Making the Case for Financial Literacy

12 Reasons why your credit union should offer financial education

1. Fulfill our mission. It’s consistent with credit unions’ ‘people helping people’ philosophy.

2. Meet a need. Bankruptcies are at record highs, and studies show that financial competence levels of high school graduates have fallen dramatically.

3. Improve member relations. You’ll enhance service to unique segments of your membership, such as seniors, youth, etc.

4. Create smarter consumers. Financially savvy members will use your products and services more effectively.

5. Prevent charge offs and member bankruptcies.

6. Enhance community relations. Establish valuable ties with local schools, community groups and others.

7. Improve brand awareness. Position your credit union as the local source for financial information and expertise.

8. Create cross-selling opportunities. Dialog with members will help staff discover financial needs your credit union can satisfy.

9. Create publicity opportunities. Sharing your efforts with local media is a great way to tout your commitment to members and the community.

10. Protect your pocketbook. Consumer bankruptcies alone are said to cost each American family $550 in inflated costs passed on by retailers and other creditors.

11. Develop staff. School visits and classroom presentations provide excellent training opportunities for developing staff leadership potential.

12. Revitalize your membership. The more young consumers know about making wise financial decisions, the more likely they'll choose credit union membership.

A collection of current personal finance statistics

*Numbers after each statistic refer to Sources listed at bottom.

Financial Literacy Education:

Of the 4,000 students who took the Jump$tart personal finance survey in 2002, 68.1% received failing scores. (21)

Only 15% of students surveyed said that they had taken a portion of a course (at least a week) in money management or personal finance. (21)

Only 21% of students between the ages of 16 and 22 say they have taken a personal finance course through school. (2)

Only 26% of 13 to 21 year olds reported their parents actively taught them how to manage money. (2)

Only 7% of parents say their child understands financial matters well (2)

94% of students ages 16-22 say they are likely to turn to their parents as a financial information source. (2)

Entrepreneurship is much less integrated into the curriculum in the U.S. Just over a thurd of the states include the subject of entrepreneurship in their K-12 educational standards, and only a handful require it to be included as a component of a high school course required for graduation. (43)

30% of youth report that their parents rarely or never discuss saving and investing with them. 47% say their parents rarely or never discuss household budgeting with them (2).

61% of parents say that parents and schools should share the responsibility for teaching children about financial education (2).

Research has shown that as little as 10 hours of personal financial education positively affects students spending and savings habits. (10)

Research shows that an individual who attended high school in a state that possessed a personal finance education mandate (and was thus exposed to personal finance in school) achieved roughly one-year’s worth additional net worth when compared to individuals who did not attend school in states with mandates. (40)

A Consumer Reports survey of 12-year-olds found that 28% didn’t know that credit cards are a form of borrowing, 40% didn’t know that banks charge interest on loans, 34% didn’t know that you can’t tell how good a product is by how much it’s advertised. (24)

One third (33%) of employees increased their contributions to their retirement savings plan after having received financial education (35)

40 states have personal finance standards or guidelines (up from 34 in 2004), 28 states with standards require them to be implemented, 9 states require testing of student knowledge on personal finance content and 7 states require students to take a personal finance course to graduate. (43)

American Teenagers:

A study of 1,065 teens found that 21% of 18- and 19-year-olds have credit cards. (47)

As a cohort, teens spent over $172 billion in 2001, equal to Mexico’s yearly exports. (1)

Average expenditures: $104/ week; $5,408/year (1)

Teens surveyed by Teenage Research Unlimited reported spending 98% of their money, rather than saving it. (1)

Children’s spending has roughly doubled every ten years for the past three decades, and tripled in the 1990s. (23)

More than 1 in 5 youths ages 12 to 19 have their own credit cards or have access to parents’ credit cards, and 14% have debit cards. (1)

40% of students are likely to buy a pair of jeans (or something similar) they really want even if they do not have the money to pay for it. 22% percent would pay for it with a credit card. (2)

One in three carry credit cards, even more have an ATM card (4)

High school graduates stand to earn over $1 million in adulthood-without adjusting for inflation (5)

Nearly half of all high school students nationwide have a part time job (16)

50% of high school graduates do not go to college and enter the workplace directly. (20)

Of the 6,000 students who took the Jump$tart personal finance survey in 2006, 62% received failing scores with 60% being the lowest passing grade. (21)

College Students:

While teens believe when they get older that they will earn an average salary of $145,000, in reality, adults with a Bachelor's Degree earned an average of $54,689 in 2005. (46)

Overall, average workers between the ages of 25 and 34 must spend 25 cents of every dollar earned on debt repayments. (45)

55% of college students acquire their first credit card during their first year of college, and 83% of college students have at least one credit card. (11)

45% of college students are in credit card debt, the average credit card debt being $3,066. (11)

Undergraduate students carry an average of three credit cards (6).

