An Atlanta-based company, Southwire, recently developed an initiative called “12 for Life” after it discovered quite of a few of its employees younger than 19 lacked basic financial skills. The company began working with the Federal Reserve Bank of Atlanta to provide financial education to its employees.
Southwire now has a mentoring program, and it is working with local schools and financial professionals to help teach workers onsite about responsible financial decision-making.
Such initiatives, which are growing in the private sector, also have a place in the federal government, which is the single-largest U.S. employer, Richard Cordray, director of the Consumer Financial Protection Bureau, noted last week in prepared comments during a public meeting of the Financial Literacy and Education Commission. As such, the bureau has been working with the Office of Personnel Management and the Department of Labor as they encourage and assist other federal government agencies in developing robust financial education plans for their employees, he said.
The ultimate goal, Cordray noted, is to enable young people to pursue decisions that will allow them to achieve their future financial goals. “To that end, at the Consumer Bureau we are working on a project that specifically examines the issue of consumer financial well-being, he said. “We are evaluating just what financial well-being is exactly, what skills and behaviors help people achieve it, and how we can measure it.”
The bureau is leading an effort called the State Engagement Project, which is designed to gather input from state policymakers on resources and information that will be helpful for states to consider when determining the best way to incorporate youth financial education into their programs, Cordray said. “We think this is an excellent opportunity for federal agencies to partner with state policymakers to expand access to K-12 financial education and help develop ways to offer hands-on financial learning,” he said.
Cordray acknowledged the need to overcome the hurdles faced integrating financial education into K-12 education. “Having come from state and local government myself, I understand the important role played by state and local policymakers,” he said. “The objective here simply cannot be met at the federal level alone. It thus is critical that we work well and closely with our state and local partners to expand access to financial education for America’s youth.”
In separate prepared remarks during the commission hearing, Mary John Miller, Treasury under secretary for domestic finance, noted the recent formation of the President's Advisory Council on Financial Capability for Young Americans, which held its first meeting in March. The council is largely comprised of leaders from across the private sector, education, and government.
“The council will help identify approaches to building the financial capability of young people in their families, schools, communities and workplaces,” she said.
The council also will help promote the mission of starting early for financial success, Miller said, noting, however, that financial education means more than just preparing young people to make informed decisions today. “Our efforts must teach them how to plan for tomorrow,” she said, citing financing higher education planning for retirement as two areas such consumers confront.
This Obama Administration has made college affordability a key focal point because higher education is a critical driver of upward mobility for many young Americans, Miller said. Among the steps taken to help make college more affordable include lowering interest rates on student loans and increasing the maximum Pell Grant award by more than $900, she added.
“These steps are critical because we know that increased debt burden from student loans can impede saving, and may hurt borrowers' credit scores,” Miller said. “This, in turn, has the potential to impact young peoples' ability to buy homes, start businesses, and save for the future.”
To encourage savings, President Obama in his State of the Union address instructed Treasury to create a new retirement savings option for working Americans. In response, Treasury is developing the government-backed and protected myRA program, which will enable consumers to begin saving with a minimum contribution of $25 and contribute $5 or more every payday automatically through payroll deductions, Miller said.
“It is intended to be a starter tool, and may be especially useful for part-time or seasonal workers who may not qualify for an employer-sponsored retirement plan,” she said “myRA is portable, so workers will be able to easily move their savings with them when they change jobs.”
Miller encouraged employers to work with Treasury to make the product available to their employees. “We would welcome your support of this effort to get this valuable savings tool to the Americans who could most benefit from it,” she said.