“The function of education is to teach one to think intensively and to think critically... Intelligence plus character - that is the goal of true education.” Martin Luther King, Jr.
Financial literacy is an issue that should command our attention because many Americans are not adequately organizing finances for their education, healthcare and retirement.
Ron Lewis
"Education is the foundation of success. Just as scholastic skills are vitally important, so are financial skills and communication skills.” Robert Kiyosaki
The State of Financial Literacy in America
In a nation where nearly a third of high school seniors already use a credit card, a higher proportion have an ATM card, and more than 1.5 million families filed for personal bankruptcy last year, the need for personal financial literacy is apparent. Yet fewer than 30 percent of young Americans are given the opportunity to take as much as one week’s worth of course work in money management or personal finance in high school.
The following statistics further describe the state of financial literacy in America today.
American Children, Teenagers and Young Adults:
- Of the 6,000 students who took the Jump$tart personal finance survey in 2006, 62% received failing scores with 60% being the lowest passing grade. (1)
- A study of 1,065 teens found that 21% of 18 and 19-year-olds have credit cards. (2)
- People in the 18 to 24 age bracket spend nearly 30% of their monthly income just on debt repayment - double the percentage spent in 1992 (10% of net income is a recommended amount for debt obligation). (3)
- The average 21-year-old in the U.S. will spend more than 2.2 million in their lifetime. (5)
- In 2007 a Charles Schwab survey on teens and money reported that only 45% of teens know how to use a credit card, while just 26% understood credit-card interest and fees.(4)
- Only 1 in 3 teens knows how to read a bank statement, balance a checkbook and pay bills. Barely 1 in 5 had an idea how to invest (4)
American Families:
- About 20 percent of U.S. households, representing 22.2 million families are "unbanked." (i.e. not using mainstream, insured financial institutions.) (7)
- The average household with debt carries approximately $10,000 to $12,000 in total revolving debt and has 9 credit cards. (1)
- In 2005, savings rates dipped to minus 0.5 percent, something that hasn't happened since the Great Depression in 1932 and 1933. A negative savings rate means that Americans spent all their disposable income and dipped into past savings or increased their borrowing. (9)
- Americans shelled out more than $24 billion in credit card fees in 2004, an 18% increase over the previous year. (10)
- The median home price has risen 26 percent in the past five years while young adults' income has gone up less than 10 percent. (8)
- About half of adults (49%) say they are concerned they have not paid enough attention to managing their finances as they should have and 48 percent are concerned they don't know enough about financial planning. (14)
College Students and Young Adults:
- By the time they reach their senior year, 56 percent of students carry four or more credit cards, with an average balance of $2,864. (6)
- Overall average workers between the ages of 25 to 34 must spend 25 cents on every dollar earned on debt repayments. (11)
- While teens believe when they get older that they will earn an average salary of $145,000. In reality, adults with a bachelor's degree earned an average of $54,689 in 2005. (13)
Bankruptcies, Defaults, and Foreclosures:
- The number of 18 to 24-year-olds declaring bankruptcy has increased 96% in 10 years. (12)
- The 2007 U.S. Foreclosure Market Report, which shows a total of 2,203,295 foreclosure filings default notices, auction sale notices and bank repossessions were reported on 1,285,873 properties nationwide during the year, up 75 percent from 2006. (15)
Educating our community, neighbors, youth, and customers to be financially responsible is a service that Panhandle State Bank, Intermountain Community Bank, and Magic Valley Bank have focused on from the beginning. We are committed to teach personal finance basics from the local elementary to the high school level, and then further financial education into various modules that cover budgeting, credit basics, saving, checking accounts, identity theft and the value of a good credit score. Our Shining Star Reader program in Post Falls has given every first grader a Shining Star reader book bag with a ruler and pencil.
From seminars on identity theft at our local retired living homes to basic finance with small businesses and church groups, our employee volunteers have invested their time to inform and teach our communities about responsible finance.
A formalized program through the American Bankers Association (ABA) is being implemented bank-wide for our youth. This involves having our employee volunteers go into the local high schools to teach the ABA sponsored “Teach the Children to Save” training module. The program is geared towards children in the 4th through 8th grade teaching the benefits and discipline of saving.
Sources:
- Jump$tart Coalition, 2007
- Junior Achievement, 2005
- Generation Broke: The Growth of Debt Among Young Americans
- Charles Schwab Teens and Money 2007 Survey
- Share-Save-Spend.com
- Washington Post, 2007 citing student loan lender Nellie Mae.
- Denver Business Journal citing Center for Financial Services Innovation (CFSI), 2007
- "Generation Debt", 2007
- U.S. Commerce Department, 2006
- Cardweb.com, 2005
- "Strapped: Why America's 20 and 30 Somethings Can't Get Ahead", Tamara Draut, 2006.
- Richmond Credit Abuse Resistant Education (CARE) Program
- The Denver Post, citing Charles Schwab Teens and Money, 2007
- The Harris Poll #22, 2007
- RealtyTrac.com. 2008
- National Council on Economic Education, 2007