You don’t have to look too hard to find alarming statistics about America’s level of financial literacy. Survey after survey confirms that many Americans lack the ability to use knowledge and skills to manage their money effectively.
U.S. students ranked average or below average compared to students from other countries in the first large-scale international assessment of financial literacy for some 29,000 15-year-olds from 18 countries. These findings were released last year by the Organization for Economic Cooperation and Development/Program for International Student Assessment based on 2012 test results.
Financial literacy levels aren’t any higher for adults. A survey from the FINRA Investor Education Foundation in 2012 asked five multiple-choice questions about topics like interest calculations, mortgage payments and investments. Just 39 percent of the 25,509 adults surveyed were able to answer at least four questions correctly. And a 2014 Retirement Income Literacy Survey conducted for The American College of Financial Services found that just 1 in 5 of the adult participants earned a passing grade on financial questions about retirement.
This lack of knowledge about finances comes at a time when we’ve weathered a volatile economy on an unprecedented scale the past several years. Student loan debt continues to increase at an alarming rate. Some 40 million borrowers owe more than $1.2 trillion, with an average balance of $29,000, second only to mortgage debt in our country
Add to all of this the traditional pressures of mortgage loans, retirement savings, credit debt and the ever-rising cost of living, and the crisis is painfully obvious. Many of us simply aren’t adequately equipped to fight the financial firestorm we face.
While many solutions are problematic, one clear step is increased education for our kids. Earlier this year, our state enacted legislation requiring financial education to be incorporated into existing K-12 learning requirements. Hats off to our state leaders, yet, as many point out, a classroom course or two is a good start — but it isn’t enough. How much do you remember from your eighth grade social studies class? And what about grown-ups who need financial education?
Financial literacy is a shared community priority, and it’s up to the rest of us to pitch in too.
Credit unions are in a unique position to help lead this effort. As a member-owned, not-for-profit financial cooperative, BECU has an interest in and responsibility for helping and educating members and their communities. That’s who we are and why we exist.
One example of helping overcome financial literacy is BECU’s Community Day at Junior Achievement’s Business Park. This event gives parents and their teens the opportunity to learn together about money-management by challenging them with real-life, hands-on budgeting scenarios. BECU also offers ongoing webcasts, webinars, classroom courses and seminars that provide a deeper dive into topics such as building credit, buying a home, paying for college and avoiding identity theft.
We so strongly believe in the importance of financial literacy that BECU closed our doors for half the day on Oct. 20 and sent all of our employees to deliver Financial Reality Fairs at high schools around Puget Sound. We called it “Closing for Good,” and the fairs reached 21 high schools and more than 3,000 students. With curriculum provided by the Northwest Credit Union Association, these were hands-on educational programs where students were assigned a career and salary, and then asked to make real-life decisions about housing, travel, food, saving, entertainment and other expenses. The goal was to figure out how to live within their means — a real-life goal for most families.
These are small steps, and teaching financial literacy takes a village. With that in mind, I respectfully challenge other organizations to enter the fray with us. Washington state was recently ranked 45th in financial literacy. We can do better. If we work together to address financial literacy, the smart money is on a brighter financial future for all of us.
Benson Porter is chief executive of BECU.