It is a pleasure to be back at the American Bankers Association. Before I begin, I would like to take a moment to congratulate Governor Keating for his dedication to the financial services industry, and for his long and distinguished record of public service. During my time at the Consumer Bureau, it has been my pleasure to get to know him and to work with him on the many issues facing consumers. His practical experience in the ways of banks, in the ways of Washington, and just simply in the ways of human beings has been immensely insightful for me. We have always agreed that consumers need two important things: effective protection in the financial marketplace and the capability to navigate that marketplace successfully. And that has been the common ground on which we have stood in our work together.
In the past few years, our country has been finding a path forward through the residue of the financial crisis. During that crisis, millions lost their jobs, millions lost their homes, and almost everyone lost a substantial part of their life savings. As we emerge from those tough times, it is even more essential that we empower people to take more control over their economic lives. Both consumers and industry will benefit if we can do more to achieve that outcome.
For this reason, we have made financial education a critical part of our mission. This goes well beyond just teaching the nuts and bolts of financial literacy. At the Consumer Financial Protection Bureau, we are committed to helping consumers increase their own capability to make sound financial choices to attain financial well-being and achieve their life goals. Our strategy to accomplish this broad task includes providing tools and information directly to the public, building collaborative education initiatives, and engaging in foundational research to spread effective approaches to financial education.
Promoting these initiatives depends crucially on creating and fostering partnerships and collaborations of all kinds. We are engaged around the country with libraries, social service providers, community groups, state and local policymakers, and anyone else who is interested in working toward these same goals. And we are well aware that many banks share our interest in this area. There is much that financial institutions can accomplish here, given their ability to connect with a wide range of consumers from various walks of life at important times in their financial lives.
We have identified three areas, in particular, where we are focusing our efforts with financial institutions. First, we are working with our schools and teachers to help young people increase their financial capability so that they are better equipped with the knowledge and skills they need to be financially successful adults. Second, we are providing workplace financial education ourselves and encouraging others to do the same. Third, we are helping educate older Americans and those who care for them to avoid financial scams and abuse. If each of you in this room will band together with us, we can forge a powerful alliance to advance these three important causes.
Let us begin with what we can do about financial education in our schools. We all know that what we learn in school informs all aspects of our lives, for the rest of our lives. As Jane Addams once said, “America’s future will be determined by the home and the school. The child becomes largely what he is taught; hence we must watch what we teach, and how we live.”
That may seem obvious enough to everyone here. Yet once we recognize that very little financial education is provided at home, we also must admit that this country has done a remarkably poor job of providing financial education in our schools. Although this is the one essential area in which we all need capability and know-how – regardless of whatever other choices we will make in our lives and our careers – it often is not included in the typical school curriculum. That is very hard to understand, and even harder to justify. We are a country that is organized around a free market economy, with the consumer as the ultimate decision-maker whose individual choices drive our economy. That magical formula has created the freest and most prosperous nation in human history. So how then can we be so casual about whether our young people are properly equipped to go out into the world and manage the ways and means of their lives? If they fail economically, with defaults and financial disorder impeding their progress in life, that is terrible for them and bad for all the rest of us as well. We need to do much better here.
There is another reason also for us to focus more seriously and more soberly on the issue of integrating financial education into the school curriculum. The marketplace for financial services has evolved and changed in the last two generations, creating more opportunity but also more risk that requires consumers to make increasingly complex decisions. Yet we continue to gloss over the kind of preparation that would enable young people to make sound choices about how to reach their key financial milestones. As bankers, you know the problems people face when they do not have a solid foundation of financial know-how and decision-making skills. It can be like trying to cross a minefield without a map. As we continue to launch young people on that hazardous journey, how can we stand idly by as we see so many of them struggling and failing? Our pangs of conscience should be our spurs to action.
To embark on a successful financial life, we must start early. In our society, financial education should be as fundamental as the education we all receive in mathematics and the language arts. The PISA reports that make international comparison on subjects like financial education are now showing that financial education in the United States is lagging behind the work done in many other countries. That should be a source of national embarrassment. The crown jewel of our financial system – our vigorous system of thousands of community banks – can make their voices heard on this subject. I have long believed that every state should include a stand-alone personal financial management course as a graduation requirement for high school students, just as they all mandate American history and government. You can help make this happen. You know these are your future customers, and you are in position to help make sure they can manage their financial affairs successfully. I urge all the leaders in this room who want to improve economic life in their own communities to set the goal of making sure that financial education is required learning in all 50 states. Let us turn this source of national embarrassment into a source of national pride.
What I do see is that all across the country, financial institutions are devoting time and effort to find ways to help young people obtain financial know-how and skills. We have seen financial institutions support teacher training, and this is an important and productive emphasis – one that the Consumer Bureau strongly embraces as well. Training teachers is crucial to making them more comfortable and confident as they present financial education topics in the classroom. It also can help them identify ways to integrate this content into their other courses. Teachers are specialists in teaching, but not necessarily in consumer finance. Most teachers have had little formal training or exposure to these kinds of financial issues, and many of them may struggle with financial decisions in their own lives just as much as everyone else does.
