Lectures are a common method of financial knowledge transmission, but they're not so great for financial skills transmission.  

Moreover, the trending behaviors of college students may make lectures an ever-less-effective mode, because they're less engaging than tempting distractions like IM. 

Harvard Business Review's Daily Stat mentions a Study, "Examining the Affects of Student Multitasking With Laptops During the Lecture", which found that their laptops for frequent multitasking during classes, generating, on average, more than 65 new screen windows per lecture, 62% of which were unrelated to the courses they were taking.

Task-based simulations are more engaging, and thereby stickier, and thereby more effective.

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Equifax rolled out a new product this past week: Debt Wise.

Shame on Equifax! This is a flawed program for which Equifax will charge $14.95 per month.

Here's how it works, and why it's a bad deal:

Debt Wise pulls all the debts from your Equifax credit file, and the program algorithm stacks the debt in order of size, from smallest to largest, and totaling the minimum monthly payment required on each. This "debt stacking" strategy is similar to "Snowball" strategies touted by Dave Ramsey and others.

Let's say, for example, that your minimum monthly debt payments total $1000. You make a commitment to pay an extra amount that you choose – say, $30 per month – until you're debt free.  That extra $30 goes to the top of the stack every month, while the rest of the stack gets their required minimums, until the top debt gets retired.

Then, you continue paying $1030 every month until every debt is retired, in stack order.

It's based on the "Snowball" strategy;  you can find FREE Snowball calculators on the web, which WILL get you out of debt faster than paying the minimum each month, but WON'T the FASTEST strategy.

To SAVE THE MOST MONEY, you want to retire your debts not in order of size, of course, but in order of highest to lowest APR (Annual Percentage Rate, your Interest expense)!

People who are carrying too much debt should not be signing up for a recurring monthly fee! Don't give Equifax $15 a month for a second-rate strategy.  Apply it to your highest APR debt every month and retire THAT debt first! You'll save ALOT more in interest expense and time, than the Snowball method!

Why would Equifax do this? Because their valued customers aren't the consumers, they're the lenders who pay Equifax for your credit score. And lenders don't want you to get out of debt too fast.

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At the recent Financial Literacy Education Commission (FLEC) meeting, one very enlightening presentation was by Barbara Ryan, lead researcher on the FDIC's most recent study of the unbanked and underbanked.  Here's the Executive Summary of the FDIC National Survey of Unbanked and Underbanked Households.

One surprising and dismaying finding: fully half the unbanked were previously banked, meaning they had decided that a bank account wasn't worth the cost or hassle. Moreover, more than half of the previously banked say they will not likely be banked in the future, either.

For too many, being unbanked is not a lack of opportunity to have an account, but an active choice NOT to have a bank account.  Banks are disenfranchising A LOT of people, and missing an enormous opportunity.

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The Financial Literacy Education Commission (FLEC) convened its first meeting of 2010 yesterday.  The highlight was the presence of Valerie Jarrett, Senior Advisor and Assistant to the President.  That the White House has a seat on the FLEC signals Obama's attention to our national financial literacy, and encourages greater coordination across federal agencies. 

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"Free" materials created by the financial industry and distributed through nonprofits are a false economy because there's an obvious opportunity cost: most "free" materials require infrastructure and teachers. 

The effectiveness of most classroom resources, especially print-materials, depends greatly on the delivery skills and subject expertise of the teacher. Training teachers to deliver personal finance instruction is the most expensive and time-consuming part of the whole initiative.

Instructional materials, free or not, are the smallest cost component of implementing curriculum. If the state or district hasn't already created and kept updated a personal finance curriculum, it must first create one. Then the materials need to be organized into the curriculum.

The Jump$tart biannual national survey of high school students' financial literacy has rendered an average grade of "Failed" every year since inception, 1997. This is especially disappointing in light of the noticeable surge over the past three years in state-level and district-level mandates for financial education in schools.  

Most of those mandates are unfortunately unfunded or grossly underfunded. When legislators pass unfunded mandates, budget-strapped schools have to pursue "least-cost" solutions which are often slow, ineffective (if measured at all), spotty, and labor-intensive. 

A financial literacy program that doesn't require a teacher who's a Subject Matter Expert; that contains all the necessary scaffolding for student success; that measures what students really learn from it, with a comprehensive curriculum that maps to many state standards, now that's real value!

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The financial crisis reminds us that the consequences of our choices, financial and otherwise, truly touch countless others.

My 2010 wish for all of us, including myself, is that we apply the lessons of the crisis, and embrace the notion of Sufficiency. With every spending decision we make we can take money away from that which is destructive, and reallocate it to that which is productive and sustainable. Each of us can decide to treat this economic recession as the "recess from excess" that is long overdue. In so doing, we create a new future of sufficiency for ourselves and all beings everywhere.

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It's time to rethink our intention for healing and rebuilding the economy. Let's stop exhorting consumers to Get out there and buy, already.  It's wrongheaded think that consumers will jumpstart the economy by buying more things that are Wants, at the expense of things that are Needs. That's how we got into this mess in the first place.

Since WWII, the beset consumer has saved less and spent more of total take-home pay, such that, by 2008, our national savings rate was below 0!  Personal savings is an absolute priority: more important than establishing credit, way more important than discretionary purchases of more stuff. 

Our New Consumer Thinking should be about sufficiency and security: saving more, spending thoughtfully, and spending ALOT less on pre-landfill stuff that depreciates or obsolesces as soon as you get the wrapper off. 

Check out The Story of Stuff, for an enlightening look at our production and consumptions patterns.

