Mr. Chairman, I want to thank you for holding this important hearing on the issue of financial literacy.
It’s an issue that was a concern of mine long before I became a member of the Senate, and I applaud you for making this issue a priority.
I would be remiss if I didn’t take this opportunity to thank my colleagues, Senators Akaka and Enzi – who cosponsored a financial literacy amendment I authored that was included in ESEA ("The Elementary and Secondary Education Act"), the education reform bill that the President recently signed into law.
Providing financial education to our nation’s young people must be a priority. Indeed it is time for our schools to make a more concerted effort to prepare our children for success in new ways – including their future financial decision-making.
Today, it is as important for young people to learn about staying out of debt, maintaining good credit and building up their savings as it is for them to learn about geography, science and history. I might add that I personally was never too good at the latter.
While we have taken an important step in getting financial literacy included in ESEA, we still have a long way to go. Despite our best efforts, the divide between those who lack basic financial literacy skills and the "financially savvy" continues to grow.
We can, and must, do more.
A recent nationwide survey by the JumpStart Coalition for Personal Financial Literacy found that a mere 36 percent of surveyed high school students could correctly answer basic personal finance questions – and only 33 percent of these students viewed financial issues as strongly affecting their lives. These responses demonstrate the need for us to continue to encourage financial education in both elementary and secondary schools.
The amendment we included in the ESEA bill will help towards that end by allowing elementary and secondary schools to apply for federal funds to promote financial education as part of the basic educational curriculum. But Mr. Chairman, as you seek to make clear through these hearings, financial literacy is not just an issue for our youth. Financial literacy should be a lifelong goal.
It is essential for families, and it is crucial to the success of families moving off of welfare and into work. If we truly expect to move these families to financial independence, we must give them the tools they will need to make that transition. We must address financial education on a national level, but help to make it a priority locally.
While our federal welfare (TANF – Temporary Aid to Needy Families) focuses on moving families off cash assistance and into work, it fails to provide recipients with the tools they need to maximize their earnings and manage their expenses in order to achieve financial stability.
I plan to introduce legislation that would do just that, by requiring states to provide financial education as part of their welfare programs.
In fact, I would echo remarks recently made by Chairman Greenspan, who said:
"Educational and training programs may be the most critical service offered by community-based organizations to enhance the ability of lower-income households to accumulate assets."
In addition to the needs I have previously outlined, we must also seek to expand on programs like the First Accounts Initiative, a program established by former President Clinton that is geared towards reducing the number of unbanked families in America. Today, approximately 12 million households remain outside the financial mainstream.
We need to emphasize financial education, and more specifically consumer education, for our seniors, who are often targeted by scam artists and others who seek to profiteer from their life’s work. It’s unconscionable that financial exploitation is the largest single category of abuse against older Americans. Education can help reverse this alarming trend.
And I hope that my colleagues will join me support of legislation I am developing that will focus on consumer and retirement education for our seniors. This will particularly help senior women, who have substantially lower Social Security and pension benefits than men do because of the work years they lose serving as primary caregivers, according to the Older Women’s League (OWL).
And there is more to do.
We must seek to provide financial education for those who are the targets of unscrupulous predatory lenders. These individuals seek to the strip equity from the unsuspecting homeowner and also seek to take advantage of many first-time homebuyers.
Finally Mr. Chairman, one of the things that the Enron debacle has crystallized is the need for better investment education for our workers. The freefall of the company’s stock hurt thousands of the company’s employees by financially devastating their 401(k) accounts. Many of these individuals lost their entire life savings. If Congress is to address the issue of pension reform, we must ensure that these accounts are properly diversified, and provide investment education for workers where the adviser does is independent and free of conflict.
As I said earlier Mr. Chairman, we have done a great deal. But a great deal more need to be done. I want to thank you again for holding these hearings and for your commitment to ensuring that financial literacy becomes a national priority.