A 2007 survey reported that only 45% of teens know how to use a credit card, while just 26% understood credit-card interest and fees. (46)

Graduating students have an average of $20,402 in combined education loan and credit card balances. (6)

The average 21-year-old in the U.S. will spend more than 2.2 million in their lifetime. (49)

20% of graduating college students have $10,000 or more in non-school related credit card debt. (26)

An increased number of college student borrowers feel more burdened by their education debt, with about 25% of the borrowers perceiving themselves as having significant problems (6)

People in the 18 to24 age bracket spend nearly 30% of their monthly income just on debt repayment - double the percentage spent in 1992 (10% of net income is a recommended amount for debt obligation). (48)

Students who came from low-income families (defined as Pell Grant recipients) report feeling more burdened by their debt than non-Pell recipients, when controlling for all other factors. This is a change from previous studies when there was no significant difference in attitudes between low-income and non-Pell recipients. (6)

28% of students with a credit card roll over debt each month. (7)

Only one in three teens know how to read a bank statement, balance a checkbook and pay bills. Barely one in five had an idea how to invest. (46)

University administrators state that they lose more students to credit card debt than to academic failure. (8)

Only 59% of college graduates agree that the benefits of incurring student loans are worth it overall. (6)

Students double their average credit card debt-and triple the number of credit cards in their wallets-from the time they arrive on campus until graduation. (6)

In 2001, the credit industry issued more than 5 billion solicitations to consumers, including college students. (18)

By the time they reach their senior year, 56% of students carry four or more credit cards, with an average balance of $2,864. (44)

Credit card companies usually offer credit limits to college students between $500 and $3000, with higher interest rates than non-students, between 18% and 20%. (25)

The median debt level among card-carrying undergraduates rose to $1,770 in 2001 from $1,236 in 2000. (37)

U.S. College students borrowed almost $47 billion in student loans during the 2001-2002 school year. (38)

Students borrowed an average of $16,100 for education at a public four-year institution and $18,000 for a private four-year school during the 1999-2000 school year. (39)

50.8% of college-age adults agree with this statement: “I have experienced repeated, unsuccessful attempts to control, cut back or stop excessive money use.” (34)

64.8% of college-age adults agree with this statement: I experience a mood change (high or low) just before or after a shopping event. (34)

American Families:

General:

The average family with school-aged children spends $483 on back-to-school items each year. (41)

40% of Americans say they live beyond their means. (20)

Approximately 10,000,000 Americans, the ‘unbanked,’ are not using mainstream, insured financial institutions. (35)

Half of all Americans are living paycheck to paycheck. (19)

About 20% of U.S. households, representing 22.2 million families are "unbanked" - they don't use mainstream, insured financial institutions. (52)

Nearly 5% of consumers are late with their credit card payments. (14)

Median pre-tax household income fell by more than $900 from $43,162 in 2000 to $42,228 in 2001. Income dropped everywhere but the top. (19)

Life expectancy in the US recently reached a record high, with an average lifespan of 74.1 years for men and 79.5 years for women. (32)

One in four women currently retires on an income below the poverty level. (33)

Americans shelled out more than $24 billion in credit card fees in 2004, an 18% increase over the previous year. (15)

Over the next 40 years, the number of women over 85 is expected to at least triple, with 3/4ths of this population single, divorced, or widowed. (33)

The net worth of the average middle-class American household after accounting for debt is less than $10,000. (31)

The US has the lowest personal savings rate of any major industrialized nation. (36)

Debt:

The average household with debt carries approximately $10,000 to $12,000 in total revolving debt and has 9 credit cards. (21)

Outstanding non-secured consumer debt rose from $805 billion in 1990 to $1.65 trillion in 2001. (13)

The percentage of income used for household debt (payments, including mortgages, credit cards, and student loans) rose to the highest level in more than a decade in 2001 and remained at 14% in 2002. (13)

48% of credit card owners only pay their minimum monthly payment each month. (30)

Credit card spending jumped 8.1% in the first half of 2002.

