Thank you. I am Richard Cordray, the first Director of the Consumer Financial Protection Bureau. Over the years, financial education has become a passion that I have pursued at the local, state, and now federal levels. It is a privilege to be invited and to serve on this Council.
At the Consumer Bureau, we are committed to helping consumers make sound financial choices. We are doing all we can to protect people by ensuring that consumer financial markets work better for them – are transparent, reliable, and fair. But we also recognize that the best form of consumer protection is self-protection, which means helping people avoid problems in the first place and knowing how to address problems when they do occur.
But this has proven to be a hard problem in our society. Although it is important for parents to talk to their children about money from an early age, many find it difficult or uncomfortable to do so, leaving our young people starved for information. So we need to begin by recognizing just how rarely families actually engage in these discussions.
This is a fundamental problem for anyone who cares about the direction of this country. Young people who lack the skills to make effective financial decisions will find it harder to become productive and capable citizens. They will incur unnecessary debt, miss opportunities to save money, and develop a poor credit history. These problems will block them from opportunities and resources to improve their futures. We are enrolling them in the “school of hard knocks,” with no reason to think they will avoid repeating the same mistakes others made before them.
We have an opportunity to see that America does better by its children. Now more than ever, as we emerge from the deepest financial and economic crisis of our lifetimes, people need the know-how to manage the ways and means of their lives. The choices they face in the financial marketplace – with instruments like mortgages, credit cards, auto loans, student loans, credit reporting, and more – are increasingly complex. Many consumers use the “Tell Your Story” feature of our website to describe their lasting regret that they did not know more at the time they made important financial decisions.
The most obvious way to create a more financially capable nation is to insist on having financial education in every one of our schools. In my opinion, this is an imperative we cannot afford to ignore or defer. Last year, we issued a report on advancing K-12 financial education. The report presents five policy recommendations that build on the great work already done by many of you and your colleagues. Let me briefly restate them here.
Our first recommendation is that financial education should begin at a young age, should be made a priority as students approach graduation from high school, and should continue to evolve through the various stages of adulthood. When we do not teach children about personal finance – about managing household budgets, saving for the future, or making informed decisions about larger investments in an education or a home – we are failing them in a very shameful and costly way. We can do this with integrated curricula in our schools, so the benefits of compound interest are understood in math class, economic costs and risks are taught in social studies class, and essay topics in English class may cover how we use money, how we protect our money, or how we can take control of our financial lives to achieve our goals.
Second, we recommend that as part of youth financial education, students should practice financial management through experiential learning. Regardless of whether they are simulating a banking experience, playing a computer game that hones financial decision-making skills, or following the progress of the stock market, they will learn more effectively from this experience.
Third, we must engage and support those teachers who are interested in teaching personal financial management. We need to ensure that teachers have the support they need. We want them to have access to training and incentives to take part, such as continuing education credits or need-based travel stipends. We are developing teacher training resources through the Bureau and partnering with others to do more in this area.
Fourth, in addition to equipping teachers with the training they need to teach financial skills, we also recommend integrating financial education concepts into standardized tests. Doing so would increase incentives for educators to teach these topics and present an opportunity to measure and track the performance of students on financial education content. We have been working on this issue with those in charge of writing the tests.
Fifth, though providing financial education in schools is critical, there are also enormous benefits when that education is present in the home. We need parents to be as involved as their children are in learning to master the concepts of personal financial management. Parents help set expectations, and research has shown that if parents engage their children by establishing a savings account for them, these children are seven times more likely to attend college than those without a savings account. Affecting how families approach financial education will not be easy, but the presentation of financial education in the schools will be a further stimulus to parents.
I look forward to working with all of you to help our young people gain the financial capability they need to control and shape their lives. Thank you.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.