financial literacy booklet-true color.indd - National Conference of State


A Primer for Policymakers


A Primer for Policymakers April 2005

By Heather Morton

Introduction American consumers have more credit options today than ever before. With the availability of goods and services at an all-time high, it is critical that people be educated about their finances. Many Americans find themselves deep in debt and not saving as much as they once did. Record numbers of homeowners are refinancing their mortgage loans to take advantage of the lowest rates in history, and college students receive many unsolicited credit card offers. In addition, record numbers of consumers are declaring personal bankruptcy—well above 1.5 million bankruptcies were filed in 2003.1 A higher income does not automatically trigger financial knowledge; even well-educated, higher-income consumers may live paycheck to paycheck because they lack the skills to budget or manage their money. Annual percentage rate, balance transfer fees, private mortgage insurance, reverse mortgage, prepayment penalties, balloon payments, and negative amortization are among the important financial terms that consumers should understand to make informed financial decisions in their lives. Recent surveys show that many Americans lack the basic financial knowledge necessary to spend their money wisely; save for the future; and manage money challenges such as a job loss, financing a college education, or a catastrophic injury. In a recent survey conducted on behalf of, more than half the 1,000 survey participants scored 67 or fewer points out of a total 100—the equivalent of a “D” or an “F” grade in school.2 Jump$tart Coalition for Personal Financial Literacy’s fourth biennial survey found similar results.3 Students in Jump$tart’s survey did a better job of answering questions about income and spending (answering 62.9 percent and 55.4 percent of these questions correctly, respectively) than they did about money management and saving (45.4 percent and 41.0 percent, respectively). What is financial literacy? At its core, the concept of financial literacy is money management knowledge and skills. A financially literate person is able to read, analyze and communicate about financial issues. This includes the ability to balance a checkbook, read and understand a contract, and plan for retirement and the future. Financial literacy is not a static skill; individuals need to be able to continue to gain new knowledge and skills as their circumstances and financial systems change. Today, consumers have numerous choices that affect their financial well-being as they select checking accounts, savings accounts, retirement accounts, credit cards, long-distance and local telephone services, Internet and broadband services, electric utility services, health care plans, and cellular telephone services, among other financial choices. Alan Greenspan, chairman of the Federal Reserve Board, recently noted, “Today’s financial world is highly complex when compared with that of a generation ago. Forty years ago, a simple understanding of how to maintain a checking and savings National Conference of State Legislatures

CONTENTS Introduction.......................................1 Financial Literacy for Students ...........2 Financial Literacy for Adults...............4 How Effective Are Financial Literacy Programs? .............................6 Legislative Policy Options ..................6 Conclusion.........................................8 Appendix. Recent State Legislation Regarding Financial Literacy ..............................................9 Notes ...............................................13


Financial Literacy

account at local banks and savings institutions may have been sufficient. Now, consumers must be able to differentiate between a wide range of financial products and services, and providers of those products and services.”4 Financial literacy is also part of any comprehensive strategy to help lower-income families build assets. The Pennsylvania Governor’s Task Force for Working Families concluded that, “ … a lack of financial training and education coupled with the absence of basic forms of asset protection like health and life insurance, can expose working families to serious and often preventable misfortunes, limit their opportunities to accumulate assets, hold back their upward mobility, and actually strip them of everything they’ve worked for.”5 Many groups are becoming involved to help consumers gain financial skills. Educators, community organizations and financial institutions are actively creating financial literacy programs so that consumers will be better equipped to make financial decisions. State legislators and other policymakers also are crafting policies to ensure that consumers gain the financial know-how to deal with the ever-increasingly complex financial markets. Not only do financial-savvy consumers help themselves, but they may also help keep the marketplace more efficient. In classic economic theory, rational and knowledgeable consumers provide the checks and balances that help to keep the unscrupulous out of the marketplace. Although educated consumers may help prevent fraud and other unscrupulous practices, financial literacy is not the only solution to fraudulent behavior. Financial literacy cannot replace consumer protection laws that address the unscrupulous in the financial market. North Carolina Commissioner of Banks, Joseph A. Smith Jr., said, “The imbalances in the marketplace can be corrected, if they are corrected at all, by a number of means. Governmental intervention is one such means; consumer financial literacy is another. Governmental intervention and consumer financial literacy are not alternatives, rather they complement each other.”6

