Highlights from the week in financial literacy:
- Survey of military personnel by FINRA Foundation provided the following highlights about the financial capability of servicemen and women (link to survey here):
- Military families are heavily in debt to credit card issuers, with over one in four respondents reporting more than $10,000 in credit card debt.
- One in four servicemembers with checking accounts reported overdrawing their accounts, which typically incurs significant fees.
- More than one in five (21 percent) servicemembers used high-cost, non-bank borrowing such as payday or auto title loans in the last five years.
- Over half of enlisted personnel and junior non-commissioned officers reported that in some months, they made only the minimum payment on their credit cards.
- Only 50 percent of military respondents have a "rainy day" fund for unanticipated financial emergencies.
- Why do 85% of U.S. investors select actively managed mutual funds vs. index funds? This research which studied German mutual fund investors indicated the role that financial literacy and advertising might play in these decisions: "To conclude, having higher financial literacy scores does not necessarily mean those investors will buy low-cost index mutual funds. Investors with higher literacy scores are overconfident they have above-average investment skills. They believe these skills enable them to choose actively managed funds that will outperform “boring” index funds with “only” average returns. Also, investors with lower financial literacy do not invest in index funds, but depend on fund advertising to choose actively managed funds."
- Want to know the relationship between financial literacy and the subprime mortgage crisis? Check out this 7-minute Federal Reserve Bank of Atlanta podcast. Here is his summary: "We found the ability to perform simple mathematical calculations (which we refer to as numerical ability) is negatively correlated with the incidence and extent of mortgage delinquency. That is, the lower the borrower's numerical ability, the more likely it was the borrower had missed mortgage payments and experienced foreclosure."
- Almighty Debt aired on CNN last evening at 9pm ET (also available at Amazon.com and itunes). Here is a description of this program: "Every leading indicator -- unemployment, income, wealth, educational attainment, homeownership and foreclosures -- demonstrates that the African-American financial foundation is crumbling at rates that are worse than other segments of the U.S. population. Reported by anchor and special correspondent Soledad O'Brien, "Almighty Debt" explores how one church is helping its 7,000 parishioners survive the worst financial crisis for African-Americans since the Great Depression. Rev. DeForest Soaries believes "debt is the new slavery." See inside his church as he fights debt from the pulpit and leads his members on a new revolutionary struggle.
- Here is an NPR interview with Rev. Soaries
- Several Indian states implementing financial literacy curricula (from indiamicrofinance.com): "The state governments of Punjab and Haryana have agreed to include financial literacy in the school curriculum. This was in response to the Reserve Bank of India Governor Dr. D. Subbarao’s suggestion to the government of Punjab and Haryana in separate meetings with the officials of both the state governments.
- Junior Achievement using mobile learning labs to improve financial literacy (from Times-Picayune): "When 14-year-old Ari Williams walked into a financial literacy learning lab at Delgado Community College this week, she was handed a card that gave her an entirely new identity. In an instant she was 31, married, and had a 5-year-old child. Each of her fellow eighth-grade classmates from Edward Hynes Charter School were also given cards assigning them new identities and personal traits, including occupation, gross annual income, and taxes paid. While a few were transformed into doctors and lawyers, most had an income in the range of $30,000 a year, and faced the challenge of fitting every expense thrown at them by the "real world" into their monthly budget."
- This Associated Press story highlights the importance of teaching kids about money at a young age: "Financial literacy advocates say even toddlers can begin to learn about making choices at the store. By the time kids are in kindergarten, they should be introduced to the concept of money, and within a few years they should have been inside a bank and opened a savings account. Tweens can be taught to balance a checkbook, have some of their own money and be allowed to make choices about spending, saving, and charitable giving. Teenagers should have their own checking account and be introduced to investing issues."
- It's Protect Your Identity Week hosted by National Foundation for Credit Counseling (NFCC) and the Council of Better Business Bureaus (CBBB). This site provides some useful tips to prevent ID theft, which occurs over 10 million times a year. Protecting your identity should be part of any financial education curriculum.
- Wonder why financial literacy test scores continue to flounder despite the myriad resources now available and the increasing number of states requiring such courses for graduation? I stumbled across this study completed by two Human Ecology professors at the University of Wisconsin: "While 89 percent of K-12 teachers agree that students should either take a financial education course or pass a competency test for personal finance before graduating from high school, relatively few teachers believe they are adequately prepared to teach such topics, according to a study by two University of Wisconsin-Madison researchers...The study surveyed teachers on six personal finance areas: income and careers, planning and money management, credit and debt, financial responsibility and decision making, saving and investing, and risk management and insurance. Relatively few teachers reported feeling "very competent" in any of the six topic areas. Teachers felt most competent to teach in the content areas of income and careers, and in planning and money management, but even for these topics fewer than 20 percent reported feeling "very competent."
- Does a public commitment help when trying to dig oneself out of debt? Keep an eye on these five college students in this Money Makeover contest with winners to be announced in November (hmmm...seems like a short timeframe to make over one's finances, but anyway here is a link to the site for those interested).
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