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Most Lawmakers Don’t Have Economic Education
The Wall Street Journal

As Congress works on one of the most important pieces of economic legislation in a generation, a Washington research group has pointed out that more than 8 in 10 members of Congress don’t have a formal educational background in the business, economics, or finance fields.

The research by the Center for Economic and Entrepreneurial Literacy, which aims to educate the general public about finance issues, showed that about 14% have degrees in economics-related fields and just 6.7% specifically have an economics degree. More than 30% of members have degrees in politics and government, while 18% majored in humanities.

The New York Times

A recent survey, done by the Center for Economic and Entrepreneurial Literacy, a Washington-based research center, asked 1,000 people in April to choose the four most relevant factors in obtaining a mortgage. Nearly 70 percent did not identify their credit score, which chiefly determines the borrower’s loan eligibility and interest rate.

It is little wonder, then, that borrowers often cannot navigate the more complex world of closing costs, which involve paying an array of fees to the loan’s originator, appraisers and those who vouch for the legitimacy of the title, among others. “You’ll absolutely find that if people don’t have the economic education background they need, they’ll end up paying more for a mortgage,” said Tim Miller, a spokesman for the Center for Economic and Entrepreneurial Literacy.

Bloomberg

Americans' lack of financial sophistication is a cause, not just a symptom, of the credit crunch, said James Bowers, managing director of the Center for Economic and Entrepreneurial Literacy, a nonprofit group in Washington. It may be a reason people are willing to take out loans for homes they can't afford or add to credit card debt at adjustable rates.

"When we go to a mechanic, we trust them to fix our problems," he said. "But right now, the mechanics on Wall Street can't get their own cars to start."

James Bowers: Financial illiteracy plagues America
Providence Journal

Why are Americans making such bad financial decisions? Many of us just don’t know any better. We may be home to the world’s largest economy, and a public-school system that spends over $500 billion every year, but only three states mandate personal-finance classes in schools. The other 47 presumably expect students to learn from their parents, three-quarters of whom admit they are unprepared to teach their kids about personal finance.

John F. Kennedy called on Americans to “think of education as the means of developing our greatest abilities.” We must now focus on developing our ability to make smart financial decisions through education, because a nation of economic illiterates cannot prosper. We must not repeat the mistakes that got us into this credit mess, and we must be vigilant in our efforts to increase financial education for all Americans.

Business Ignorance On The Rise
Jamestown Post Journal

Because of this trend of economic ignorance, the Center for Economic and Entrepreneurial Literacy has implemented a number of programs, all designed at educating the public, explained Tim Miller, a spokesperson for the center.

Too many young adults are starting careers without sufficient knowledge of key financial issues,'' Miller said. ''We focus on economic education by presenting the facts to the public in a way that is easy to grasp and implement in their lives.

Cape Cod Times

"Americans are astonishingly illiterate when it comes to very basic facts about personal finances," said Tim Miller, spokesman for the Center for Economic and Entrepreneurial Literacy, an educational project of the Employment Policies Institute in Washington, D.C. "Financial illiteracy has been one of the major causes of the subprime mortgage crisis."

Press Releases

05/13/09 - Econ4U Supports Efforts to Make Credit Card Bills Fairer, More Transparent

Legislation Currently Before Congress Would Bring Useful Reforms to Credit Card Industry

WASHINGTON D.C.- Econ4U today expressed its support for rules currently being considered by the United States Senate, which would make credit card bills more transparent and protect borrowers from hidden fees. While we do not endorse all the aspects of this legislation, the bill contains some core reforms that will empower people to make responsible decisions with their finances.

The two key provisions that will help borrowers throughout the country are:

Less tiny print: For starters, you can say goodbye to tiny and unreadable fine print: all disclosures must be in 12-point font or larger. This is such a no-brainer it’s hard to imagine anyone but magnifying glasses manufacturers opposing it.

