By Sen. Kay R. Hagan (D-N.C.) - 09/14/09 09:54 PM EDT
In June, I introduced my first bill as a United States senator, the Financial Literacy for Students Act of 2009. This bill will incentivize states to incorporate personal financial literacy into their curriculums, beginning in the sixth grade and continuing until high school graduation. Passage of this legislation will help young people better understand the major financial decisions they are regularly asked to make, such as applying for credit cards, securing student loans, taking out a mortgage or managing a budget. The bill also gives educators the flexibility to incorporate financial literacy into school curriculums using their own creativity and innovation. And it mandates that at least 80 percent of the funding go to classroom learning, with the remaining 20 percent available for professional and curriculum development.
Alarming results from recent studies confirm that our students are not prepared for adult financial decisions. A recent Harvard Business School study found that only one-third of adult respondents were able to understand compound interest or how credit cards work. These findings are not surprising considering personal debt in this country is greater than the national debt, much of it owed to credit card companies.
Financial literacy education should begin at home, but many parents lack personal finance skills. This bill creates a program for school districts to provide parents with financial literacy training and assistance, which will benefit the entire family.
This legislation also requires the U.S. Department of Education to coordinate with the Federal Reserve’s current financial literacy program. We should utilize the Federal Reserve’s expertise to teach students to manage money. The bill also builds on the Education Department’s Excellence in Economic Education program, which awards grants to nonprofits that promote personal finance and economics education. These partnerships will improve the quality of financial literacy education as we expand its reach.
The economic turmoil across the country underscores the need for formal financial literacy education. Our world economy is increasingly complex and consumers face a vast array of financial products. Banks no longer just serve communities through loans and checking and savings accounts. They now offer sophisticated loans, credit options and savings instruments. In Congress, we have an obligation to ensure these products are fair to consumers, but we also must arm young people with knowledge about our 21st century economy and the tools to smartly manage their money from the start of their career through retirement.
I am proud to build on my work in Raleigh by advocating for financial literacy education in the United States Senate. I am working with my Senate colleagues this year to advance this important issue and will push for its inclusion in any overarching education reform initiative that Congress considers.
Hagan is a member of the Senate Health, Education, Labor and Pensions Committee.