Are We Winning the Fight for Financial Literacy?
Podcast Title: Are We Winning the Fight for Financial Literacy?
Podcast Series: Financial Literacy Boot Camp
Video and illustrations available on our YouTube channel here
Questions/Issues We’ll Address on this Episode:
The Question–“Are We Winning the Fight?” (2:25)
What drives or influences our spending decisions? (5:30)
The influences that marketing has on us are undeniable. We are constantly bombarded with the message of CONSUMPTION to, if not drive decision making, definitely influence our decision making.
What is US consumer spending?(8:00)
Domestic consumption of goods and services is near 70% (per the Bureau of Economic Analysis or the BEA). This is measured by PCE or “personal consumption expenditures”. How much of that do you think is a result of the “Marketing Machine’s” influence?
What are the Facts? (9:40)
So how many people actually learn the basics around cash flow management, budgeting, saving or investing in high school? or even college? Here are some sobering statistics…
- Per the WSJ, the US ranked 14th in a 2015 global study conducted with a grade of just 57%
- As of May 2016, only 17 states require high school students to take a course in personal finance.
- Another independent study that about 1/3 of students took a personal finance course in college
Two Articles from WSJ I reference:
Another Independent Study:
Past Problems (12:20)
I think the most notable problem of the last decade was the US Housing crises where would-be homeowners were SOLD the idea through marketing that homeownership was good (which it is) regardless of your level of income and financial situation. We needed more educated consumers back in the early 2000s (when was the bill passed?) that could have navigated the relaxed lending standards that allowed them to secure mortgages they couldn’t afford. (What was the debt-to-equity ratio or the home ratio 1 or 2 back then compared to what it should be?)
Current/Future Problems (15:15)
Have we learned from our mistakes? I don’t think we have or at least our children haven’t. The next domino could indeed be something that is ironically enough, “in the name of education”–student loans. Student loan debt is #2 on the list behind mortgages in the consumer credit market. Per the St. Louis Fed, the number of student loans outstanding has increased 300% since 2006.
This all points to a problem of lack of education efforts towards financial literacy to keep consumers ignorant as to the consequences of their purchase decisions.
- Start with earlier, more relevant education to younger students (my wife as a school teacher);
- Financial services industry needs to take a more proactive to educate through pro-bono work;
- Post-secondary lending standards need to be raised to stop the bleeding
#financialliteracy #finance #financialplanning #financialeducation #advice #financialadvisor #debt #studentloans #finlit #money
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Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.
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