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December 8 was the last of a series of Department of Education events focused on the ESEA reauthorization and its breathtaking and ambitious reforms, goals and funding.  A key feature of the series was the opportunity for frank conversation between the invited audience and the public officials. The series addressed the whole continuum of student readiness, ending in the final session, fittingly, on College- and Career-Readiness: here's the transcript, and here's the video.

I had an opportunity to ask about the role of financial literacy in readiness and what commitments the Dept of Ed was making toward it (my moment in the conversation: 1:00:20 on the video), excerpted below.

MS. GRIFFIN:  My name is Kathy Griffin.  I'm a financial literacy educator and advocate.  I work especially with high school students, college students, college graduates.  My site is moneyu.com.  Financial literacy clearly is an essential piece of college and career readiness.  They need to have financial skills before they even take out the student loan, before they choose a major and a career, before they drop out because of debt, before loan repayment begins.

Young adults who are financially unskilled are not just unready, they're a social liability.  They're a threat to our economic stability.  So what is being done to help schools offer financial literacy instruction in schools now, in the near term, and in the future?

DEP. ASST. SEC. RITSCH:  Does anyone want to throw out anything you're familiar with along those lines?  Carmel?

MS. MARTIN:  There are several programs that the Department of Education has in our budget that relate to financial literacy.  Several programs that are about preparing children for college access specifically.  There were several provisions added to the Higher Education Act in the last Congress that puts obligations on high schools and college financial aid offices in terms of --

MS. GRIFFIN:  Lenders and college guidance counselors, right.  There are few teeth in that.

MS. MARTIN:  And TRIO and GEAR UP are two funding sources that fund financial literacy and this is specifically around college access.  The bill that Martha mentioned that's moving through Congress has the President's proposal for our College Access and Completion Fund which would include activities around financial literacy with respect to college access.  We have a very small program related to K-12 in terms of teaching economic literacy at the K-12 level.  We are definitely interested in this -- the Secretary ran a school before he was the superintendent of schools in Chicago that was focused on financial literacy initiatives.  So it is something we are looking for ways to promote. 

There are folks here at the Department who have been talking to folks at Treasury and HUD about ways that we could link up together to expand access to financial literacy programs.  So I think it is something that we are looking for ways to promote in addition to the existing programs.

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While MoneyU's primary focus has been to bring financial literacy instruction in education, at state- and district-levels, and in secondary and postsecondary levels, I have recently been doing a little research on States' initiatives in financial literacy outside of schools.  

Most States are extremely interested in addressing the financial illiteracy crisis, for obvious reasons: a financially capable populace is a healthier tax base, and less likely to be in need of welfare and similar services. 

I searched the web for every State's financial literacy initiatives.  A few States have none, some States have done nothing more than declare April to be Financial Literacy Month. Shame on them, in either case.  Some States have tucked their financial literacy resources so deep as to make them invisible.  Others parse and sprinkle financial literacy initiatives across so many agencies that a needy citizen would squander hours in searches and navigation.

States could learn a lot from each other, and from the success story of New Zealand's National Strategy for Financial Literacy, which  owes in large part to two key strategies:

1. a centralized, trusted, easy-to-find and easy-to-navigate website of financial resources for its citizens.  http://www.sorted.org.nz/ 
2. Empirical measures of the campaign's effectiveness, for example percentage of the population owning bank accounts, savings rates, and regular testing of citizens' financial literacy.

And, Wow, they did it in under 3 years.

Even as the US climbs slowly out of this economic crisis, its aftershocks in the job market, the credit freeze, mortgage defaults, student loan defaults will hamper complete recovery, and necessitate continued efforts in financial literacy.  Such efforts need to be driven at both the Federal and State levels. 

Kudos to several States that have done near-exemplary jobs of making their financial literacy efforts and resources easy to find.

Connecticut        http://www.state.ct.us/ott/FL_youth.htm

Florida                 http://www.myfloridacfo.com

Kansas               http://www.kansasstatetreasurer.com/prodweb/financial_resources.php

 New York          http://www.nyfinancialliteracy.com/

 Texas                http://www.window.state.tx.us/citizens.html

They'd be even better, if they mentioned MoneyU! 

I welcome our readers in other States to to let us know about other laudable examples.

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Student debt is a serious and growing problem in the US. Many qualified young people are deterred from college by the cost, and the majority of those who graduate from college have substantial debt that can limit their career options and make it difficult to save for a home, healthcare, retirement, or their own children’s educations.

The Project on Student Debt just released its fourth Annual Report on the student loan debt of new graduates, Student Debt and the Class of 2008. The picture is grim: the new average student loan debt is $23,200, an increase of 6% over last year. The range of average student debt varies enormously among states, from the lowest, Utah, with $13,041, to the highest, District of Columbia, with $29,793.  The percentage of students graduating with debt varies from a low of 37% (Hawaii) to a high of 79% (South Dakota).

Because of data limitations, the authors warn, the state figures may understate average debt levels by as much as $5,000 and the percentage of students with debt by as many as 12 percentage points.

And for insult to injury, the unemployment rate for college graduates has been rising every quarter the last few years, to a punishing 10.6% in the 3d quarter of 2009 -- the highest on record.

 Clearly, many or most students are borrowing too much, without an accompanying study of starting salaries and expected earnings for their chosen field, and without an analysis of how long it's likely to take to repay their student loans.  Obviously, financial literacy instruction must include an understanding of principal and interest, practice comparing loans, access to current salary and employment data, and tools to create a feasible loan repayment plan. Ideally, students would receive such instruction BEFORE taking out student loans.

 Although these are sophisticated skills, with the right presentation, they are certainly within the reach of any college-ready student.

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