Education Secretary Arne Duncan and Treasury Secretary Timothy Geithner put the focus on financial literacy recently when they teamed up to announce the National Financial Capability Challenge, a joint initiative of their two departments.
The program, scheduled to take place this spring, is a voluntary initiative designed to boost the financial acumen of high school students nationwide. Students that participate will take an online exam about age-appropriate financial concepts.
"Before children can drive or vote, they are offered credit cards," Geithner said, one of the many reasons why it's important that young people understand personal finances. Duncan and Richard Ketchum, top executive at the Financial Industry Regulatory Authority, also gave remarks at the Dec. 15 launch event, held at the Treasury Department.
Ketchum shared the spotlight in order to release the results of the foundation's financial capability survey -- the first of its kind -- intended to measure Americans' financial capabilities.
The survey found that fewer than half of respondents correctly answered two basic questions about how interest rates and inflation work; only 41 percent of parents have set aside money for their children's college education; and more than 1 in 5 respondents use high-cost alternative borrowing methods such as payday loans or pawn shops.
A small group of lawmakers attended the launch, including Sen. Daniel Akaka, D-Hawaii, and Reps. Carolyn Maloney, D-N.Y., and Sheila Jackson Lee, D-Texas, all of whom have introduced legislation aimed at improving financial literacy. Maloney, a member of the House Financial Services Committee, told National Journal she supports a federal requirement for financial literacy education.
The National Financial Capability Challenge, run out of Treasury, is actually a revamped version of a program administered during George W. Bush's last year in office. Over 120,000 students took the financial exam in 2008, and the administration hopes to see that number rise next year. Officials from Treasury and Education indicated this is only the beginning of their efforts to bolster the nation's financial fitness.
"We are committed to doing more than just admiring the problem," said Matt Yale, deputy chief of staff at the Education Department. Back in Chicago, Yale worked with Duncan at the Ariel Foundation, sponsor of the Ariel Community Academy, a primary school in the South Side of Chicago built around a financial literacy curriculum.
With private support from Ariel Investments, each first-grade class at ACA receives a $20,000 gift that follows the class until graduation. Initially, investment professionals manage the money on behalf of the students, but by seventh and eighth grade, a junior board of directors makes the ultimate decision about how to invest the money.
"You literally have fourth- and fifth-graders talking about their portfolio picks," Duncan said.
Upon graduation, ACA students give the principal $20,000 to the incoming first-grade class, so the program is self-perpetuating. Students give half their profit to the community in a manner of their choice; with the remaining half, students choose to take their share in cash or put it away for college. Students at ACA, who are predominantly African-American and low-income, outperform their peers in the same district in both math and English.
Yale says he knows he's not likely to find the private support to bring the program to a national scale but hopes to promote education that provides students with the same kind of money smarts. The Education Department is going to double down on its efforts to recognize students and teachers from schools that excel at the financial challenge.
Two Education Department employees will be part of a team to develop teacher toolkits, which will be available for download in advance of the test, to help educators teach finance to their students.
Many people who spoke at the financial challenge's launch noted that the burden of managing retirement funds has shifted from employers to employees. Workers must be stewards of their own retirement money in a society where most people will change jobs a number of times and financial products are more complicated -- a fact that exacerbates the need for all Americans to master the basics of personal finance.
But despite the energy and sense of urgency around this issue in Congress and the administration, and an economy struggling in large part because of ill-informed financial decisions, only three states require a one-semester course dedicated to personal finance: Tennessee, Missouri and Utah. Eighteen states require incorporation of personal finance instruction into other subject matter.
The fact that financial literacy doesn't belong to a particular department or have dedicated staff is a big challenge, said Laura Levine, executive director of the JumpStart Coalition, an organization devoted to improving young people's financial literacy. But Levine noted that attention to financial literacy education has gained a lot of traction in the past decade and said she believes the trend will only continue.
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