Mr. Speaker, I thank the gentleman for yielding me the time. Mr. Speaker, I rise today in strong support of H. Res. 578, which my colleague the gentleman from Texas (Mr. Hinojosa) and I introduced to designate April as Financial Literacy…
Mr. Speaker, I thank the gentleman for yielding me the time.
Mr. Speaker, I rise today in strong support of H. Res. 578, which my colleague the gentleman from Texas (Mr. Hinojosa) and I introduced to designate April as Financial Literacy Month. We did so in order to raise the public awareness about the importance of financial education in the United States and the serious consequences that come when young people and adults lack basic understanding of personal finances and economics.
Today, 60 percent of preteens do not understand the difference between cash, checks, and credit cards. We need to teach basic financial literacy skills so that they can understand the difference. But financial literacy is only part of the problem.
It is equally important they understand basic economic concepts, such as supply and demand, opportunity costs, what drives interest rates, and other economic principles. Why? Well, it is because financially literate students may learn what the credit card is, but the lesson will be meaningless if they do not understand the concept of compound interest.
Just look at the pay-off. Financial education, including economics, has been linked to lower delinquency rates for mortgage borrowers, higher participation and contribution rates in retirement plans, improved spending and savings habits, higher net worth, and more positive attitudes towards money.
If our young people learn how to manage money, credit, and debt, they can become responsible workers, heads of households, investors, entrepreneurs, business leaders, and citizens. It is through financial education these young consumers will learn to capitalize on the choices and flexibility that this new world has created. And financially literate children grow up to be financially savvy adults. And we need more of them.
Today, more than 42 million Americans participate in 401(k) plans. But a 2002 retirement confidence survey found that only 32 percent of workers surveyed have calculated how much money they will need to save by the time they retire. And less than one-third of those surveyed are confident in their ability to make the right financial decisions for themselves and their families. One-quarter of those workers, over 10 million Americans, have done no specific financial planning.
Many programs already exist in both the public and private sectors to address economic education and financial literacy; but no matter what their specific target, they all recognize that the most effective time to impart basic financial and economic knowledge is during a student's formative years through the K through 12 education system.
Many States have introduced outstanding financial literacy programs for children. In my home State of Illinois, State Treasurer Judy Baar Topinka created the Bank At School program, which helps children learn the fundamentals of money management through the operation of an in- school bank. Schools are partnered with financial institutions which conduct a monthly bank day at the school where students open savings accounts and make regular deposits.
I believe that these kinds of programs provide the guidance that is desperately needed; but we need more, and we need them now. For instance, while 40 States have set standards for personal financial education in 2000, only 31 States renewed their standards in 2002. Of these 31 States, only four States, Idaho, Kentucky, Illinois, and New York, implemented a course that covers personal finance during a student's K through 12 education. In 2002, Jump$tart released a survey that showed high school seniors know even less about credit cards, retirement funds, insurance, and other personal finance basics than they did 5 years ago. This is a trend that we must reverse.
With only seven States currently recognizing financial literacy month, there is obviously a great deal of work to do. But if we take the time to take on this challenge, we can begin to turn things around and excite students about becoming the next generation of investors.
Mr. Speaker, the state of financial literacy among our children may not garner much in the way of headlines, but it is an issue nonetheless that should command our attention. While it is a problem that is serious and urgent, it is one that can be solved through education. This body would like to call special attention to that need during the month of April. It is our duty to help our youth succeed in today's increasingly sophisticated world of finance.
We must continue to keep the pressure on in terms of public awareness of the problem. I hope that we will use this month as a springboard to raise public awareness about the importance of financial education in the United States.
I want to thank my distinguished colleague and friend, the gentleman from Texas (Mr. Hinojosa), for his strong support and cosponsorship of this resolution. I would also like to thank the chairman of the Committee on Government Reform, the gentleman from Virginia (Mr. Tom Davis), and especially the gentleman from Utah (Mr. Cannon) and the gentleman from Illinois (Mr. Davis), also members of the Committee on Government Reform, for managing this resolution and the gentleman from California (Mr. Dreier) for his long-term work on this issue.