66% of Americans don’t pay off their entire credit card bill each month. (25)

In 2001, the credit industry issued more than 5 billion solicitations to consumers. (18)

Average U.S. credit card debt per household is on the rise: from $2,985 in 1990 to $8,562 in 2002, with an average interest rate of 14.71%. (15), (27)

Christmas 2001 was the highest level of consumer debt in US history. (19)

Savings & Investing:

The national average credit score is 692. (42)

The personal savings rate as a percentage of GDP decreased from 7.5% in the early 80’s to 2.4% in 2002 During World War II, Americans were saving more than 24%. (12)

More than half of American families are not saving enough to preserve their standard of living in retirement.

The average 50-year-old has less than $40,000 in personal wealth. (2)

In 2005, savings rates dipped to minus 0.5%, something that hasn't happened since the Great Depression in 1932 and 1933. A negative savings rate means that Americans spent all their disposable income and dipped into past savings or increased their borrowing. (54)

The average American retires with only enough savings to provide about 60% of former annual income. (2)

Between 1983 and 1998, 2/3rds of the defined benefit or traditional pension plans in the US were terminated. (17)

More than half of American workers between the ages of 45 and 54 did not have any kind of retirement account in 1998. Data compiled in 2000 showed half of those in the 55 to 64 age range had balances of less than $33,000. (22)

69% of Americans plan to work in their retirement years. (28)

There are nearly 7,000 mutual funds to choose from. (29)

About half of adults say they are concerned they have not paid enough attention to managing their finances as they sould have and almost half are concerned they don't know enough about financial planning. (55)

Bankruptcies, Defaults and Foreclosures:

The median home price has risen 26% in the past five years while young adults' income has gone up less than 10%. (53)

Bankruptcy filings for those in the 18- 25-year age group were at an all time high in 2000- numbering almost 150,000, which is a tenfold increase in just five years. This is the fastest growing age range for bankruptcies). (4)

More young adults filed for bankruptcy than graduated from college in 2001. (36)

Non-business bankruptcy filings increased again in 2002 totaling 1,539,111. (9)

The number of 18- to 24-year-olds declaring bankruptcy has increased 96% in ten years. (50)

Non-business bankruptcy filings accounted for the overwhelming majority (97.6%) of all bankruptcy cases filed in calendar year 2002. (9)

Home foreclosures in 2002 reached the highest rate in 30 years. (11)

Mortgage delinquencies have surged to their highest level since 1992.

The 2007 U.S. Foreclosure Market Report shows a total of 2,203,295 foreclosure filings - default notices, auction sale notices and bank repossessions - reported on 1,285,873 properties nationwide during the year, up 75% from 2006. (51)

SOURCES:

1. Teenage Research Unlimited, 2001

2. ASEC

3. National Longitudinal Survey of Youth

4. Louisiana State University Agricultural Center

5. NEFE, 2001

6. Nellie Mae, 2002

7. Nellie Mae, 2000

8. Utah Mentor, 2003: The Voice Digital news

9. American Bankruptcy Institute, 2003

10. NEFE, 1998

11. Senate Resolution 48, 2003

12.Bureau of Economic Analysis (NIPA), 2003

13. Federal Reserve, 2003

14. The Nilson Report

15. CardWeb.com

16. Financial Literacy 2010

17. EBRI, 2002

18. Consumer Federation of America

19. John Bryant, Silver Rights Movement

20. Fort Worth Business Press, 2002

21. Jump$tart Coalition

22. Lakeland Ledger, 2002

23. Northern Virginia Parent, 2003

24. Consumer Reports

25. Centre Daily Times, 2002

26. Milwaukee Journal Sentinel, 2003

27. NFCC, 2002

28. AARP, 2002

29. Moneycentral.com, 2002

30. VISA, 2000

31. Consumercredit.com, 2002

32. US Department of Health and Human Services, 2002

33. Investing for Women, 2002

34. MyVesta, 2002

35. The Bureau of National Affairs, 2003

36. ABA Education Foundation

37. ABC News, July 2003

38. The College Board

39. Sally Mae

40. Stanford University, National Bureau of Economic Research, June 1997

41. Home and Family Finance Resource Center

42. Consumerinfo.com, 2007

43. National Council on Economic Education, 2007

44. Washington Post, 2007

45. "Strapped: Why America's 20 and 30 Somethings Can't Get Ahead," Tamara Draut, 2006.

46. Charles Schwab Teens and Money Survey, 2007

47. Junior Achievement, 2005

48. Generation Broke: The Growth of Debt Among Young Americans

49. Share-Save-Spend.com

50. Richmond Credit Abuse Resistant Education (CARE) Program

51. RealtyTrac.com, 2008

52. Center for Financial Services Innovation (CFSI), 2007

53. "Generation Debt," 2007

54. U.S. Commerce Department, 2006

55.The Harris Poll #22, 2007