Ms. Voyles. I totally agree with everything the gentlemen
have said. I have just one grandchild story to tell you exactly
how young they can learn.
My youngest grandson, when he was a year and a half old,
hated to be away from his father, he was very connected to him.
So when I would take care of him, he wanted to know where dad
was. And I would say, he'll be back soon, he'll be back, he
would say daddy's working. And I would say why does he work.
And he will say make the money.
[laughter]
Ms. Voyles. Why does daddy need to make the money and he
would say to buy diapers, food, and toys. When I took him to
the beach for the first time, he was only two, and later he was
looking at pictures and he said, I want to go back to the
beach. And I said, that was a wonderful trip, we will go back
but we cannot go soon because it takes a lot of money for all
of us to fly and spend a whole week. So he went on playing and
then he came over and he said, grandma, work more.
[laughter]
Ms. Voyles. So two year olds definitely get it.
I wanted to add to that that one of my big concerns has
been--and I know it is hard to address this, but we know with
more emphasis on communication arts, math, and science that in
many of our schools across the Nation, K-5 social studies
education has been diminished. And the amount of time the
teachers are allowed to teach social studies concepts. And
economics and personal finance used to fall within that realm.
So I think this balance of what I heard people talk about, life
skills and where we all belong, what our students need, I have
been very, very concerned about this and would like some
attention paid to how do we get balance back.
Chairman Moore of Kansas. My time has expired, but can I
have just a minute, if any other panelists have anything to
add?
Ms. Tuttle. It has already been mentioned in terms of
working with adults and seeing the parent/child relationship as
something that is viable. At colleges and universities around
the country, we are dealing much more with parents, parents of
college age students and so as we think about developing our
financial literacy program for college students, we would like
to incorporate communication with their parents as well,
because some of them have not learned at that stage either. I
do think for any level of education, especially K-12, trying to
have things be as experiential as possible and I think some of
the examples given, it should not be dry, lecture-type
information, it needs to be something that they can experience
and integrate in their lives. And the college time is when our
students really are experiencing that.
Chairman Moore of Kansas. Mr. Petty, any comments?
Mr. Petty. I just have one brief comment. I feel like
necessity is the best motivator and I feel that incorporating a
curriculum at the high school level, especially for seniors, as
the State of Kansas has done, they are uniquely poised to make
significant financial decisions. So I think that there needs to
be very direct curriculum that they receive right before they
make those significant financial decisions.
Chairman Moore of Kansas. Representative Jenkins?
Ms. Jenkins. I have thoroughly enjoyed the discussion here
today and I know we are short on time, but I thank you all and
your comment about Members of Congress benefitting from some
financial literacy made me smile because I remember a former
Speaker of the House, whom I will not embarrass, was speaking
here in Kansas several years ago, and he was an educator by
profession, and he said the only thing more difficult than
teaching junior high school students about money was teaching
Members of Congress about the whole issue of the economy.
[laughter]
Ms. Jenkins. I had to smile because I thought how
appropriate that is.
I just have one thing. I was interested, Ms. Tuttle, in
your presentation, that was very interesting and maybe because
I am a mom who just sent my freshman baby daughter off to
college, but I was curious, I do not recall hearing this, are
you doing this all with your own resources? I know there are so
many in the private sector, so many that rely on good financial
decisions for the bottom line, are you engaging any corporate
participation?
Ms. Tuttle. That is definitely part of our plan. Since we
are just opening our doors, we had to be creative about our
funding for the first year, actually looking for internal
sources at KU for that. But we definitely plan on partnering. I
have taken some notes today noticing the kinds of opportunities
there are in the State and I think it would obviously be the
way to go, because I think there are some ways that it could be
done in a very objective way, unbiased way, to get that help.
There are also some of those national resources in terms of
foundations, like Cash Course and others, so I think there is
some opportunity here to partner and expand what we are able to
do.
We did this summer visit, an excellent program that has
been started at K State called Power Cat Financial Counseling,
and they have been going on for about a year and they are also
very connected with the academic units, both the Personal
Finance Department and the School of Business. So I see us also
partnering with academic units and some of the Federal grant
money and corporate money that we may have access to as well.
But I think it is something we definitely will use in the
future.
