Financial literacy is the specific knowledge and concepts needed to manage your money and build wealth. This includes creating and managing a budget, investing for retirement, and understanding how to buy a house or start a business. These concepts are important for increasing economic security for our families and for managing tax money.
In 2012, Legislators in 28 states introduced financial literacy requirements, with legislation passing in ten states. The programs included teen financial awareness, non-profit education programs, testing requirements for economics and financial literacy, and support for college and adult literacy education. Iowa was not one of them. This is not to say that there is no interest in financial literacy by our state government. The Iowa program for college costs is managed by the State Treasurer as part of his 529 plan responsibilities. Other initiatives include financial literacy requirements for clients of community action programs and K-12 financial education. However, for at least one recent graduate of our public schools the information provided by both teachers and parents went in one ear and out the other. This, unfortunately, is pretty normal (for consumers, students, and Legislators), as recent research shows.
The 2012 Financial Literacy Survey by the National Foundation for Credit Counseling discovered that 56 percent of adults did not have a personal budget. Forty percent recognize this is bad, and gave themselves a C, D, or F. One-third of Americans do not pay all of their bills on time. Many save less than they did a year ago, and few have any non-retirement or emergency savings. In most of the households the women (61 percent) said they were primarily responsible for managing the money and want to be more informed. Parents think they’re talking with their children about “needs and wants” but their children don’t remember these conversations. A survey by Visa found that 85 percent of parents think that a course in personal finance should be required. Teachers in general (60 percent) don’t think they’re qualified to teach this material. Only 11 percent have taken a workshop on teaching personal finance according to the National Endowment for Financial Education (NEFE).
Schools often focus on financial education in preparation for the National Financial Capability Challenge test by the U.S. Department of the Treasury. In 2012, Iowa had 88 high schools participate, with 3,500 students taking the test. Thirty schools received a $1,000 recognition check from Iowa Student Loan for outstanding achievement. Unfortunately the website no longer exists. Possibly the Department of the Treasury has recognized that they are not qualified to teach this material, based on the Federal government’s financial record.
There was no information available about how qualified State Legislators think they are to teach financial literacy, or how well they manage their own money – much less our state tax dollars. As the Legislative session continues, with proposals for spending taxpayers’ money on roads and bridges, mental health, education, special tax breaks, and pet projects, the financial literacy of State Legislators will become self-evident. Taxpayers will then see if the state ends up rich or poor, and how much of our income we get to keep for ourselves.
Hopefully, in the meantime NEFE or the Iowa Bankers Association will conduct a financial literacy workshop specifically for Legislators.