WASHINGTON–The President’s Advisory Council on Financial Capability for Young Americans has issued its final report on how to promote the financial capability of young Americans.
Many of the findings will be common knowledge to many in credit unions that have attempted to reach and educate the 127 million Americans under the age of 30.
The report, required by a June 2013 order that required Treasury to study the issue, examined the requisite knowledge, skills and access needed to manage financial resources prudently and effectively, and recommends ways to empower individuals to make informed choices; plan and set goals; avoid pitfalls; know where to seek help; and take other actions to better their present and long-term financial well-being.
The report’s authors said they took into consideration the particular needs of traditionally underserved populations, recognizing that building financial capability is especially critical to enable upward economic mobility.
“Our Council focuses on encouraging financial capability among young people in schools, families, communities and the workplace,” the report states in its introduction. “By starting early, young people can learn the difference between wants and needs, the power of saving, and the productive role that money can play in their lives. Age-appropriate money skills and habits will make our young people better equipped to tackle more complex financial decisions regarding the financing of higher education and saving for emergencies and retirement. These decisions have lasting consequences for financial security.”
Among the “ideas for action” outlined in the report are:
- Ways to better prepare teachers to implement financial education in the classroom using the power of technology.
- Identification of the importance of equipping young people with both information and guidance so they can navigate the critical and complex decisions related to post-secondary education and how to pay for it.
- Recognition of the uniquely powerful roles that cities and communities can play like connecting young people to appropriate financial products and tools through youth employment programs.
- Appreciation for the need to assess how to better protect the identity and credit histories of young people.
“Young Americans are part of the global economy and workforce. Their financial skills and knowledge will determine how successful our economy will be in the years ahead,” the report states. “However, there is reason for concern. Fifteen-year-old American students fell short of global financial literacy expectations in 2012 in the first large-scale global financial literacy assessment. The Programme for International Student Assessment (PISA) evaluated students in 18 countries on their ability to apply mathematical skills and basic financial concepts to real-world situations. The United States’ mean score ranked ninth; Shanghai-China ranked first; and Colombia ranked last. As troubling as these findings may be, the underlying facts demonstrate a concerning picture of the disparities in financial capability by socio-economic status in the United States. According to the PISA study, low-income and minority students were much more likely to score lower than their peers.”
Among the policy recommendations made in the report:
- Build on work done by the Administration and Congress to simplify the FAFSA (Free Application for Federal Student Aid), making it easier to complete.
- Offer a mechanism similar to the VITA (Volunteer Income Tax Assistance) program to aid families in completing financial aid forms, including the FAFSA, the CSS (College Scholarship Service) profile and other state- and school-specific forms, and support the development of technology and tools that can help students and families access and file these forms.
- Create a simple mechanism for interested students to grant access to selected and relevant academic information (e.g., test scores, transcripts) so that technological tools can deliver meaningful, customized information about post-secondary options in a trusted, timely and relevant form.
- Foster better coordination between federal and state agencies, including social services organizations, to ensure students are accessing all available resources to help support them as they work toward a post-secondary credential.
- Improve and strengthen communications about all available repayment options for federal student loans, including income-driven repayment plans, so that borrowers can easily ― and seamlessly apply ― and stay enrolled.
Among the findings in the report:
- Students and families need information earlier about financing needs, industries and job training, and opportunities after their post-secondary education in order to better understand and make long-term plans. Many students choose paths of study based on their general interests, without a plan for how to get a job with their degree or knowledge of if and where jobs based on their studies are available.
- College, career and financing are not “one size fits all.” Many of the students with the most need are non-traditional (for example, many years out of high school, going back to school to finish a degree). There are many job training options that should be considered beyond traditional four-year college, including community college, career technical education certificate programs, career ladder/stackable certificate programs and apprenticeship programs. For underserved students, financing and support is needed not just for tuition, but also to defray other costs, including books, rent, day care, transportation and other “life” costs not directly associated with school. In the case of internships, pay is important for underserved students and, for many, is the deciding factor if they pursue a job program.
- Businesses can provide crucial input to colleges on their workforce needs and the skills students will need for them this should be used to drive curricula for degree/certificate programs. They also can provide opportunities like internships and apprenticeships.
- A core curriculum, and pathway to creating a personal financial plan, should include learning about spending, saving and consumer protection; consumer credit and debt management; employment, income/compensation and taxes; investing and estate planning; risk management and insurance; and financial decision making and strategic planning.
- Cross-sector partnerships that link financial literacy, education, social/support services and career opportunities, including summer employment and internships, are effective in building financial capability.
- Information about post-secondary options and financial aid will change behavior only if it is trusted, timely and immediately relevant. Help filling out the financial aid forms, in particular, has been shown to increase aid dollars and college attendance.