Financial Literacy for Students Students may be a relatively easy audience to reach with financial literacy programs due to their required attendance in school and to graduation requirements. Financial education can be included in an economics course, a stand-alone personal finance course, or part of a consumer education or life skills course. At least 48 states and the District of Columbia include economics in their educational standards, while at least 17 states require students to take an economics course.7 At least 37 states have personal finance educational standards, many of them placed within the economic standards. At least seven states—Idaho, Illinois, Kentucky, Louisiana, New York, South Carolina and Utah—require students to complete a personal finance management skills course or consumer education course.8 Florida requires students to take a life management skills course to graduate. School-based financial literacy programs vary in several ways. One difference is whether financial education is mandated via state law through the curriculum. Personal financial literacy classes are not currently mandated in the majority of states. Fiscal constraints on public school systems and full curriculum requirements have made it difficult for most states to mandate financial education. However, state legislators in at least 13 states—California, Colorado, Connecticut, Indiana, Kansas, Michigan, Mississippi, Montana, Ohio, South Dakota, Tennessee, Texas and National Conference of State Legislatures


A Primer for Policymakers

Washington—have required education officials to develop financial education curricula or have encouraged inclusion of personal financial education in the public school curriculum. The Washington Legislature, for example, is taking an active role in developing a financial literacy curriculum. In 2004, the Legislature created a financial literacy public-private partnership to develop a definition of financial literacy to be used in the state’s educational efforts and to identify strategies to increase the financial literacy of public school students in the state. The public-private partnership is composed of up to four legislative representatives, one member representing the office of the superintendent of public instruction, one representing the department of financial institutions, four educators and up to four representatives of the financial services sector. A second difference in school financial literacy programs is the age at which schools teach financial literacy courses. As many as 14 states teach basic financial skills at the elementary school level. Although ongoing exposure to financial literacy concepts beginning in the early grades may be most effective, fiscal constraints may make teaching such courses in middle school and high school more feasible alternatives for states. A third difference in school financial literacy programs is whether the course is a separate course or integrated into an existing course. Groups such as the Credit Union National Association have teamed with the National Endowment for Financial Education to provide financial planning classroom materials and volunteer teachers, which allows for a separate financial literacy curriculum.9 School-based financial literacy courses also differ in their focus in teaching financial skills. Programs for elementary students generally are more conceptual in nature and include school savings programs that award prizes to students who open savings accounts. Some of these programs are structured as young investor clubs, where students are paid interest on their savings and receive quarterly statements. In addition, many banks and credit unions, in partnership with elementary schools, have created on-line programs that teach the fundamentals of saving and banking. Programs geared toward high school students focus more on skills rather than on the concepts of financial education. High school programs include life skills such as balancing a checking account and stock market simulation programs. School-based bank branches are another method used to help secondary school students learn real-life financial skills. Having a schoolbased bank allows bank staff members to teach the students how to run a bank, such as how to be tellers, record transactions and prepare marketing plans for the branch. Credit unions have been active participants in school-based facilities. At least 125 credit unions in 30 states operate student-run branches in 401 schools.10 Working in conjunction with educators, banks, credit unions and other financial institutions are contributing to improve financial literacy programs. According to a 2004 survey by the Consumer Bankers Association, 89 percent of 54 respondents are involved in running public school programs.11 The respondents included nine of the top 10 leading banks in America and 15 of the top 25 leading banks.12 Among the banks involved in public school financial literacy programs, 56 percent are the primary sponsors of these programs and 44 percent are involved in partnership or supporting ventures. In addition, credit unions have partnered with the National Endowment for Financial Education (NEFE) to distribute NEFE’s High School Financial National Conference of State Legislatures


