The Newly Created Advisory Council on Financial Literacy

President Bush announced last week the creation of the Advisory Council on Financial Literacy More information is available on the White House web page: Operating under the guidance of the U.S. Treasury Department with the specific charge of keeping America competitive and assisting citizens in understanding and addressing financial matters, the 19-member council will focus … [Read more…]

Financial education: Does it work?

As additional evidence that financial illiteracy is considered a severe impediment to saving, both the government and employers have promoted financial education programs. Most large firms, particularly those with DC pensions, offer some form of education program. The evidence on the effectiveness of these programs is so far very mixed. Only a few studies find … [Read more…]

Financial education: Learning from other countries

The experiences of other countries offer important lessons for the United States. While the increase in individual responsibility that is required in the pension system we’re transitioning to (moving from Defined Benefit to Defined Contribution pensions) provides incentives for individuals to become knowledgeable and informed, one has to be cautious about relying simply on individual … [Read more…]

Financial illiteracy and debt

With the November elections rapidly approaching, millions of Americans are examining each candidate’s views on the country’s economic situation. Americans with unmanageable levels of debt, which, according to TNS’ survey, include over one in four Americans, will be particularly interested in candidates’ plans to help alleviate that burden. While strengthening family finances is a complex … [Read more…]

Where does illiteracy hurt?

While the low levels of financial literacy discussed in my previous blogs are troubling in and of themselves, what is most important are the potential implications of financial illiteracy for economic behavior. One example is offered by an article Hogarth, Anguelov, and Lee published in 2005, that demonstrates that consumers with low levels of education … [Read more…]