CUNA Comment Letter

State of Financial Literacy

May 23, 2008

President’s Advisory Council on Financial Literacy
Office of Financial Education
Room 1332
Department of the Treasury
1500 Pennsylvania Ave, NW
Washington, DC 20220

RE:    State of Financial Literacy in the United States

Dear Mr. Schwab:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the President’s Advisory Council on Financial Literacy’s (Council) solicitation regarding the state of financial literacy in the U.S. and suggestions on how to improve it. By way of background, CUNA is the largest credit union trade organization in this country, representing approximately 90 percent of our nation’s nearly 8,400 state and federal credit unions, which serve more than 90 million members.

Summary of CUNA’s Views

CUNA supports efforts to increase financial literacy among the American public. In light of the current economic situation, financial education is now more important than ever to our country’s economic stability and future growth.

Discussion of CUNA’s Views

The primary objective of the President’s Advisory Council on Financial Literacy is to promote and enhance financial literacy among Americans. In order to achieve its goal, the Council is soliciting comments on the current state of financial literacy and recommendations on how it can be improved. CUNA is very supportive of the Council’s mission and appreciates the opportunity to offer our input to the Council from the perspective of the credit union community. CUNA’s policy regarding financial education is that we “support voluntary and government-supported efforts to improve the financial literacy of people of all ages.” CUNA partners with the National Endowment for Financial Education (NEFE) to provide financial literacy materials to schools in communities all across the country, and also provides credit union volunteers to teach courses in the classrooms.

Youth Financial Literacy

While financial literacy is important to those of all age groups, we believe that the most crucial demographic is our nation’s youth. We commend the efforts of the Council in targeting young people, such as MoneyMath and the National Financial Literacy Challenge. As mentioned above, CUNA is also very supportive of independent organizations, such as NEFE, that promote financial education.

The financial education of children and teenagers would best be accomplished by involving parents and teaching the children from an early age how to make good decisions about money.

Once in school, children will benefit from personal finance instruction in their everyday classes. While optional courses for older students is acceptable, it is important that younger students either be required to take a separate financial education course, or incorporate financial material into existing classes. High schools should mandate that at least some coursework in financial education be completed prior to graduation. More and more college students are accumulating large amounts of credit card and student loan debt while in school, and it is vital that they have some working knowledge of financial issues prior to going off on their own and being exposed to seemingly endless credit card offers.

Certification for teachers on the state level should include courses on financial literacy. It is important that those educating our nation’s youth have a very solid understanding of the material in which they are teaching. Additionally, since it will ultimately be up to the states to decide how to incorporate financial lessons into the classroom, it is important that the federal government take the lead in establishing minimum financial education requirements.

Financial Education in the Workplace

The importance of financial education in the workplace is second only to such education in the classroom. Financial illiteracy costs employers and the economy as well as individual workers. Research conducted by E. Thomas Garman, President, Personal Finance Employee Education Foundation, and others shows that employees concerned about their finances are less productive on the job. It is estimated that one of four workers experiences enough financial distress to affect job performance; this would certainly be true of individuals who experience problems making their mortgage payments for example. It serves the interest of employees and employers to improve workers’ financial literacy by providing workplace access to reliable information, education, and programs. That is why a number of credit unions offer such programs.

It is also important that employers at all levels and in all sectors pursue access to financial education for their employees. There is often the misconception that it is only certain workers who need such education.

Financial Access for Underserved Members

First generation Americans, new immigrants, and individuals in poverty have been identified as having a critical need for financial education.

By some estimates individuals without financial services in the U.S. totals 10 million people. Mere translation of financial education tools into foreign languages is an incomplete effort at best. Local, one-on-one financial education is both the most effective and the most costly service to provide. Collaboration at the local level with church groups, media, and community organizations is a prerequisite for improving access to financial institutions.

One in 12 families in the U.S. does not have an account at a traditional financial institution. That number is higher for poor people, where 25% of families earning less than $18,900 annually do not have a formal account relationship. Many of these individuals utilize check-cashing outlets.

The Consumer Federation of America (CFA), Washington, D.C., notes that these consumers do not understand how much they pay for those services. CFA’s survey on check-cashing found that it costs an average of $24.45 to cash a $1,002 Social Security check at a check-cashing outlet and workers spend an average of $19.66 every week to cash checks at such establishments valued at an average of $478.41.

Financial Literacy Research

New financial education materials appear often. However, many if not most of them, have not been scientifically evaluated for effectiveness. (The NEFE High School Financial Planning Program is perhaps the most notable exception, having undergone two full-scale studies since 2003).

Personal finance program developers should place more emphasis on evaluation, which should be integrated into program design from the beginning. Evaluation also should go beyond the simple pre-test/post-test measurement to look at the long-term effects of personal finance education on behavior change, decision-making, and wealth-building over years and decades.

Incentives for Saving

In today’s economic environment, it is harder than ever for families and individuals to save, yet accumulation of at least some wealth is essential to support a good quality of life. We encourage the Council to urge the federal government to provide further incentives in order to encourage savings.

Outreach and Awareness

A campaign to help and encourage parents to examine their own money values and take responsibility for modeling sound money management can go a long way in preventing bad spending habits of youth that can later ruin their chances for financial security as adults.

Parents who assume a role in educating their children about money will be more likely to insist that the schools include comprehensive personal finance education. Parents who take up this role early will raise children who are less likely to need remedial financial education in the classroom. Furthermore, these parents and their grown-up children will be more likely to recognize the need for continuing financial education and seek it out in the workplace and in the community.

Before closing, we would like to note how pleased we are that Mr. Cutler Dawson, CEO of Navy Federal Credit Union, and Mr. Ted Beck, CEO of NEFE, our strategic partner, are both on the Council. Thank you for the opportunity to express our views on what can be done to help improve the financial literacy in the United States. If you have questions about our letter, please do not hesitate to give Senior Vice President and Deputy General Counsel Mary Dunn or me a call at 202-508-6743.


Luke Martone
Regulatory Research Counsel