Financial Literacy

Planning Program. This partnership has reached 3,300 schools and at least 262,000 students. In addition, 50 percent of the surveyed institutions also are involved in college-based financial literacy programs. Among those banks involved in college-level financial literacy programs, 57 percent of them are the primary sponsors, while 43 percent are partners or supporters of third-party programs. Because many of their students are incurring credit card debt, colleges and universities also are recognizing a need to help students learn financial skills. In 2001, Nellie Mae, an originator of student loans, found that 83 percent of undergraduate students have at least one credit card with an average balance of $2,237.13 Further, by the time they graduate, college students have an average of $20,402 in credit card and education loan balances. The study also found that students double their average credit card debt and triple the number of credit cards they carry by the time they graduate. Responding to the need for financial literacy, colleges and universities are including financial education courses. Ohio University, for example, has included financial education in its freshman orientation course.14 Along with time management, stress management, campus safety, and drug and alcohol use, freshmen are learning to manage their finances with information provided by the Ohio University Credit Union. In a resolution, Hawaii legislators requested that the University of Hawaii Board of Regents offer consumer credit seminars as part of freshmen orientation. To address the issues of rising debt among college students and the lack of adequate financial training and knowledge, legislators have proposed legislation to address credit card marketing to this demographic. Arkansas, Louisiana, New York, Pennsylvania and West Virginia have enacted laws to regulate marketing of credit cards to college students. Louisiana prohibits a credit card issuer from giving or offering any gratuity as an inducement for a student to read, review or consider material relating to a credit card application, unless the student has been provided a credit card debt education brochure. California, Hawaii, Louisiana, Missouri, New Mexico and Virginia have urged colleges and universities to study the effects of marketing credit cards to college students.

Financial Literacy for Adults According to a 2003 AARP national survey of consumers age 45 and older, individuals lacked knowledge of basic financial and investment terms.15 A little less than half the survey respondents reportedly were not aware that the Federal Deposit Insurance Corporation (FDIC) does not cover loss of money invested in a mutual fund. Only 41 percent of the respondents correctly answered that a “no-load” mutual fund involves no sales charge but does charge the consumer for maintenance fees.16 When presented with a list of possible sources, 45 percent said that they obtain financial advice from family and friends; media sources, such as TV, radio and newspapers; and banking professionals. Unlike students, it is more difficult to reach adults to provide them with financial education. First, adults tend not to be in easily accessible, organized groups. Also, to reach adults, financial literacy campaigns must take into account the adults’ different experiences, language, cultural differences, and work and family demands. In addition, adults’ learning styles differ from those of children in school–a generic approach may not work to educate adults. Adults generally are more interested in skills they can use immediately rather than in abstract conceptual materials. The question remains of how states can best provide continuing education for adults. National Conference of State Legislatures


A Primer for Policymakers

One method that organizations have used to reach such adults is consumer counseling and training associated with specific transactions, such as purchasing a home or a car. For example, 93 percent of banks surveyed by the Consumer Bankers Association require credit counseling in order for individuals to qualify for affordable mortgage lending programs.17 In an effort to combat predatory mortgage lending practices, financial institutions also have created education programs for specific audiences. In the survey, 30 percent of such programs in 2004 were directed toward low- and moderate-income individuals, 23 percent toward the general population, and 21 percent toward senior citizens. These consumer counseling and training programs also provide an opportunity to increase financial literacy among minorities and immigrants for whom English is not their primary language. Several states offer home ownership education materials in multiple languages. Pennsylvania, for example, offers counseling and training in English and Spanish, while Minnesota developed programs for its southeast Asian populations who speak Hmong and Khmer.18 Employers also can serve as a resource to help adult employees improve their financial literacy skills. The Federal Reserve Board developed a financial literacy initiative for its own employees.19 In 2004, the board held 12 “lunch and learn” employee seminars that focused on such topics as financial planning, college funding, estate planning, investing and retirement planning. The board also held two additional sessions specifically for younger employees to help them understand basic financial concepts and the benefits of saving at an early age. In addition, the board added a special section, “Managing Your Finances,” to its employee Web site. In developing this financial literacy initiative, the board determined that, to make a workplace financial education program successful, the program must base the education and communications on relevant life events such as marriage, buying a house, children and retirement. The program also must be dynamic, up-to-date and interesting and must be available in multiple formats, such as in-person sessions and on the Internet or Intranet. An incentive to provide such programs is that they benefit employers. In 2002, the Delaware Governor’s Task Force for Financial Independence found that, “ … [employees with basic financial knowledge can be better employees, as they spend less time on the job dealing with personal financial crises and have greater incentives to maintain employment.”20 Another way to increase financial literacy for adults is to find unconventional ways to reach adult populations. Reaching out to adult prison inmates who are studying for their general equivalency diploma (GED), the Maryland State Department of Education and the Maryland Correctional Education Program developed a curriculum to incorporate financial literacy into the GED coursework.21 Approximately 50 teachers will receive training and materials, based on a pilot program that was tested in 2004. The teachers can choose whether to use the financial education materials in their teaching. Credit unions in Maryland also are reaching out to inmates in the Prince Georges Correctional Center.22 The program teaches the inmates basic financial skills, including budgeting, creating savings, and dealing with financial institutions. In addition, organizations have had some success in reaching out through community groups to older adults to provide information about such issues as identity theft, mortgage refinancing and other services. In 2001, Delaware created a money management program that uses volunteers to help older people or those with disabilities to organize expenses and pay bills. This joint project between AARP and the state Department of Health and Social Services targets individuals who are at risk because of their inability to manage their financial affairs. The state Division National Conference of State Legislatures


