posted by admin on Oct 1

Calling All to Financial Literacy!…..

Richard had graduated from high school in 2007; he was a pretty smart guy and got into a state college. He left for his first year in the fall and I did not see him again until the next summer.

“How did it go Richard?” I asked, he said he could not go back to school because he had taken four credit cards he had been offered on the first day of school and had maxed them out. ” On what,” I asked. “Important stuff like pizza, music, electronic stuff… you know the stuff I need to be cool. My parents helped me with my tuition and all my regular budget needs, but I did not have much left to live on, the credit cards were so easy to get and they came with a free t-shirt. The credit card companies are now chasing me, every day they threaten to take me to court. My parents say I have to stop and clear this debt, so I have to work full-time to pay them off and then I can return to school,” he said.

Richard told me this story a short time before the announcement of the failure of the housing market and sub-prime loan crisis. When I asked Richard what kind of interest rate he was paying, that look on his face said it all, this poor soul had no clue, he too had gotten “sub primed”. Because of the lack of credit history payments, he received the highest interest rate and he was now going to pay way more than he had borrowed.

The Jumpstart Coalition has met many people like Richard who failed in the management of their first consumer credit experience, luckily for Richard, his parents made him stop and clear the debt before he established bad financial management habits. Richard seems to be the exception, most young people do not have parents who make them stop and clear debt. According to the Jumpstart Coalition “most young people stumble through their lives learning financial literacy by trial and error.”

People like Richard and the sub-prime loan consumers, give indication of a sense of urgency for financial literacy education, like no other time that I can remember. We have to reform our Education system to include mandatory curriculum on the essentials of financial literacy and managing money – and everybody in the system should be prepared for ‘real life’ financial situations.

For persons who are out of the education system and need financial literacy training, non-profits are desperately needed to step up and think about offering these type of programs. There is some good information about the financial literacy concept in the Assets for Independence (AFI) program, which provides five-year grants to nonprofit organizations — including faith-based organizations — and government agencies, “that empower low-income families to become economically self-sufficient for the long-term.”

Assets for Independence grantees provide financial education training on money management issues, and assist participants to save earned income in special accounts that are matched, sometimes, four dollars to each one dollar and are called Individual Development Accounts (IDAs). Participants use the IDAs to accumulate funds with the goal of acquiring a first home, post-secondary education, or starting up or expanding a small business. The Federal Office of Community Services, within the U.S. Department of Health and Human Services, administers the program. The average grant award is about $300,000 for a five-year project, matching monies are required. Current AFI programs are found throughout the United States; however, there are not enough locations to address the financial literacy crisis.