Campaign attacks 'financial illiteracy'

Campaign attacks 'financial illiteracy'

June 4, 2002
The Philadelphia Tribune
by Ayana Jones

There is a strong need for Americans - particularly low-to-moderate- income individuals -- to become financially literate.

Those were the words echoed during a "Building Wealth, Not Debt" financial conference hosted by the Federal Reserve Bank of Philadelphia and the Consumer Credit Counseling Service of the Delaware Valley (CCCS). Held in the bank's auditorium at Seventh and Arch streets, the conference was attended by representatives of financial institutions and community organizations.

"As a nation, our personal income is rising, but unfortunately, it is not keeping pace with spending for too many of us. To address this situation, consumers must have access to information, and be able to understand and use it," said Bank President Anthony M. Santomero. He added that broad-based economic education programs for children would be a way to address the problem of financial illiteracy in the future.

The Philadelphia Federal Reserve currently has a successful pilot program in one Delaware Valley high school and is planning to expand the program to schools throughout Pennsylvania and New Jersey.

Dr. John P. Caskey, professor of economics at Swarthmore College and visiting scholar in the bank's research department, stressed that lower-income households are highly vulnerable to practices such as predatory lending because many receive their financial information on an informal basis.

A January 2000 study conducted by the Federal Reserve has found that approximately 9.5 percent of U.S. families manage their finances without access to savings or checking accounts of any kind.

Meanwhile, Stephen Brobeck, executive director of the Consumer Federation of America, focused on the importance of people setting aside something as savings. He noted that a federal survey of consumer finances has found the typical American household holds under 10,000 in net financial assets.

Brobeck also pointed to the following as barriers that discourage people from saving money: economics, stipulations from bank institutions that require customers to open accounts with a minimum balance and the American culture.

"Society places a great deal of importance on spending," Brobeck explained.

He also stressed that a major barrier is psychological -- many lower-income people do not believe that they are able to save money.

Brobeck noted that it was important to have a savings plan in place because those funds could help cover emergencies, capital investments such as a home, education or business, and make it possible to retire and have something to supplement one's Social Security income.

To address the issue, Brobeck touted "America Saves" - an initiative launched last year by the Consumer Federation of American Foundation to act as a clearinghouse and resource for local, grassroots savings programs that could be organized in communities around the nation. The initiative is geared towards low- income individuals.

"America Saves" was first launched in Cleveland where it is referred to as Cleveland Saves.

Since the inception of "America Saves," other cities such as Charlotte, Phoenix and Indianapolis have organized community savings programs.

Participants in "America Saves" receive information on savings options, access to certified financial planners, an American Saver newsletter and a membership card.

Now efforts are being made to bring the initiative to the Philadelphia area, with the assistance of the CCCS of the Delaware Valley.

An initial meeting about the creation of a Philadelphia/Delaware Valley Saves program is scheduled for 9 a.m. June 4 at the CCCS Main Office at 1515 Market St., Suite 1325.

Patty Hasson, president of the CCCS of Delaware Valley, says the goal is to bring programs such as this to the community to get to the root of the problem.

And there's another financial initiative that was presented to conference attendees. The "Get Checking" program is an education course that was designed to give cash consumers a second chance at obtaining a checking account. The program is also open to people who have never had a checking account.

The program was launched by a coalition of banks, credit unions, social service agencies, lenders and utilities coordinated by the University of Wisconsin. Participants of "Get Checking" receive six hours of training in basic banking skills and financial principles. Upon completion of the course, a certificate is granted which allows the individual to open a qualifying checking or savings accounts at a participating financial institution.

Consumer Credit Counseling Service of Milwaukee, UW-Extension and 12 sponsoring financial institutions have piloted the program since August 1998.

The eFunds Corp. is a partner of the "Get Checking" program. It is the owner of ChexSystems - a new account verification network which helps to prevent fraud and facilities access to financial services.

Bonnie Breezee, manager of the Consumer Affairs for eFunds Corp., says many individuals are unable to open new checking accounts because of mismanaging their accounts in the past.

"We really need to find ways to help consumers manage their funds responsibly," Breezee said.

"So many consumers get in trouble because of mismanagement."

Andy Frishkoff, the interim director of community and economic development of Greater Philadelphia Urban Affairs Coalition (GPUAC), was also on hand to talk about GPUAC's Delaware Valley Financial Literacy Campaign.

GPUAC and the Delaware Valley Financial Literacy Coalition (DVFLC) will engage community organizations, churches and other community institutions to educate 300 consumers in asset and debt management with the use of a curriculum developed by the National Endowment for Financial Education (NEFE).

The campaign is slated to kick off this summer in Bristol, Bucks, Chester, and Delaware counties and then expand into Philadelphia and other surrounding communities.

Frishkoff noted that while it is important to get information out to the community,-30- financial institutions should be willing to market easy, affordable products to the low-income community.

"We need to make sure that our communities are places where banks want to operate," he added.