As the Democratic National Convention hits its halfway point here in Philadelphia, the entire city has come alive with activism and the full force of participatory democracy. While the prime time speeches at the Convention have focused on party unity and the historic nomination of a female candidate, more personal topics related to economic stability and financial issues are dominating side conversations. Delegates are debating among themselves a hike in the minimum wage and continued oversight of financial systems. Across Philadelphia, the protests and breakfast events reveal that delegates are sharply divided about how to reaffirm the economic mobility that has long been a hallmark of American citizenship.
Many of these conversations reflect a lack of fundamental understanding of how the financial system works.
Against this backdrop, the Council for Economic Education (CEE) released its survey of economic and financial education in U.S. elementary and high schools. The results suggest that our education system has made minimal progress in providing the tools people need to understand even fundamental personal finance concepts like budgeting, purchasing and loans. Only 17 states require a personal finance education class, but even more alarming is the number of states with standardized testing in economics, which has dropped from 27 to 16 since 2002. The result? 75 percent of college students who own credit cards are unaware of late payment charges. If students cannot pay bills on time, how can we expect them to understand implications of major policy issues such as the debt ceiling or federal interest rates?
This federal election cycle will shape the long-term landscape for financial services companies in profound ways. Issues include:
These are complex issues where policy changes often trigger huge ripple effects. The challenge for financial service companies dealing with an undereducated populace is complexity is easily mistaken for lack of transparency – a sinister turn-of-phrase in the shadow of the 2008 financial collapse. It follows that it is the responsibility of the financial services industry to explain with clarity their consumer products and services with the goal of consumers understanding the impact of their choices. The financial services industry depends not only on educated policy makers but also an educated citizenry who understand their roles in the greater scheme of investment decisions.
Some states have stepped up to incorporate this kind of education. Last year, Delaware added elements of financial literacy to its high school curriculum because, in the words of Dr. Bonnie Meszaros, one of the program’s architects, “Letting students go out into the world and learn by making mistakes is just the wrong approach.”
But as other states continue to lag behind, the onus to provide this education is on companies and advocacy groups to ensure information is not only available, but accessible, to these audiences.
This requires financial services companies to embrace a new way of communicating. Whether it’s providing clear, simple explanations or delivering information through infographics, listicles and videos on social networks, the industry needs to be a better partner and the coalition member that delivers just-in-time information that enables educated democracy.
Kelly Rohrs is a senior vice president in Edelman New York's Financial Services sector.