At a hearing Monday at the Robert J. Dole Institute of Politics, Rep. Dennis Moore said improved financial literacy among Americans is essential to preventing a second financial crisis.
The House Financial Services Subcommittee on Oversight and Investigations held the hearing as part of its “End of Excess” series that it organized to examine key issues uncovered by the financial crisis. Monday’s hearing, titled “Empowering Consumers: Can Financial Literacy Education Prevent Another Financial Crisis?” was the third and final hearing of the series.
“Will financial literacy, on its own, prevent the next financial crisis?” asked Moore, chairman of the subcommittee. “Perhaps not, but I know if we don’t do a better job promoting financial education, that will only increase the likelihood of another crisis.”
Eleven witnesses, including state officials, educators and a recent KU graduate, presented written testimonies on financial literacy programs from across the state.
The educational programs ranged from stock market simulation games for K-12 students to financial classes available to parents and married couples. Almost all 11 testimonies emphasized continued financial literacy education — from childhood through adulthood.
“There is a lack of understanding of our financial system out in the country,” Moore said. “It would be a great gift to future generations in this country if we educate our children and grandchildren about this.”
Assistant Vice Provost Kathryn Nemeth Tuttle presented a testimony focused on Student Money Management Services, a new educational outreach program designed for KU students.
Nemeth said financial literacy for college students was a significant concern across the country. A study by the KU Financial Literacy Task Force found that the average financial literacy score for KU students was 3.26 on a scale of one to six, with one representing no understanding and six representing complete understanding. More than 80 percent of students in the study said it was important to learn more about money management, credit card and debt management, savings and investing.
“I think up until this time we haven’t paid as much attention as we should to students becoming independent about financial manners,” Tuttle said.
Despite Monday’s hearing and the its discussions about emerging financial literacy programs, many students still struggle to manage their personal finances. High costs and low incomes remain facts of life for college students, which make financial loans and credit cards all the more appealing.
A report by the National Center for Education Statistics shows that the combined cost of tuition with room and board has nearly doubled during the past decade. To help cover these rising costs, students increasingly rely on student loans and easily acquired credit cards to fit the bill.
A study by Sallie Mae, the nation’s biggest student lender, found that 30 percent of college students pay for tuition with their credit card. On average, students have 4.6 credit cards with a median debt of $1,645.
The rate at which many students are willing to incur debt far exceeds their understanding of what they’re getting into when they sign up for credit cards or a student loan. Witnesses at Monday’s hearing said they hoped that would soon change.
“We all have to make financial decisions sooner or later, especially in college,” said Taylor Petty, a recent KU graduate who testified at the hearing. “The whole point of financial literacy is that it’s something we’ll use throughout our lives.”