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Posts Tagged ‘consumer need for financial education’

Financial Literacy Is the First Step to Financial Independence

Posted by Larry Doyle on July 22nd, 2009 3:12 PM |

Financial literacy does not guarantee financial independence but it is a necessary first step.

In a society which has undervalued thrift and prudent financial management, is it any wonder our country is woefully unprepared to help future generations become financially literate?

The goal of Sense on Cents is to help people navigate the economic landscape, from whatever point of departure on that landscape they may currently occupy.

The Medill Washington Program recently reported on challenges to improve financial literacy. From the article Financial Literacy Programs Face Uphill Climb:

“The economic crisis was caused by the fact that a lot of Americans lack basic financial literacy skills, which makes it difficult to make wise credit decisions, as was evidenced by the mortgage crisis and other areas of the overall economic crisis,” said Levine. “However, with the advent of the new presidency, also comes a new approach when it comes to undertaking the goal of increasing national financial literacy in schools. And the transition to this new approach takes time.”

Everett Hoffman, 22, of Staten Island, N.Y., wishes he had taken the elective of a personal financial education course in high school. He thinks it would have helped him make wiser spending choices.

“I think it might have been good because I’m learning a lot of things the hard way now being a young adult,” said Hoffman. “But I really do think taking that class might have helped me avoid some minor debit card issues I’ve been having lately, you know basics, like balancing a checkbook.”

Allison Joseph, 21, of Chesapeake, Va., also interviewed on the National Mall, said that her parents still shelter her from having to take care of her finances. She took a macroeconomics course in high school that did not cover personal finance.

“When I went to college, I started getting my own credit card statements, but my parents have always helped me out, so I’m not totally independent in that sense.”

Up to now, only three states require at least a one-semester course devoted to personal finance – Utah, Missouri and Tennessee. Eighteen other states require personal finance instruction to be incorporated into other subject matter. The rest have no requirements, but leave individual schools the choice to implement personal finance education programs in their curricula.

According to JumpStart, a personal financial education course would give students a head start at being less debt-prone by teaching them how to manage checkbooks, how mortgages work, and other basic financial life skills.

I will readily admit that the tone and tenor of my writing at Sense on Cents is not geared toward high school students, but certainly the Financial Primers in the right sidebar (Debt Management, Financial Aid, Insurance, Investing, Mortgage Finance) provide a wealth of information for anybody embarking down a financial path.

By the same token, I am heartened by the number of college students and recent college grads who have informed me how much they have learned and are learning from Sense on Cents.

Please spread the word and do not be bashful about asking me anything.

Financial literacy is the first step in becoming financially educated which is the path to becoming financially independent.

I am happy to help you navigate along the way.

LD

Consumer Financial Protection Agency or Sense on Cents

Posted by Larry Doyle on June 17th, 2009 9:27 PM |

A large initiative embedded in President Obama’s financial reforms is the launching of the Consumer Financial Protection Agency. Why does President Obama feel it is necessary to launch such an agency? For the very same reason I was compelled to launch Sense on Cents earlier this year.

The Wall Street Journal provides insights on this agency in writing, A New Consumer Agency With Enforcement Teeth:

President Barack Obama’s proposed regulatory revamp includes sweeping changes to help consumers make informed decisions about financial products, save for retirement and get better investment advice.

A centerpiece is the creation of a Consumer Financial Protection Agency with authority to write and enforce rules across a slew of financial products.

Firms would also have to offer “plain vanilla” versions of products — such as a mortgage that does not include prepayment penalties and has predictable payments — along with their other offerings. The goal is to make it easier for consumers to shop around without worrying about hidden fees.

“The new agency is about making consumer credit markets work,” said Elizabeth Warren, chairman of the Congressional Oversight Panel, which oversees the government’s Troubled Assets Relief Program. Ms. Warren had proposed the idea of a financial-products safety commission in an article published in the journal Democracy in 2007.

“It’s not possible for a customer to compare three or four credit-card products and determine which one is the cheapest and which one poses the least risk,” Ms. Warren said. “This agency is about changing that.”

Consolidating the job of consumer oversight into one agency could help resolve consumer disputes more quickly and effectively.

Clearly the financial industry has not had the interests of consumers at heart. Why are so many investors dissatisfied with their banks, brokers, and financial planners? The financial companies and individuals did not protect the customers. More often than not, brokers and bankers themselves were ill equipped to understand the dynamics at work within products, the market, or the economy. (more…)






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