April is Financial Literacy Month

April 2, 2010

April is Financial Literacy Month, thanks to a Congressional resolution authored by Senator Daniel Akaka (D-AK). And if there ever were a time of need for improving financial literacy among the American populace it's now.

According to data compiled by the Center for Financial Services Innovation (CFSI) only one in six American adults is happy with their current financial situation.

Here are some other startling facts uncovered by CFSI's numbers crunchers:

• Only 37% of adults have calculated how much money they'll need for retirement.

• Just 31% of those with kids are saving for college, and among those, only one-third are using tax-advantaged education savings accounts,

• A mere 35% have emergency savings.

• 61% are having difficulties paying their bills, and

• 25% have overdrawn their checking accounts.

Knowledge is Power

"Financial literacy means empowerment," Sen. Akaka told a group brought together yesterday in Washington by CFSI and the National Endowment for Financial Education (NEFE). A one-time educator, Sen. Akaka is a long time champion of financial education initiatives.

"We want smart Americans who can understand their financial situations," Rep. Shiela Jackson Lee (D-TX) later added. Had that been the case in the past, we may have avoided the subprime meltdown, the Congresswoman said, explaining "then maybe someone would've read the fine print" on their mortgage loans.

Rep. Jackson Lee and Sen. Akaka are collaborating on financial literacy legislation, the Congresswoman said. Although she stayed clear of details, noting that legislation is still being crafted, Rep. Jackson Lee has authored legislation in the past that would require institutions of higher learning (like colleges) to provide at least 4 hours of financial literacy counseling to student borrowers.

"Financial literacy is part of survival," Rep Jackson Lee said.

Making the Grade

Yesterday's event - Making the Grade: Improving Financial Capability of Americans - was billed as a "kick-off" for Financial Literacy Month. It drew several hundred Congressional staffers, financial educators, public interest groups, community leaders, financial services providers and others.

"As policy makers begin to contemplate how they can support financial capability among their constituents, understanding the need for a new approach that results in real behavior change and improved outcomes will be critical," Melissa Koide, CFSI vice president for policy, told the group.

CFSI used the event to showcase innovative strategies that are being used to empower and enable families to pay down debts, build savings and to better manage financial affairs. Among those featured were: Piggymojo, a savings program tied social networking; Borrow Less Tomorrow, a debt management program developed by the Credit Counseling Center of Delaware Valley; and Mission Assed Fund, an alternative to payday lending that builds on the concept of community lending circles.

The three were part of a group of five non-profit led programs that shared in $1.5 million in awards from the Financial Capability Innovation Fund (FCIF). Funders of the project included: Citi Foundation, Bank of America, Capital One, Morgan Stanley, Experian, U.S. Bank and Visa.

CFSI also released a white paper - Making the Shift from Financial Education to Financial Capability: Evidence from the Financial Capability Innovation Fund - which explores themes and trends among proposals for funding considered by the FCIF. Copies are available for downloading at the CFSI Web site.

Governments worldwide make regular payments to more than 170 million poor people (G2P payments)