Financial Literacy

of Services for Aging, and Adults with Physical Disabilities manages the program, screens and trains volunteers, and monitors volunteer/client accounts.

How Effective Are Financial Literacy Programs? As state legislatures continue to face tight budgets, programs that receive state and federal funding must increasingly demonstrate their effectiveness in order to continue to receive funding. Although the number of financial literacy programs has increased significantly and such programs now are offered by many different organizations, research to measure the success of these programs has not kept pace.23 One tool is the U.S. Department of Treasury’s Office of Financial Education’s performance measurements, included in its Eight Elements of a Successful Financial Education.24 One challenge in determining the effectiveness of financial literacy programs is defining what qualifies as a “successful” program. Is success measured by how well the information is presented to the individuals or whether the training leads to the achievement of a specific outcome? Adding to the confusion is the disconnect between knowledge and behavior. Despite all the training and information available, individuals may not always act in their best financial interest. The desire to purchase the newest products may outweigh people’s best intentions to save money.

Legislative Policy Options Given the popularity and proliferation of financial literacy programs and campaigns, what are other options—in addition to passing laws—for legislators to address this issue? Here are some options for policymakers to consider: •

Personalized flyers to send to constituents and to use in events. Many state agencies and organizations have flyers and pamphlets that legislators can personalize and distribute to constituents through mailings, town hall meetings and other constituent contacts. Another option for legislator involvement is to participate in activities such as housing fairs, which often are used to reach out to low- and moderate-income individuals who may be buying their first homes. Fairs and other activities often occur in April, which several states have designated as “Financial Literacy Month.” Legislators’ involvement in financial literacy efforts demonstrates to constituents the importance of this issue.

Build partnerships between private and public organizations. State legislators can help build partnerships between private and public organizations to encourage these groups to work together on financial literacy efforts for school and college age individuals, and for adults. New Jersey, for example, created the New Jersey Financial Literacy Awareness Network (NJFLAN) through the state Department of Banking and Insurance. The network is a statewide distribution channel that aggregates and provides easy access to existing financial education programs and materials through a learning center display and resource guides, both online and in book version, to children and adults.

Federal and state financial literacy initiatives for adults. The federal Financial Literacy and Education Commission established under the Financial Literacy and Education Improvement Act of 2003 as part of the Fair and Accurate Credit Transactions Act of 2003—could focus increased attention on the financial literacy needs of baby boomers and older people. National Conference of State Legislatures


A Primer for Policymakers

Establish interagency councils to coordinate efforts. Interagency councils could be used to coordinate existing and future efforts to increase financial literacy. These councils could include organizations and agencies that serve older persons, such as financial service providers, consumer groups, researchers, educators and government agencies, such as a state Department of Aging.

Increase funding for financial education efforts. Funding and assistance for student financial education efforts can be increased through the Excellence in Economic Education Act of 2001, created through the federal No Child Left Behind Act. The Excellence in Economic Education Act promotes economic and financial literacy for K-12 students.25 The objectives of this program are to: 1) increase students’ knowledge of and achievement in economics; 2) strengthen teachers’ understanding of economics; 3) encourage economic education research and development, disseminate effective instructional materials, and promote best practices and exemplary programs that foster economic literacy; 4) help states to measure the effects of education in economics; and 5) leverage and expand increased private and public support for economic education partnerships at the national, state and local levels.

