Teaching financial literacy

Personal finance expert Beth Kobliner


Tess Vigeland: Financial system is getting a makeover as part of the new financial reform legislation. This includes the new Office of Financial Literacy in the Consumer Financial Protection Bureau. Sure, you're thinking, "Not another group to study on how bad the economy is." But can these studies actually help us in the long run? What are the financial basics we should all know?

Beth Kobliner, author of "Get a Financial Life" is here to answer those questions. Welcome back to the show, Beth.

Beth Kobliner: Great to be here Tess.

Vigeland: You know, it's been said that in Washington, commissioning a study is basically the equivalent of letting ideas go to die. Now, part of the legislation calls for a year-long study about financial literacy. Why do we need another study on this? Don't we know at this point that there's a lot of work to be done here.

Kobliner: Right. Well, the legislation does call specifically for two studies within this section on financial literacy and financial education. But they're very specific. One is a report that basically, just manual report that looks at what progress this Office of Financial Education is making. You know, how well are they improving the financial literacy of Americans, and I think that's a good thing. You know, looking at real metrics and real progress.

But the second study is investigating the feasibility of certifying expertise in terms of financial literacy. In other words, the House initially proposed that we offer, basically, financial counseling certification for community groups, and there's some sort of specific certification program. And then the SEnate pulled back and said, "Wait a second. This is just a small office, can we really do that?" And so that's what the controller of the (currency) is going to do. So I don't see this as study after study, sort of the academic halo of "where do we keep going?" and studying and studying. I see this as two very concrete studies that are much needed to figure out how do we attack the issue of financial literacy.

Vigeland: Well, if you were advising them, how would you say to get started on this kind of thing? I suppose, first of all, it's good that we're addressing the literacy issue, but how do you start tackling that when so many other organizations have already tried?

Kobliner: Working with the grassroots group that are out there already. You know, going back to President Obama's grassroots is the right decision, in terms, of getting the money out there to organizations that already do financial literacy. Getting it to the groups that are out there educating people. You know, at the point at which somebody is about to get a mortgage, making sure they understand what are they getting; at the point at which somebody is about to get a credit card, making sure they're getting unbiased information and they know what the interest rate is on their credit card.

The government earlier on this year did do a financial literacy study on what percentage of people understand what the interest rate is on their highest credit card. And astoundingly, one in three people don't know that interest rate.

Vigeland: What do you think would be the most effective way to get the basics of personal finance out to the public?

Kobliner: I think that often, you know, we're so trapped in this media-Internet world, and I think there's something to be said for human contact. I think when somebody finally gets that credit card, if it's a person they can interact with, or I mean, this new consumer agency is going to have a hotline for people to call with complaints, but also with questions. So if there's some sort of human contact that you can get that isn't a broker selling a stock, or isn't a mortgage broker pushing you toward a mortgage, I think that really makes a huge difference for people.

Vigeland: Beth Kobliner is the author of "Get a Financial Life." She is a long-time advocate of financial literacy, and we've been talking about the new financial reform bill. Also, a very good friend of show. Beth, always nice to have you on. Thanks so much.

Kobliner: Great to be here.

Log in to post4 Comments

We grew up learning this at Daddy's knee. Today's kids don't learn it at all. I would love to teach financial literacy to students in my area. How do I find or start an organization to sponsor me?

From my point of view, there are a few things thta we could do to vastly improve how people manage money.

1. High School - It is unbelieable that there is not a course in high school that teaches about credit, saving, investing et al and that the basic idea of spending less than you have always.

The number of adults, and I include myself here at least until recently, that do not understand this is shocking. Also as the recent financial meltdown has taught us - people need stong protections - and I work in the finanical industry.

Libraries would be good places to start. In fact before anyone even gets a loan or a credit card what about a course in credit management?

Can we include financial literacy training for members of Congress?

From my vantage point as a single mother, I would like to see at least these three areas receive attention:

1. Financial literacy for women. Too many women do not know the basics of managing their financial affairs or, if they are in a relationship, they cede responsibilities to their partner. Divorce, disability, widowhood can all bring confusion, anxiety, and sometimes economic catastrophe.
2. No child should get through school without the basics of financial literacy: how credit and debit cards work, compounding of interest, importance of credit reports/scores; potential burdens/benefits of loans for education; even such basics as the difference what you see on your ATM receipt and what is actually available to spend in your checking accout. (Few kids keep a check register!)
3. Prohibiting credit card companies from raising the credit limits on cards of minor children. I got my sons credit cards when they were in high school with a limit of $500 -- enough to "learn" on without getting in serious trouble. The card issuer raised the limit without notifying me.
Whatever training is provided, make it pragmatic, real-world, easily accessible for community groups to access, with lots of practice examples and downloadable teaching aids. But keep in mind, none of this will work without realistic standards to keep folks out of trouble: loan to income rules, income verification on loans, required down payments that give people some "skin in the game".

With Generous Support From...