Should the House Express its Support for Public-Private Financial Literacy Education Initiatives? (H. Res. 327)

What is H. Res. 327?

(Updated June 17, 2019)

This resolution would encourage greater public-private sector collaboration to promote financial literacy for students and young adults. It would recognize that personal financial literacy is essential to ensuring that individuals are prepared to make informed financial decisions and that young people are often ill-equipped to handle major financial decisions in an increasingly complex financial marketplace. This bill would also express the House’s support for a number of specific measures for improving public-private collaboration to promote financial literacy.

Under this resolution, the House would:

• Emphasize the importance of raising awareness of individual financial capability by providing relevant information, financial workshops, and other decision-making tools to consumers of all ages;
  
• Support federal financial agencies’ efforts to partner with organizations focused on developing opportunities for minorities and women in industry internships, summer employment, and full-time positions;
  
• Support federal financial agencies’ efforts to provide consumers with relevant information and decision-making tools regarding important financial decisions; and
  
• Urge the Treasury Dept. to consult with the Financial Industry Regulatory Authority and implement future national financial capability studies.
  

As a simple resolution, this legislation is non-binding and wouldn’t advance beyond the House if passed.

Argument in favor

Too many young Americans are financially illiterate and therefore unable to make smart financial decisions for themselves. Encouraging public-private partnerships to fix this problem has a wide range of benefits for individuals and the broader economy.

Argument opposed

As a non-binding resolution, this bill is a pointless gesture that doesn’t achieve anything meaningful. Rather than debating and passing this, it’d be better for the House to consider legislation to actually create public-private financial education partnerships.

Impact

Students; young adults; financial literacy education; public-private partnerships in financial literacy education; House; Treasury Dept.; and the Financial Industry Regulatory Authority.

Cost of H. Res. 327

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Rep. Bill Foster (D-IL) introduced this resolution to encourage public-private collaboration to promote students’ financial literacy, emphasize financial literacy’s importance for consumers of all ages, and support federal agencies’ efforts to expand financial education resources:

“In our increasingly complex financial marketplace, young people often find themselves lacking the knowledge to make tough financial decisions that can have profound effects on their futures. Studies have shown that promoting financial literacy at an early age helps equip young people to make sound financial decisions that will set themselves up for success.”

Original cosponsor Rep. French Hill (R-AR) adds:

“As a father, a former community banker, and an investment adviser, I believe that we should make every effort at home and in school to encourage our kids to develop responsible, financial habits. Recent studies have shown that children as early as seven years old can begin developing financial behaviors. At this age, children don’t just learn information–they acquire it. Introducing primary school students to financial literacy and personal finance classes will help create a deeper understanding of earning, saving, and spending money.  Acquiring these skills at a younger age allows students to better navigate complicated financial decisions as adults and puts them on a path towards lifelong fiscal prosperity.”

In an April 2018 op-ed in , Oregon State Treasurer Tobias Read and Indiana State Treasurer Kelly Mitchell, who also serve as the Chair and Vice Chair, respectively, of the National Association of State Treasurers’ Financial Education Empowerment Committee, wrote in support of public-private partnerships to teach financial literacy:

“Throughout the country, state treasurers have helped launch a number of programs and initiatives to help individuals make the best use of their financial resources. Through partnering with the private sector— which has a vested interest in ensuring individuals are financially savvy— state and local governments are developing easily accessible tools to help educate and improve the country’s overall financial literacy. These tools include free online resources that help individuals better understand the basics of personal finance, banking and retirement savings. A growing number of young adults are also turning to alternative financial services such as payday loans and check cashing services because they are easily accessible. But many state treasurers are working with local banks and credit unions to ensure that all individuals have access to affordable banking services, and to raise awareness about the importance of saving, investing and managing debt. Stronger public-private partnerships can help support new financial literacy programs and promote smart financial decisions. In Oregon and Indiana, our offices have worked with the private sector to develop tools that help remove barriers to saving money through various programs and free online resources. Our fellow state treasurers in Vermont, Utah, Rhode Island, Massachusetts and Mississippi are doing the same, while additional states have focused on partnering with the private sector to offer online courses that teach basic financial knowledge to students and parents in schools… [S]tate treasurers are committed to partnering with the community leaders and private sector partners year round to raise the importance of financial literacy. We all have a role to play. Together, we can help prepare the next generation for the financial challenges they will face in the future.”