Create state-level office to coordinate state financial education policies. A state-level office dedicated to coordinating and promoting the state’s financial education programs and policies could further a state’s financial education policies, similar to an office created in Pennsylvania. The Office of Financial Education will help state agencies work together and with community-based and private-based sector partners to create and maintain a clearinghouse with an accurate and up-to-date inventory of help available throughout Pennsylvania.26 The Governor’s Task Force found “ … a multitude of resources already exist to help Pennsylvania’s working families build assets, increase incomes, improve financial literacy, and avoid financial abuse, but awareness of these resources is low among both working families and the professionals who provide or coordinate social services.”27

Include financial education in assistance programs. States could include financial education efforts for low-income families through the Temporary Assistance for Needy Families (TANF) program. Legislatures could recognize participation in financial literacy training as an approved work activity meeting the 30-hour per week work requirement for TANF recipients, similar to the state of Illinois. TANF funds can be used to support financial education strategies. States could also increase funding for individual development account (IDA) programs, which often include financial education as part of participation requirements.

Financial literacy professional development for teachers. Investing in professional development for teachers and encouraging and motivating teachers to incorporate financial literacy into their lesson plans will help further financial literacy efforts. The Pennsylvania Governor’s Task Force concluded that, “ … it cannot be assumed that all teachers have a full understanding of financial principles themselves. Professional development opportunities must be made available to teachers to enhance their own knowledge and skills.”28

Sponsor additional research to improve the effectiveness of financial literacy programs. The private sector, foundations, federal and state governments, and others could support additional research aimed at improving the effectiveness of financial literacy and consumer counseling programs, particularly with regard to obtaining outcomes that lead to better money management and wealth-building behaviors and skills. National Conference of State Legislatures


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Conclusion Financial literacy is a broad term that has multiple meanings, depending on an individual’s situation. It may mean learning how to create and manage a household budget, learning how to invest money for retirement, or participating in one-on-one coaching and counseling to figure out how to buy a house or start a business. It is also part of an overall strategy to increase economic security for lower-income families. Financial education, just like reading and writing, affects the well-being of every individual. It also affects the economic and social well-being of every community and, ultimately, the overall strength of the nation’s economy. Although state legislators have been active in proposing legislation to increase financial education programs in schools, legislators can become involved in many other ways to advance the financial literacy of all their state’s citizens.

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A Primer for Policymakers


2005 State Legislation on Financial Literacy



A.B. 1492 Allows a school district, in providing instruction in economics, to include instruction related to the understanding of personal finances.

S.B. 11 Authorizes the state Board of Education to establish personal financial management education programs within the Department of Education for grades kindergarten through 12.

A.C.R. 6 Declares April 2005 as Financial Literacy Month to raise public awareness about the need for increased financial literacy.

Florida H.B. 431 Creates the Financial Literacy Council; provides legislative findings; provides purposes; provides for membership; provides for meetings, procedures, records, and reimbursement for travel and per diem expenses; provides powers and duties of the council; provides for resources of the council; requires annual reports to governor and Legislature. H.B. 559 S.B. 1188 Establishes the Prosperity Campaign Office to be housed in Workforce Florida Inc.; provides duties of the office; provides for establishment of the Florida Prosperity Campaign Council; provides membership and responsibilities; requires development and offering of a high school financial literacy course; requires each Prosperity Campaign to connect low-wage workers to economic benefits programs and to offer additional services. S.B. 1120 Creates the Financial Literacy Council; provides legislative findings; provides purposes; provides for membership; provides for meetings, procedures, records, and reimbursement for travel and per diem expenses; provides powers and duties of the council; provides for resources of the council; requires annual reports to governor and Legislature.

S.B. 1353 Directs the Board of Education to add a mandatory one-semester economic and financial management literacy course to the public high school curriculum.