Ms. Jenkins. I know resources are tight and it seems like
there are some in the communities willing to step up in a good
way. I know the Treasurer's Office has done so much in this
area, it seems like people knock down their door, they want to
help, it is just finding those to partner with. So I would love
to see that.
And then maybe just a final thought as far as measuring
outcomes in this whole area of financial literacy. I am not
sure I want to go to my grave before I see the results of all
of the efforts that has been put into this. But maybe that is
what we will have to do, is just let a generation pass. I don't
watch a lot of TV, but there is a ridiculous jingle that sticks
in my head from the little bit of TV that I do watch, related
to I think a requirement that credit reports be made available.
Do you know what I am talking about? There's this ridiculous
little jingle about freecreditreport.com. I will not sing it to
you.
Chairman Moore of Kansas. Please don't.
[laughter]
Ms. Jenkins. But do we know if things like that are
beneficial to getting our message out and should we do more of
that? Do any of you have any thoughts or data on measuring
outcomes or ideas on how we might, other than just waiting a
generation to see if our bankruptcy rates go down and then I
will yield back, Mr. Chairman.
Ms. Tuttle. I am aware of some research that has been done
for college students' financial literacy, actually a doctoral
research study is starting to be done, I just saw a report
about that. I know there are some real assessments going on,
and it is in fact showing impact. I mean it was somewhat
modest, it did not change behaviors I think as much as they had
wanted, but it did change students' knowledge and awareness, it
did change their decisionmaking about personal finance, but
maybe less so about taking out loans. So there actually is
starting to be, at least on the college level, some real
assessment going on about the impact of that. And I think a lot
of that has to be looked at in terms of eventually does it
actually change behavior. And that will be the harder piece to
really get at or see, whether loan indebtedness starts to go
down or some of those kinds of issues. On K-12, I would leave
that to my colleagues, I am not sure.
Mr. Wolgamott. I think it is very difficult to see outcomes
because it is hard to follow the student from when we teach a
Money$mart curriculum or go into the classroom one time and
teach. We do not have access to them 3 or 4 years later. And
that is something that we are starting to look at with the
Money$mart curriculum and other things that we do, is there a
way that we can track the student if we partner with a specific
school, 5 or 6 years down the road, maybe give them another
evaluation to see have they retained any of the things that
they have been taught.
And I think also when we here in the State of Kansas start
to add a really strong financial literacy curriculum to the
core curriculum that they teach, then I think that will help, I
think repetition is the huge thing there. It is very hard in my
job to get repetition with the students, but if that is brought
up in the schools, then I think that will help a great deal.
I hope we do not just have to wait and see for a
generation, that kind of scares me a little bit, but I think
the repetition is helpful.
Ms. Jenkins. Thank you, Mr. Chairman.
Chairman Moore of Kansas. Thank you.
I ask unanimous consent that the following documents be
entered into the record for our hearing today: First, a
statement from our colleague on the House Financial Services
Committees, Representative Ruben Hinojosa, who co-chaired the
House Financial and Economic Literacy Caucus with our
subcommittee's ranking member Judy Biggert; second, a statement
from the Financial Education and Counseling Alliance; and
third, a letter from the National Association of Credit Unions.
Without objection, these documents will be made a part of
the record.
I want to thank our first and second panel of witnesses for
their appearances and their testimony. I know Ms. Jenkins and I
will take back what we learned from today's hearing to the
District of Columbia and share it with our colleagues. I also
want to thank the Dole Institute and KU for being such
excellent hosts for us today.
I note that either of us, Ms. Jenkins or myself, may have
additional questions for our witnesses, which we can submit in
writing and without objection, the hearing record will remain
open for 30 days for members to submit written questions to
these witnesses and place the responses in the record.
I just want to say in closing, I think this discussion
today about financial literacy and understanding our financial
systems in our country is probably one of the most important
discussions we can have and I sometimes, my wife says, have an
inappropriate sense of humor, but I think there needs to be a
lot of education across the whole spectrum, I am talking about
from children and start teaching our children very, very early
about how this works and continue that through high school and
college and then try to reach the adult population and Congress
as well, because we all need to understand this and the
consequences of not following good financial practices in our
country, because there can be disastrous results if we do not.
I thank all of you and especially my colleague for being
here today. Thanks to all of you and we are going to adjourn
this hearing.
[Whereupon, at 12:04 p.m., the hearing was adjourned.]
A P P E N D I X
August 24, 2010
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