Prepared Remarks of CFPB Director Richard Cordray at the Society for Financial Education and Professional Development
Thank you. Over the years, financial education has become a passion that I have pursued at the local, state, and now federal levels. It is a joy and a privilege to be here amongst others who share that passion and understand its importance to the future of our country.
In the past few years, we have been working through the residue of the worst financial crisis since the Great Depression. During that crisis, many lost their jobs, many lost their homes, and many lost much of their life savings, amounting to trillions of dollars in household wealth that simply evaporated. People have been shaken in their deeply held belief that if they work hard and behave responsibly, they can and will get ahead in life and pass on a higher standard of living to their children.
There were multiple causes of the crisis, but one factor that contributed to the magnitude of the problems experienced by so many Americans is the simple fact that they lacked financial education. Faced with the growing complexity of financial decisions around mortgages and other household credit, and given little or no training in these matters, consumers were poorly equipped to make sound and sensible decisions as they tried to manage their affairs.
The Consumer Financial Protection Bureau is a new agency filled with fresh enthusiasm to face and address these issues. So we have made it a point to encourage consumers who come to our website to tell their stories. We are the first federal agency with the sole responsibility of protecting consumers in the financial marketplace and we are committed to helping them make sustainable choices about the ways and means of their lives. We are doing all we can to protect people by ensuring that consumer financial markets work better for them – by insisting those markets are transparent, reliable, and fair. We were created, in part, to take steps to help ensure that the financial crisis never repeats itself. Fundamental to that mission is educating the American public about personal finance.
Unless we can force change on these issues, millions of young people who lack the skills to make effective financial decisions will find it harder to become productive and capable citizens. Unnecessary debt, missed opportunities to save money, poor credit history, and a general feeling of helplessness and desperation at finding themselves underwater throughout their lives will block them from the resources and opportunities that could improve their futures.
Benjamin Franklin once said, “An investment in knowledge always pays the best interest.” In the case of financial education, that can be true both literally and metaphorically. At the Consumer Bureau, we are working to empower consumers to take more control over their economic lives. We know that financial education is about more than websites and flyers, more than speaking earnestly and meaning well – it is about working with consumers face-to-face and finding ways to effect systemic and lasting change.
The challenges that confront us in achieving this goal of financial capability are complex, varied, and significant. To overcome them, we must start early. We must start where good education always starts – with our children. Financial education should be as fundamental as the education we are all required to receive in mathematics or the language arts.
Because children form their financial identities early, it is important for parents to begin talking with their children about money at an early age. We now offer many resources to help parents do just that. Our website offers “Ask CFPB,” which is our interactive online tool that gives consumers expert and neutral answers to more than a thousand commonly asked questions. Some of these questions and answers are designed to help parents and guardians learn about “money basics” in order to begin those conversations at home.
Over the summer, in collaboration with the FDIC, we launched an awareness campaign targeting parents and guardians so they can understand the key part they play in nurturing their children’s financial behavior. We created a new website, consumerfinance.gov/parents, that has a series of age-appropriate resources to help parents engage with their children on financial topics. By directing parents to these kinds of reliable resources, we can build know-how and confidence in helping their children work with these tools. At the same time, as they are able to provide solid information and guidance to their children, parents will be learning more about their own financial management.
One of the goals shared by many of us involved in this movement is to develop integrated curricula in our schools – where the benefits of compound interest are understood in math class; where economic costs and risks are taught in social studies class; and where essays in English class include topics involving money and its role in our society. We believe 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 are likely to learn more effectively from this kind of direct personal experience.
To help implement these ideas and produce change in the schools, we know we must do all we can to support teachers who share our passion for financial education. To that end, we are organizing materials for teachers in partnership with the FDIC by creating an online, self-service resource center. The resource center will feature videos, tools, practical tips, and other resources that teachers can use in the classroom. Plenty of great resources already exist; what we need is to do is a better job of promoting their accessibility and ease of use for our busy teachers.