Illinois H.B. 171 Amends the Deposit of State Moneys Act. Provides that the treasurer may accept a proposal from an eligible institution that provides a reduced rate of interest if the institution agrees to expend an amount equal to the reduction for the delivery of credit union products and services and financial literacy programs to lowincome people or economically disadvantaged areas of the state. H.B. 468 Amends the Deposit of State Moneys Act. Provides that the treasurer may accept a proposal from an eligible institution that provides a reduced rate of interest if the institution agrees to expend an amount equal to the reduction for the delivery of credit union products and services and financial literacy programs to low-income members of certain credit unions. Provides that the proposal and acceptance shall be contained in an agreement between the state treasurer, the institution, and a third party, if applicable, and the agreement shall restrict the use of the funds to the prospective delivery of the foregoing products, services and programs.

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S.B. 632 Requires schools to provide instruction in personal financial responsibility to students in grades 9 through 12.

H.C.R. 24 Encourages a mandated high school course in personal finance economics.


Kentucky H.B. 227 Creates a new section of KRS 158 to permit financial literacy instruction to be included in courses currently offered in public schools; creates a new section of KRS 158 to establish the financial literacy trust fund in the state treasury and identifies possible fund uses; clarifies that the fund may receive state appropriations, gifts, grants, federal funds, and any other funds, both public and private; identifies that the fund shall be a trust and agency account and made available solely for the purpose and benefits of the Kentucky financial literacy trust fund program; requires the Kentucky Board of Education to promulgate administrative regulations related to disbursal of funds; identifies the Kentucky Department of Education as administrator of trust fund.

Maine L.R. 1227 Encourages personal and family financial management education.

Maryland H.J.R. 11 Urges county boards of education to integrate the principles of basic personal finance into the curriculum and instruction established for their local school systems; and urges county boards of education to implement specified standards as part of a student’s eligibility to graduate from a public high school and receive a high school diploma.

H.B. 664 Establishes an individual development account program in the Office of Economic Development. The purpose of the program is to match savings and to provide financial literacy and credit counseling in order to provide eligible individuals the opportunity to establish special accounts that may be used: a) to purchase a first home; b) to capitalize a small business; or c) to fund postsecondary education or training.

New Jersey S.B. 1403 Requires a public institution of higher education to establish a financial management program for its students if the institution enters into an agreement for the direct solicitation of credit cards to its students. The financial management program is to be funded by the credit card issuers and conform to the guidelines for the program established by the Department of Banking and Insurance. If a student has not successfully completed the financial management program prior to entering a credit card agreement pursuant to a direct solicitation, the student would not be liable for any interest on the debt pursuant thereto.

New Mexico H.B. 155 Makes an appropriation to New Mexico State University to develop partnerships with the public schools to promote financial and economic literacy.


New York

S.F. 168 Relates to higher education; requires student financial management proficiency at public postsecondary institutions.

A.B. 316 Establishes that instruction in financial education be provided to pupils in grades nine through 12; establishes what should

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A Primer for Policymakers

be included in such curriculum, including the basics of financial planning, budgeting, borrowing, interest rates, personal insurance policies, etc. A.B. 1360 Provides for the registration of cash-dispensing machines operated by entities other than banking organizations and establishes the “Improving Financial Literacy Fund,” consisting of money collected from civil penalties collected from civil actions pursuant to the cash-dispensing machines article of the banking law; requires disclosures of fees and other information to cash-dispensing machine users.

H.B. 3282 Applauds the newly formed South Carolina Jump$tart coalition for personal financial literacy and recognizes April 11-15, 2005, as “South Carolina Financial Literacy Week.” S.B. 122 Expands the educational standards and core academic areas to include certain basic skills required to function independently as an adult, including counting money and making change, understanding and applying percentages and interest rates, and balancing a checkbook.

H.B. 47 Requires that every high school include in its requirements for graduation instruction in personal economics.

S.B. 501 Enacts the Financial Literacy Instruction Act of 2004, to provide for the development or adoption of a curriculum for local school boards to teach financial literacy, and provides for the establishment of a fund to receive public and private contributions for financial literacy instruction.




S.B. 378 Requires the state Board of Education to adopt standards for personal financial economics; requires one-half unit or set of competencies of personal financial economics for high school graduation.

Oregon S.B. 748 Directs the Department of Education to prepare financial education program. Allows school districts to implement financial education program.