No sudden/arbitrary rate increases: When you sign up for a credit card, or any other loan, you expect to know the interest rate you’ll be charged. Recently, however, a lot of credit card customers have been surprised with arbitrary rate increases, even if they never missed a payment. Under the new law, if you are carrying a balance at 10% fixed APR, you’ll know that interest rate won’t change (unless your monthly payment is late, or it’s a promotional rate that expired). And if it does change, you’ll have at least 45 days’ notice, plenty of time to look around for a better card and interest rate.

“It is important that all financial institutions make a good faith effort to ensure that contracts are easier to read, that there are no surprises lurking in the fine print, and no hidden fees. Borrowers who make their payments in full and on time should not have to fear surprise, arbitrary rate increases,” said James Bowers, Managing Director of the Center for Economic and Entrepreneurial Literacy. “There is an epidemic of financial illiteracy in this country and policy makers should work to make sure that Americans have all the tools at their disposal to make wise financial choices. If we eliminate confusing contracts and hidden fees as well as promote a renewed focus on financial literacy, the public will be better prepared to weather this financial crisis, and less likely to make the same mistakes again in the future.”

The Center for Economic and Entrepreneurial Literacy, Econ4U.org, is a non-profit organization promoting financial education. Its economic education program presents facts on personal finance, business economics, entrepreneurship, and government spending in unusual venues such as movie theaters, restaurants, and bowling centers.

03-31-09 - In the Midst of Economic Crisis, New Survey Finds Majority of Americans Confused About Personal Finance

Survey Demonstrates Need for More Adult Economic and Financial Education

WASHINGTON DC – With tomorrow marking the start of “Economic Literacy Month,” the Center for Economic and Entrepreneurial Literacy (CEEL), Econ4U.org, today released a new survey that underscores the need for increased education on personal finance and economic issues. The national survey conducted last week shows that an overwhelming number of Americans are unable to answer even the most basic questions about borrowing, interest rates, and economic terms.

Startling highlights from the multiple choice survey include:

53% of respondents did not know what the Dow Jones Industrial Average was.
52% could not describe the advantages of a Roth IRA.
43% could not identify a FICO score as the most important factor in receiving a loan.
76% did not know that when in need of short-term emergency cash, bouncing a check costs more than wire transfers and short-term payday loans.
71% of people severely underestimated the amount of time it would take to pay off a credit card balance making only the minimum payments.

Later this week CEEL will release further details of the survey which will show how Americans are coping with the financial crisis as well as how it has affected them.

"Considering the wall-to-wall media coverage of the financial crisis, it is startling to see how few Americans have a grasp on the most basic economic facts,” said James Bowers, managing director for CEEL. "It is clear that we need to increase personal finance education at all ages so we have better informed employees, borrowers, and voters. Americans need the tools to understand both their own personal finances and the economy at large."

01/06/09 - Five New Year’s Resolutions to Help Your Personal Finances

Econ4U.org Offers 5 Useful Tips for Managing Your Finances in the New Year

WASHINGTON, DC – While it is important to make prudent financial choices in good times as well as bad, with the economy hitting a rough patch many Americans are taking a closer look at their budget to ensure they are making the right financial decisions for their family in the new year. The Center for Economic and Entrepreneurial Literacy (CEEL), Econ4U.org offers five easy-to-keep New Year’s resolutions which can help you manage your budget in 2009.

