Q: You were recently appointed to the president’s Advisory Council on Financial Literacy. What is the mission of the group?
A: First and foremost, it is to improve access to financial education to the American public, in schools and in the workplace.
Q: How would you define financial literacy?
A: Financial literacy is an intimidating term and we have to be careful with it. I prefer the term financial education.
We would like people to have good, solid information throughout their economic lives. We need to have unbiased information so people can make informed decisions.
Q: How would you describe the state of financial literacy or education in the U.S.?
A: One of the things that the council has endorsed that will be put in place by the Treasury Department is a base-line study of the entire country. That has never been done. We have good anecdotal information about specific groups, but don’t have that solid baseline of information that says, this is where we are as a country.
Once we have that, we can gauge how effective we are in improving that baseline.
Q: But aren’t the fundamentals pretty simple: spend less than you make, and save? Why do so many people live on the edge?
A: There is a bigger question of why people put off doing things that are good for them. It goes into health, relationships, as well as finances.
People are often intimidated by finance. Most people don’t go home and say, I’m going to read a good finance book tonight. We have to figure out how to get people the message in a manner that is acceptable to them and in a time frame that works for them.
Q: Isn’t the most frequent message people receive one that can harm them long-term?
A: A lot of the messages are about instant gratification. Go ahead, you have earned it. There is a constant consumption message. People need to stop and ask, is this something I need or I want. If you need it, develop a plan where you can buy it and pay for it.
Q: Is there a link between our current housing crisis and poor financial decision-making?
A: One of the things I have found very disturbing is when people say, ‘I didn’t know what I was getting myself into’ or ‘I didn’t understand it.’ That is where effective education makes sense. If it looks to be too good to be true, stop and think about it.
Q: What are some things people can do to improve their financial situation?
A: Put together a budget you think you can live on and stick with it. That includes having savings and an emergency fund. Stop and try to understand the cost of credit. If I’m going to buy something, how long is it going to take to pay it off and what is the cost?
Same thing with a mortgage. Think out what is the worst possible thing that can happen and can I handle it. The great thing about finance is that time is on your side if you have a plan. We have built a lot of data and information into our websites and .
Q: What are some things NEFE does to promote financial literacy?
A: We are best known for the high school program that we have been sponsoring for over 20 years. It is active in all 50 states. Last year in Colorado, 100 high schools sponsored the program, with 9,000 students participating. Everything we do we provide for free. We partner with other programs providing financial content. We are doing a pilot program for colleges and universities. Good, sound financial advice is what we try to do.
Edited for length and clarity by Aldo Svaldi.