As a result, some may be reluctant to introduce these discussions into the classroom, yet doing so can be a highly effective means of conveying financial education. It is not really that hard to draw on young people’s interest in money issues for their writing projects; to adapt budgeting and financial issues as word problems in their math classes; or to expose young people to the distinction between wants and needs or choices between present and future goals. All of these ways to integrate financial thinking into the standard curriculum can make a real difference over time, and teacher training is a key avenue to achieving that outcome. Each of the respected leaders in this room can do more to make this happen throughout this country.
We also have seen financial institutions create or support experiential learning programs of many kinds. Locating bank branches in schools where students can get hands-on experience can be an effective program. Where we can learn from the experts, and bring their real-life experience into the school day, that is well worth doing. Other programs are having positive effects as well. So whether young people are simulating a banking experience, opening an actual bank account at school, playing a computer game to hone financial decision-making skills, or following the stock market, students can learn quite effectively from these personal experiences. But in the schools where no such things are happening, we need to do some soul searching and find ways to do more to advance this important cause.
Another area where we can work together is workplace financial education. At work, we make many important financial decisions: we decide how much to save for retirement, whether and how to secure health and life insurance, and whether to set aside funds to meet child care and medical expenses through specialized savings accounts. As more employers begin to give their employees the ability to split their paychecks automatically into savings, investments, and checking accounts, they are also helping their employees set aside money for college, a new car, or a rainy day. In doing these things, people can appreciate help from their employers. Indeed, financial education practitioners note that right now the workplace is the only place where most adults have ever received any financial education.
Companies are starting to get the message. According to a survey by Aon Hewitt, 93 percent of employers surveyed are likely to expand their focus on financial wellness in the workplace in the next year. Those employers are your customers also, and you are in a special position to help them figure out how they can do that.
Financial institutions are huge employers – this segment of the economy provides more than five million jobs here in the United States – and they can model employee financial education for employers in other segments of the economy. So our banks can and should lead by example. You have the credibility and the expertise to promote best practices around budgeting, savings, and retirement options. Banks can make it a priority to educate their own employees and help them develop and use sound financial strategies, including savings for both emergencies and retirement. We also want you to be conscious of what more you can do to ensure that your employees understand and optimize the existing benefits already available to them. By making your employees’ financial capability a priority, you can help them stretch their dollars further or provide more securely for their future needs.
Banks can launch strategic awareness campaigns to promote positive financial behavior. For those that want to go beyond the basics, they can leverage key moments in an employee’s life – such as marriage, the birth or adoption of a child, or buying a home – to deliver specific financial skills training at the right time. Good decisions at these crucial moments can exert a disproportionate influence on the positive trajectory of people’s financial futures.
We want to see big banks, small banks, community banks – all financial providers of all shapes and sizes – and all employers across the entire economy find better ways to connect with their employees during those key life moments and implement programs to boost financial capability. The initial research on financial education in the workplace already suggests that a financially capable workforce is more satisfied, more engaged, and more productive for their employers. With our financial institutions leading by example, we then can build a strong business case for expanding these efforts to other businesses and organizations in order to convince them of the many benefits of providing financial wellness at work.
Our third area of mutual focus is financial well-being for older Americans. Frank Keating and I share a passion for this subject, and we want to leave a joint legacy of respecting our elders by protecting them more effectively against financial predators. When Congress created the Consumer Bureau, it saw the need to protect older Americans against financial exploitation and to promote economic security later in life. With that in mind, Congress required us to create a special office that is exclusively dedicated to working on behalf of older Americans in the financial marketplace.
Our Office for Older Americans focuses on improving the financial lives of consumers all over the country. Each day, more than 10,000 Americans turn 62 years old. And they are joining 57 million others who turned that page on the calendar before them and now face financial issues that create risks if they are not adequately prepared and protected. We are working to help them.
In order to support our loved ones who raised us, protected us, and guided us into adulthood, we must ensure that their caregivers have the know-how. Making that happen is of great importance to many of us. Frank has talked to me at length about his mother, and I have spoken to him often about my father, who is now 97 years old. My Dad grew up during the Great Depression, and the tough economic circumstances of his childhood affected his outlook on financial matters for the rest of his life. But like anyone else, my father now needs some help from time to time. As the years pass, the role our family plays as his caregiver has grown. Like many other children of aging parents, that has meant making sure he has the information, the tools, and the support he needs to make the best financial decisions for himself – and to protect him against those who would seek to take advantage of him.
