Financial literacy is all the rage these days.
A little more of it might have ameliorated the worst effects of the recession currently beating up the economies of many countries. The roots of the financial meltdown had to do with people ignoring the rules of finance, be they high-priced executives in penthouse offices or the guy on the street smitten—and bitten—by a mortgage deal too good to be true.
The EDSA Group, which sells financial education products, and the nonprofit Louisiana JumpStart Coalition For Personal Financial Literacy, which promotes awareness, think it’s not too late to have an impact the next time around. The groups are attacking the same problem with different approaches.
Ken Uffman knows how hard it can be. He organized what became the Louisiana JumpStart Coalition in the late 1990s after retiring as president and CEO of the Credit Bureau of Baton Rouge.
In the early days, the group concentrated on K-12 students, later added postsecondary and now is focusing on employees in the workplace as well as the “unbanked and underserved” market—people without a bank account and vulnerable to making bad choices with their money.
Uffman says JumpStart’s new efforts are the result of attempts to reach young people that haven’t had the impact JumpStart, now an affiliate of a national coalition, had hoped it would. In effect, financial-literacy education aimed at schoolchildren doesn’t work, so the organization is going after them as adults. Despite JumpStart’s best efforts, U.S. high-schoolers are becoming less financially literate.
College-age individuals would be wise to learn more as well, since so many of them fall into financial instability because of credit-card and student-loan debt, Uffman says, noting more students drop out of college because of credit-card debt than academic failure. If it’s necessary for a teenager to take a driver’s test to get a license, the same should go for taking out a $50,000 loan for school, he says.
One could argue parents should be the ones teaching kids prudent money-management practices, but many parents also are ill-equipped, Uffman says.
“The problem is how do you find these people?” he says. “How do you find the dropouts if you don’t get them in schools?”
To reach out to the unbanked, JumpStart wants to conduct pilot projects at eight sites around the state, including East Baton Rouge Parish. There’s no shortage of good information out there, but getting it under people’s noses is a challenge.
“We’re setting up meetings to use the bully pulpit of the mayors to help call attention to resources that are out there,” Uffman says. “Obviously what has happened in the last 20 years is the financial-services industry has just exploded. When I was young, we had a local bank. You didn’t hear of payday lending. There were no credit cards. You had a mortgage loan with the local bank with a 30-year fixed rate.”
Now there are nine major credit-card companies with thousands of affiliates, including alumni associations.
“You see why this initiative is moving,” he says. “But you need patience because you’re not going to solve it overnight.”
Susan Windham, CEO of the EDSA Group, says the company grew out of an initiative by a division of Exxon in the bleak mid-1980s to find a registered investment adviser to provide money-management, debt and insurance advice to Exxon employees—the ones who weren’t laid off. That investment adviser was Shobe Financial Group.
In the early 1990s, it became a licensee of a product called Money 101, which eventually was refined into what is today EDSA’s flagship product: Money Basics. EDSA’s products cover everything from advice for people nearing retirement age to people who are drowning and need help now.
“In today’s population, that’s a big percentage—people who are in trouble or just really need to get a grip on spending and stop relying on credit cards,” Windham says.
She says employers are paying a lot more attention to financial literacy amid indications for increasingly financially stressed employees: wage garnishments, loans against 401[k] plans and calls from creditors.
“They’re seeing those signs that their employees are really struggling right now,” Windham says.
EDSA has roughly 100 commercial clients, though the company also provides services for higher-education institutions, with three university clients outside the state [none in Louisiana]. EDSA recently contracted with the Louisiana Community and Technology College System to provide financial education to typically low-income students at the system’s 46 campuses.
For companies, the best reason to invest in financial literacy might be employee health, which has a direct impact on productivity and health-care costs. A financially stressed employee tends to be less well than a financially secure one, according to several studies.
Can financial literacy education really make a difference in people’s habits, considering the plague of ignorance and/or indifference that contributed to the country’s current economic mess through the subprime loan disaster and foreclosure crisis?
“I think it’s absolutely doable,” Windham says.
Nan Davis, vice president of human resources for AWC Inc., a Baton Rouge-based manufacturers representative and distributor for instrumentation automation and process-control equipment, made EDSA’s Good Money Habits program part of her company’s wellness program. The company’s employees earn points toward extra vacation time by participating.
AWC, which implemented the program about 18 months ago, pays about $700 a year for the services, which Davis considers worth the cost if it leads to healthier employees. The point, she says, is to reduce the company’s health-care expenses, though employees also get the benefit of being financially smarter and perhaps even healthier as a result.
“We want everybody to be healthy—financially, physically, mentally, spiritually,” Davis says. “It all works together.”
