Financial literacy | Getting it right on the money | Economist.com

23 Nov 08

jrockads

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13 Oct 08

Abigail Lundy

This article talks about the state of financial literacy. What makes this article different than most of the others that I have come across, is that it talks about financial literacy in an international context. It quotes several well qualified scholars on the issue and not only discusses the need for financial literacy, but the article gives several different solutions for it, rather than just compulsory financa classes. It also discusses President Bush's new advisory on financial literacy and the consequences.

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03 Jul 08

Sean

The Economist 042008 personal finance financial literacy education finance investment management

John Bryant has been telling anyone who will listen about the problems caused by widespread ignorance of finance. In 1992, in the aftermath of the Los Angeles riots, he founded Operation HOPE
Operation HOPE offers mortgage advice to homebuyers and runs “Banking on Our Future”, a national personal-finance course of five hour-long sessions that has already been taken by hundreds of thousands of young people, most of them high-school students.
Financial Literacy Corps: a group of people with knowledge of finance who will volunteer to advise those in financial difficulties.
a new campaign to promote financial literacy in the developing world was launched at a conference in Amsterdam. Called Aflatoun (“Explorer”), after a cartoon character based on a Bollywood star, it is the brainchild of Jeroo Billimoria, a social entrepreneur who previously worked with street children in India.
Ms Billimoria addresses herself to children aged between six and 14, whom most educators consider too young to understand money.
Jump$tart, a coalition of 180 organisations in America that promote financial literacy, found that one in six had taken part in a course dedicated to personal finance.
the only classroom method that seems consistently to raise financial literacy among high-school pupils is playing a stockmarket-investing game—which rewards taking high-risk bets. Most other approaches tend to show only short-term increases in financial literacy, he says.
Richard Thaler, a behavioural economist at the University of Chicago. Aptly for someone who has built his career on the study of irrational financial behaviour, Mr Thaler admits that even he finds it hard to know the right thing to do. “If these things are perplexing to people with PhDs in economics, financial literacy is not the right road to go down.”

Instead, policymakers should “focus on making the world easier”, he argues in a new book, “Nudge: Improving Decisions About Health, Wealth and Happiness”, written with Cass Sunstein, a law professor (and an adviser to Barack Obama). By this he means defining more carefully and simply the financial choices that people have to make, and building “sensible default options” into the design of financial products, so that the do-nothing option is “financially literate”. Today, the best choice typically requires some working out and an active decision.
Indeed, one of the biggest problems may be the illiteracy of financial-service firms, which often fail to provide the products that poor consumers most want.
“One of the open secrets in this industry is that when people are engaged in behaviour that seems irrational, often it has a rational basis.” Which only goes to show that consumers are sometimes only as literate as the products the financial-services industry chooses to sell them.

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27 Apr 08

amar kasap

That many poor people do not have a bank account—and that few of them understand why this puts them at a disadvantage (let alone other essentials of personal finance)—is at the heart of “the civil-rights issue of the 21st century”, says Mr Bryant.

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19 Apr 08

FruFru FourOne

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06 Apr 08

Katie Day

A global crusade is under way to teach personal finance to the masses.

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Getting it right on the money

Apr 3rd 2008 | NEW YORK
A global crusade is under way to teach personal finance to the masses
For years John Bryant has been telling anyone who will listen about the problems caused by widespread ignorance of finance. In 1992, in the aftermath of the Los Angeles riots, he founded Operation HOPE, a non-profit organisation, to give poor people in the worst-hit parts of the city “a hand-up, not a handout” through a mixture of financial education, advice and basic banking.
In January George Bush appointed Mr Bryant vice-chairman of his new President's Council on Financial Literacy.
The council is not short of expertise. It is chaired by Charles Schwab, eponymous boss of a broking firm. Its other members include the head of Junior Achievement, which has been teaching children about money since 1919, and a co-author of “Rich Dad, Poor Dad”, a self-help bestseller. Already, it has approved a new curriculum for middle-school students, “MoneyMath: Lessons for Life”.
April has been declared Financial Literacy Month by Congress.
Meanwhile, on March 17th a new campaign to promote financial literacy in the developing world was launched at a conference in Amsterdam. Called Aflatoun (“Explorer”), after a cartoon character based on a Bollywood star, it is the brainchild of Jeroo Billimoria, a social entrepreneur who previously worked with street children in India.
It is a “well-established fact” that “a substantial proportion of the general public in the English-speaking world is ignorant of finance,” writes Niall Ferguson, an historian at Harvard University, in his forthcoming book about the history of finance, “The Ascent of Money”.
Instead, policymakers should “focus on making the world easier”, he argues in a new book, “Nudge: Improving Decisions About Health, Wealth and Happiness”, written with Cass Sunstein, a law professor (and an adviser to Barack Obama). By this he means defining more carefully and simply the financial choices that people have to make, and building “sensible default options” into the design of financial products, so that the do-nothing option is “financially literate”
Mr Thaler deserves to be taken seriously, as one of his earlier attempts to apply behavioural economics to saving has had impressive results. Recognising that people find it harder to save money they already possess than to promise to put aside what they might have one day, he designed the Save More Tomorrow scheme, which gets people to commit themselves to saving a slice of any future pay increases.
One of the most interesting attempts to combine teaching and superior products is taking place in New York, championed by a mayor, Michael Bloomberg, who made his fortune selling financial information. He has created an Office of Financial Empowerment, which is trying to use the powers of government to promote both financial education and better design of financial products.
With Miami, San Antonio, San Francisco, Savannah and Seattle, New York has formed the Cities for Financial Empowerment Coalition, which met for the first time to share ideas on March 18th. There was general agreement that education and better product design should go hand in hand.