This resolution has one cosponsor, Rep. French Hill (R-AR).

Of Note: The Brookings Institution notes that lack of basic financial knowledge among today’s youth is a matter of “national concern” with a range of consequences:

“The lack of basic financial knowledge and skills among youth today is of national concern. American high school students routinely fail tests that evaluate their financial knowledge and are ill-prepared to face important decisions about borrowing, saving, investing, and planning for their financial futures. A 2008 analysis of the Jump$tart Coalition’s national survey found that the average financial literacy score of high school seniors was just 48.3 percent, more than 10 points below a ‘passing’ score, and the lowest in a series of failing scores since the bi-annual test was first administered in 1998. An analysis of a nationally representative sample of young adults found that only 27 percent understood the concepts of inflation and risk diversification and could do simple interest rate calculations, while a 2018 survey identified a similar knowledge gap among college students. The consequences of these low levels of financial literacy can be significant. Low financial literacy is correlated with a host of negative credit behaviors, including higher borrowing rates, mortgage delinquency, and home foreclosure. These negative behaviors are particularly pronounced among young people: individuals age 18 to 34 pay more in interest on credit card debt and penalty fees than older adults, and are also twice as likely to take a hardship withdrawal from their retirement account or miss a mortgage payment.”

Champlain College’s Center for Financial Literacy notes that financial literacy leads to a range of better personal finance behavior, benefiting both individuals and society at large:

“There are a variety of studies that indicate that individuals with higher levels of financial literacy make better personal finance decisions. Those who are financially illiterate are less likely to have a checking account, rainy day emergency fund or retirement plan, or to own stocks. They are also more likely to use payday loans, pay only the minimum amount owed on their credit cards, have high-cost mortgages, and have higher debt and credit delinquency levels. As a society, we need more training programs that increase the number of financially literate citizens who are able to make better and wiser financial decisions in their own lives. Such programs are not just good for the individual but also helpful to society. The 2008 financial crisis clearly shows that poor financial decisions by individuals had negative consequences on our country.”

The Brookings Institution adds that financial literacy education for K-12 students is a matter of sound public policy for states, which have a vested interest in their citizens’ economic health:

“States have a vested interest in the economic health of their citizens, making low financial literacy an important issue for policymakers. Public education before high school graduation can play a role in improving financial literacy and promoting sound financial decision-making. Yet many—if not most—financial education efforts focus on college students and adults. Such efforts are often reactive rather than proactive, and may be too little too late. Furthermore, programs offered by firms and colleges may fail to reach a large number of Americans. In contrast, earlier education initiatives during and before high school can target individuals before they have had the opportunity to get into serious financial trouble and become entrenched in negative behaviors. Research suggests that introducing children and adolescents to general concepts, such as responsible spending and good saving habits, may pay dividends later in life by establishing the building blocks for financial well-being in adulthood. Financial education at an early age, therefore, can be viewed as an ‘investment in human capital.’ On a state level, some boards of education have worked effectively to promote financial education for K-12 students through standards and mandates, but many other states lag behind. In the nonprofit sector—on local and national levels—a number of programs, curricula, and initiatives targeted at high school students (and even younger students in some cases) also provide a substantial amount of financial literacy education.”  

In keynote remarks at a 2013 American Academy of Arts & Sciences symposium on “Financial Literacy and the Educated American,” John Rogers, Jr., Chairman, CEO, and CIO of Ariel Investments and founder of the Ariel Community Academy, pointed out that financially literate citizens “engage our democracy and our political leaders in a very constructive way to tackle the tough issues we face.”

Media:

• Sponsoring Rep. Bill Foster (D-IL) Press Release
  
• The Hill Op-Ed (In Favor)
  
• Brookings Institution (Context)
  
• Champlain College Center for Financial Literacy (Context)