South Carolina H.B. 3020 Enacts the Financial Literacy Instruction Act of 2004, to provide for the development or adoption of a curriculum for local school boards to teach financial literacy, and provides for the establishment of a fund to receive public and private contributions for financial literacy instruction.

H.B. 492 Relates to personal finance education as a requirement for graduation from public high school. H.B. 763 Relates to a financial literacy curriculum requirement in certain public high schools located in the Texas-Mexico border region. H.B. 900 Relates to the requirement that workforce development programs provide training in financial literacy. S.B. 498 Relates to the development of a financial literacy program for consumers.

Virginia S.B. 950 Requires instruction in economics education and financial literacy in public middle and high schools. The Board of Education is required to develop and approve objectives for economics

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education and financial literacy in grades six through 12. The principles of the American economic system and financial literacy also must be systematically infused in the Standards of Learning and in career and technical education programs. However, these objectives are not required to be included in the Standards of Learning assessments. In addition, to provide for experiential learning and practical application of economic and financial literacy principles, public schools may establish on-site banking programs for students. In addition, public institutions of higher education must make provisions for the promotion of the development of student life skills through inclusion of principles of economics education and financial literacy within an existing general education course, the freshman orientation process, or other appropriate venue. The provisions of §§22.1-200.02 and 22.1-208.2: 3, which provide for instruction in certain mathematics and finance objectives, and the Banking-at-School Partnership Program, respectively, have been incorporated in this bill and have been repealed.

financial literacy public-private partnership account for the purposes of RCW 28A.300.465. Appropriates the sum of $25,000, or as much thereof as may be necessary, for the fiscal year ending June 30, 2007, from the general fund to the Washington financial literacy publicprivate partnership account for the purposes of RCW 28A.300.465. Declares that the amounts in this provision are provided solely for the purposes of RCW 28A.300.465.

Wyoming S.J.R. 5 Recognizes financial education’s value to the state of Wyoming and its citizens.

Washington H.B. 2152 Provides that, to the extent funds are appropriated or are available for this purpose, the superintendent of public instruction and other members of the partnership created in RCW 28A.300.455 shall make available to school districts the list of identified financial literacy skills and knowledge, instructional materials, assessments and other relevant information. Encourages each school district to provide its students with an opportunity to master the financial literacy skills and knowledge developed under RCW 28A.300.460. Declares that, for the purposes of RCW 28A.300.455, 28A.300.460, and this act, it is not necessary to evaluate and apply the office of the superintendent of public instruction essential academic learning requirements or to develop grade level expectations. Appropriates the sum of $25,000, or as much thereof as may be necessary, for the fiscal year ending June 30, 2006, from the general fund to the Washington National Conference of State Legislatures