Our financial education efforts are extending beyond the classroom. We are also working to empower consumers throughout the life cycle and across the economic spectrum. In July, we launched a nationwide effort to provide financial education and tools to low-income consumers all over the United States. Your Money, Your Goals is a toolkit that social services organizations are using to help their clients with topics like budgeting of daily expenses, managing debt, and avoiding financial tricks and traps.
We consulted with local organizations across the country to test out the toolkit. By holding training workshops in 21 states and here in the District of Columbia, we were able to get input from over 1,400 social services staff in a wide variety of organizations. The toolkit is available in both English and Spanish, and it is already being used by a growing number of social service providers. We plan to release a customized version for community volunteers and yet another version for legal aid organizations in the coming year.
We also are helping older Americans protect their assets and prepare for financial security later in life. The Bureau is home to the only office in the federal government specifically dedicated to the financial well-being of seniors. Rather than enjoying the respect that is due them, our elders are often the target of malicious schemes designed to deceive them and drain their savings. For this reason, our Office for Older Americans works to improve prevention and identification of financial exploitation. We also help seniors navigate the many important financial decisions they must confront as they age. We offer resources on topics like reverse mortgages, financial advisers, and avoidance of fraud. We also offer guides for financial caregivers to help them carry out their duties and responsibilities when they are managing someone else’s money.
Another group of consumers we focus on is servicemembers. The indefatigable Holly Petraeus heads up our Office of Servicemember Affairs, and she and her team have been to more than 90 military installations across the world so far. They bring back compelling stories about some of the special problems faced by our military and their families, and we work to find solutions. We have also launched a series of informative videos tailored to those in the military or their families, covering topics such as student loan servicing, mortgage servicing, debt collection, and veteran-related issues.
One crucial set of decisions for many families is how to pay for college. For high school students considering college, we are applying the same “Know Before You Owe” approach that we have applied to mortgages and other consumer financial products in order to simplify and clarify the choices to be made. In partnership with the Department of Education, we created the “Financial Aid Shopping Sheet,” which lets prospective students see hard numbers in a common-sense format. This form is a model of what all financial aid award letters should look like and provides a uniform way for families to understand and compare the true costs of their available options – before they commit to a school.
Thus far, over 2,000 schools have adopted the Financial Aid Shopping Sheet. And we have augmented our support by developing a more comprehensive set of tools we call “Paying for College,” which is available on our website at consumerfinance.gov. This set of tools walks people through the experience of making decisions about how to pay for higher education, which is particularly valuable for students and their families who may be confronting these significant decisions for the first time in their lives.
In order to further help all consumers in the marketplace, we are working on a project that specifically examines what financial well-being means to consumers, since that is really the ultimate goal of financial literacy. First, we are developing a consumer-driven definition of this core concept: How do consumers experience financial well-being, in terms of their own financial security and financial freedom of choice? Second, we are researching the key knowledge, skills, attitudes, and behaviors that contribute to individual financial well-being. Third, we are developing a way to measure financial well-being so that all of us working on this issue can have shared standards as a common reference point. This research will allow us to understand how to support consumers in ways that will resonate with them, with their own views of financial well-being, and with the goals they set for their financial lives.
We are also interested in piloting new initiatives to bolster financial fitness in the workplace, as we are already doing for our colleagues at the Consumer Bureau. We believe there is a sound business case for these efforts as laid out in our recently released report, Financial Wellness at Work. In fact, a good starting point for these efforts would be the millions of employees who work in the financial industry alone.
In all of these ways, we are committed to giving all consumers the confidence that they can take more control over their lives. People deserve peace of mind that the financial world is not full of pitfalls that will ruin them. There is not a single good reason – none – that should prevent any American from gaining the knowledge and skills needed to build a healthy financial future. Collaboration among a wide range of stakeholders, including those of you here today, will make it possible to achieve that goal. We are grateful to serve alongside you in this most worthy cause. 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.