Finegold and Eldridge: Charting a Course to Financial Literacy

By Senators Barry Finegold (D-Andover) and James Eldridge (D-Acton) - Today’s youth are bombarded with a multitude of financial options and responsibilities at an increasingly young age. One out of every three teenagers has a credit card, and even more have an ATM card.

Yet many teenagers are ill-equipped to make informed decisions about financial matters. They don’t understand the fundamental principles of money management and the larger economy. As a result, teenagers are at a disadvantage when making important first financial decisions: buying a car, taking part or full-time employment, and using credit cards.

New college freshman have an average debt of $1,500 on personal credit cards. Four out of 10 Americans admit they are living beyond their means, primarily because of their misuse and misunderstanding of credit. Americans under 25 are filing for bankruptcy faster than any other age group.

At the same time, financial transactions are becoming more and more complicated. As we saw with the recent collapse of the housing market, those lacking financially literacy can be steered into risky loans and mortgages by unscrupulous lenders.

It’s clear we need to do a better job of teaching our children financial education basics, from how to create a budget or manage a credit card to how to apply for a loan and understand a credit score.

Building on the leadership of former State Senator Sue Tucker, we have filed legislation in the Massachusetts State Senate this session that would integrate financial literacy lessons into the current math curriculum of all students in the Commonwealth, from kindergarten through grade 12. This will help give our students the tools to plot a course toward strong financial footing.

The components of the personal financial literacy program outlined in the bill include: understanding loans, interest, credit card debt, and online commerce; the rights and responsibilities of renting or buying a home; saving, investing and planning for retirement; and banking and financial services. Additionally, the bill creates an advisory committee to investigate and study the development of curriculum and guidelines.  We believe that by incorporating this material into the math curriculum, there will be a seamless transition for students.

Ensuring that our graduating seniors are financially literate is critical to the Commonwealth’s economic future. In light of the economic problems facing our nation, we are reminded of how important it is to prepare our children to navigate an increasingly complex financial world. Finding their way in this marketplace will require more financial savvy than ever before. By teaching children the financial education basics in school, we will help them make educated financial decisions in the future, preventing future bankruptcies, foreclosures, and unmanageable debt.

This is a result that’s good for society as well as for individuals. Over the long term, the investment we make in teaching children financial literacy now will help strengthen our economy, prevent future economic crises, and improve economic security for all Massachusetts residents.

Importantly, financial education programs have a proven track record of helping working families. In Massachusetts, 7,707 foreclosure deeds were recorded in 2009 through October. Foreclosure-prevention education offered by community based organizations, such as Lawrence CommunityWorks in Lawrence, MA, have done significant work in improving local foreclosure rates. Of the 388 people who received foreclosure counseling from Lawrence CommunityWorks in 2009, only 5 foreclosed on their homes—that’s less than 1 percent of participants. Introducing similar education through this legislation into our children’s curriculum will magnify and increase their financial success rate in the future.

We have heard loud and clear from dozens of teachers, financial institutions and students that the long-term health of our economy will be determined by how well we educate young people today. In an increasingly complex financial marketplace, we need to set a strong financial course for our youth. It is our hope that our colleagues in the House of Representatives and the Senate acknowledge the fundamental need for financial literacy programs and enact “An Act Establishing a Financial Literacy Curriculum” during this legislative session.