A Primer for Policymakers

Notes 1. American Bankruptcy Institute, U.S. Bankruptcy Filings 1980-2003 (Business and NonBusiness, Total) Chart; D=12324, January 1, 2005. 2. Financial Literacy Survey 2004;, April 6, 2004. 3. Jump$tart Coalition for Personal Financial Literacy, 2004 Personal Financial Survey of High School Seniors Executive Summary (Washington, D.C.: Jump$tart Coalition for Personal Financial Literacy, September 2004). 4. Federal Reserve Board Chairman Alan Greenspan, “Financial Education” (presentation at the annual meeting of the Jump$tart Coalition, Washington, D.C., April 2003). 5. Governor’s Task Force for Working Families, Dollars and Sense: Realistic Ways Policymakers Can Help Pennsylvania’s Working Families (Harrisburg, Pa., January 2005), 10. 6. Joseph A. Smith Jr., “Financial Literacy, Regulation and Consumer Welfare,” North Carolina Banking Institute Journal, no. 8 (April 2004): 96. 7. National Council on Economic Education, Survey of the States: Economic and Personal Finance Education in Our Nation’s Schools in 2004 (New York: NCEE, 2005), 7. 8. Ibid. 9. Colleen Kelly, Financial Literacy* in Schools: The Credit Union Commitment, (Washington, D.C.: Credit Union National Association, 2002). 10. Ibid. 11. Consumers Bankers Association, 2004 Survey of Bank-Sponsored Financial Literacy Programs, (Washington, D.C.: Consumers Bankers Association, 2004), 26. 12. Ibid., 7. 13. Nellie Mae, Undergraduate Students and Credit Cards: An Analysis of Usage Rates and Trends (Washington, D.C.: Nellie Mae, 2002). 14. “Ohio U’s Frosh Orientation Adds Financial Ed Info,” CUNA News Now (Washington, D.C.), January 14, 2005. 15. AARP, Beyond 50.04: A Report to the Nation on Consumers in the Marketplace (Washington, D.C.: AARP, 2004). 16. AARP, 2003 Consumer Experience Survey: Insights on Consumer Credit Behavior; Fraud and Financial Planning (Washington, D.C.: AARP, 2003). 17. Consumers Bankers Association, 2004 Survey. 18. David Lawson, Financial Literacy & Homeownership Education: Building Assets for Minority and Immigrant Communities, (Washington, D.C.: National Conference of State Legislatures, 2003). 19. Lynn Fox, Federal Reserve Personal Financial Education Initiatives Federal Reserve Board of Governors, Federal Reserve Bulletin, P449-450 (Washington, D.C., 2004). 20. State of Delaware Governor’s Task Force for Financial Independence, Final Report (Dover, Del., June 2002), 27. 21. Kathleen Johnston Jarboe, “Maryland Prisoners to Get Personal Finance Education,” The Daily Record (Baltimore, Md.), January 12, 2005. 22. “Sarbanes Staff Learns About CU’s Inmate Program,” CUNA News Now (Washington, D.C.), September 9, 2004. 23. Sandra Braunstein and Carolyn Welch, Financial Literacy: An Overview of Practice, Research, and Policy Federal Reserve Board of Governors, Federal Reserve Bulletin, P 449 (Washington, D.C., 2002). 24. U.S. Department of the Treasury, Office of Financial Education, Eight Elements of a Successful Financial Education Program (Washington, D.C., 2004). 25. Excellence in Economic Education Act of 2001, U.S. Code, vol. 20, secs. 7267-7267f (2001). 26. Governor’s Task Force for Working Families, Dollars and Sense, 14. 27. Ibid., 15. 28. Ibid., 17.

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Acknowledgments The author gratefully acknowledges the many individuals who helped make this publication possible. Members of the NCSL Foundation for State Legislatures’ Banking Partners Project provided overall guidance and support for this publication. Jo Anne Bourquard of NCSL contributed to and provided ongoing advice and support throughout the project. Leann Stelzer edited and coordinated printing of this report. The cover was designed by Bruce Holdeman. Although others contributed to the report, any errors or oversights are solely the responsibility of the author. For their generous support of this project, NCSL gratefully acknowledges the NCSL Foundation for State Legislatures, AARP, American Financial Services Association, Community Financial Services Association of America, Credit Union National Association, and the Mortgage Bankers Association.

National Conference of State Legislatures


A Primer for Policymakers


The National Conference of State Legislatures (NCSL) is the bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. NCSL provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system. NCSL has three objectives: • To improve the quality and effectiveness of state legislatures. • To promote policy innovation and communication among state legislatures. • To ensure state legislatures a strong, cohesive voice in the federal system.

NCSL FOUNDATION BANKING PARTNERS PROJECT Banking is a part of the fabric of the economic life for each and every state. Unique in regulation, the American banking system consists of separate state and federal chartering and regulation of banks, thrifts and credit unions. States and the federal government act independently to charter, supervise and regulate financial institutions for their citizens benefit. This project provides an opportunity for state legislators, legislative staff and Foundation for State Legislatures Partners to address a variety of banking and financial services issues through meetings and through the development of both print and electronic products.

National Conference of State Legislatures


Financial Literacy

William T. Pound, Executive Director 7700 East First Place Denver, Colorado 80230 (303) 364-7700 444 North Capitol Street, N.W., Suite 515 Washington, D.C. 20001 (202) 624-5400 © 2005 by the National Conference of State Legislatures. All rights reserved. Item #017202 ISBN 1-58024-391-6 Price: $20

National Conference of State Legislatures


financial literacy booklet-true color.indd - National Conference of State

FINANCIAL LITERACY A Primer for Policymakers NATIONAL 1 CONFERENCE of STATE LEGISLATURES A Primer for Policymakers April 2005 By Heather Morton I...

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