For some caregivers, though, their role goes beyond just advice and help. Sometimes caregivers have to step in to make financial decisions for a family member or friend who is unable to do so. It could be a daughter who was appointed by a court to serve as guardian for her mother with Alzheimer’s disease. It could be a young man serving as agent under a power of attorney for an autistic brother unable to live on his own. Or it could be a friend who handles payments from the Department of Veterans Affairs on behalf of a brother-in-arms or a sister-in-arms who was wounded in combat. For these and many other reasons, an increasing number of Americans, young and old, are now acting as fiduciaries by managing money or property for a family member or friend.
Managing someone else’s money can be a daunting and sensitive task. Most financial caregivers have the best of intentions, but may not fully understand their duties as a fiduciary or know the best ways to go about helping another person successfully navigate their financial affairs.
After listening to older Americans and financial caregivers speak about their lives, we realized there is a need to provide guidance for people who are in this situation. So the Bureau has released plain-language guides for lay fiduciaries all over the country. Each guide provides tips and answers to everyday questions people may have about managing someone else’s bank account, applying for federal benefits, and sharing information with family members. They also help prepare caregivers to protect their friends and loved ones against financial scams and abuse. Unfortunately, all too often we have seen seniors with diminished decision-making capacity targeted remorselessly and effectively by predators in disguise.
To date, we have distributed over 650,000 printed copies of these guides, called “Managing Someone Else’s Money.” Consumers tell us the guides are providing valuable plain-language help that they can translate into action and better decision-making. We urge you to order the guides for yourselves (for free!) and make them available to your own customers. Nothing we create in the government is copyrighted, and we encourage you to work with us to help arm people with the knowledge they want and need to take care of their elderly loved ones.
We also have created a resource to help older people and their families prevent the growing crime of elder financial exploitation. Older people are often the specific targets of financial fraud and abusive practices. Estimates of annual losses range from $3 billion to $36 billion, and one study has found that for each case that is reported, 43 others go unrecognized. Many seniors have routines, and their predictable patterns can make them easy targets for predators, including family members and others in a position of trust. They can be lonely or isolated, and perfect strangers now have many ways to communicate with them, either anonymously or by pretending to be someone they are not. Seniors may be dependent on hired caregivers who gain access to their finances. Cognitive impairments may make them vulnerable. And abusers often assume that the victim will be too embarrassed or is too dependent on them to report the problem or take legal action. Unfortunately, that assumption is all too often correct.
I know from my own experience as Ohio Attorney General that scams targeting older adults can be vicious – a fake foreign lottery, a caller falsely claiming a grandchild is in trouble and needs money, or a contractor who overcharges an elderly homeowner. So together with the FDIC, we released “Money Smart for Older Adults,” an educational program to raise the awareness of older Americans and their caregivers about how to prevent, identify, and respond to elder financial exploitation.
This work builds on the FDIC’s outstanding Money Smart curriculum for financial education, which is the best work of its kind that I have seen in this country. With Money Smart for Older Adults, we provide information on the most common frauds and scams. We want to engage and empower consumers on these issues and ensure that older consumers and their family members have the information they need to avoid being victimized and make sound decisions. You can help us make this educational resource available to your customers and their family members.
Curbing financial exploitation requires coordinated efforts on the national, state, and community level. We all need to know how to identify and report common signs of elder financial abuse. Sometimes the indicators are obvious: funds disappearing from accounts, unpaid bills, missing belongings. Sometimes they are more subtle, such as odd electronic or ATM withdrawals or a new acquaintance with power of attorney or who is added as a joint account holder. On all these issues, Money Smart for Older Adults can educate older consumers and those who care for them.
To your credit, we have found that banks are often the first ones to spot these danger signs, and you can often act to stop older accountholders from being victimized. Seniors have great trust in their financial institutions and many make frequent use of local bank branches. Bankers know their customers, and they can and should report suspected abuse to the appropriate authorities.
Today, I want to applaud the American Bankers Association Foundation for recently launching the “Safe Banking for Seniors” campaign. And I appeal to you to do even more to help protect older Americans. The Consumer Bureau will release an advisory soon to help you prevent, recognize, and report elder financial abuse. You are especially well-positioned to spot red flags and intervene quickly, so think about how you can do that more consistently and thoroughly.
As Americans, we cherish our rights of life, liberty, and the pursuit of happiness. Good financial education can take us a long way down that pathway. Knowing how to save money and make the most of your money can imbue people with a sense of control, ownership, and peace of mind.
Each one of us, regardless of our career choice or our income level, must be able to evaluate the choices that are available in the financial marketplace. We need to understand the implications of our financial decisions in order to build secure financial futures. When we look out over this vast country populated by 320 million Americans, we are forced to realize that it will take all of us, and then some, to make a lasting difference on this crucial subject. Join us in this work, and help us move consumers closer to having their money choices serve their life goals. Let this coming year be the year we all commit ourselves to make that happen. Thank you very much.
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.