Don’t incur any overdraft or non-sufficient funds fees. Overdraft fees are more expensive than any other conceivable type of short-term borrowing. Instead of paying up to $40 for as little as a $1 overdraft, keep track of your account balance. Ask your bank if they offer free online banking, and check your balance regularly to avoid any surprises. Young adults and low-income Americans are disproportionately bearing the brunt of the expensive and often hidden fees.
Make a budget and eliminate unnecessary expenses. By keeping track of your budget, setting realistic goals, and putting money aside for unexpected expenses, you can ensure that you aren’t increasing your debt in 2009. Everyone has items in their budget that could be cut or replaced. Whether it’s substituting free office coffee for your $3 morning latte or cancelling the newspaper subscription (most newspaper content is available online now anyway), a few small choices to cut expenses can make a big difference in your year-end bottom line. Cutting that $3 per day coffee out of the budget saves you more than $750 over the course of the year!
Pay your bills on time. Our most recent financial literacy survey showed that 1 in 3 Americans paid a bill late in 2008, and most of those people had the money to make the payment! The interest rate charged on late bill payments is more expensive than any other borrowing option, except bank overdraft fees. And each bill you pay late can be another red mark on your credit score.
Find out what your credit score is. Lenders use credit scores to determine whether or not you qualify for a loan, what the interest rate on that loan will be, and how high your credit limits are. Know what your credit score is -- and how to improve it -- so that you can save money on interest and ensure you won’t be left out in the cold when you need a loan.
Reassess all of your fixed bills. The cell phone, cable, or insurance plan you signed up for a couple years ago might not be the best available plan for your budget today. Can you cut down the amount of monthly minutes you are paying on your cell phone? Eliminate your home phone entirely? Cancel those premium channels? Raise the deductible on your insurance? Going through each of these bills one by one will almost certainly yield results.

“In 2009, it is important that all Americans redouble their efforts to ensure that they have the knowledge to make the best financial choices for their families and their budgets,” said James Bowers, Managing Director of CEEL. “Whether it is avoiding overdraft fees and late payments or cutting back on superfluous expenses, the new year is a good time to make a positive change in your personal finances.”

Go to Econ4U.org to learn more.

Happy New Year from Econ4U.

12/15/08 - Econ4U Launches Economic Literacy Initiative in Washington, D.C.

Television, Radio, and Print Advertising Campaign to Fight Economic Illiteracy in the Nation’s Capital

WASHINGTON, DC – The Center for Economic and Entrepreneurial Literacy (CEEL, Econ4U.org) today launched a $1 million economic literacy campaign in Washington, D.C. with a full page advertisement in the Washington Post. The ad, which highlights the “5 Biggest Credit Myths,” is part of a larger effort including radio, television, online, and outdoor advertising to promote economic literacy.

Econ4U “Fact of the Day” radio messages are running on WTOP, WAMU, WJFK, and WASH-FM. These PSAs provide clear and helpful advice regarding mortgages, credit, personal finance, and macroeconomic issues. A television ad running on local cable warns viewers of the dangers of complex and confusing mortgage contracts, in the context of children buying a dollhouse. It illustrates how confusing getting a mortgage can be, and directs viewers to Econ4U’s online resources. You can view the ad at http://Econ4U.org/.

CEEL has launched this campaign as a way to remind lawmakers and the public of the importance of personal finance education. The subprime mortgage crisis is a clear example of how economic illiteracy can have disastrous effects for our country and our economy. A recent CEEL survey showed that most Americans do not know what a subprime mortgage is, cannot subtract 25% from 8, and have overdrawn their personal checking account at least once.

“Economic illiteracy is at the heart of our current economic crisis,” said James Bowers, Managing Director for CEEL. “Many Americans find themselves knee-deep in mortgages that they don’t fully grasp and cannot afford. A majority of Americans don’t understand some of the most basic facts about the economic crisis and many don’t have the tools to manage their personal finances.”

“It is our goal to expand economic education to Americans of all ages so that we will have better informed employees, borrowers, and voters.”

12/11/08 - In the Midst of Economic Crisis, New Survey Finds Most Americans Don’t Understand Basic Economics

Survey Demonstrates Unprecedented Need for More Economic and Financial Education

WASHINGTON DC - The Center for Economic and Entrepreneurial Literacy (CEEL), www.econ4u.org, today released a new survey that underscores the need for increased education on personal finance and economic issues. The national survey conducted last week shows that an overwhelming number of Americans are unable to answer some of the most basic questions about borrowing, interest rates, terminology, and even basic math. More troubling is that many Americans admit to making poor decisions with their own personal finances.

Highlights from the survey include:

54% of respondents could not identify what a subprime mortgage was.
56% of respondents could not identify FICO score as the most important factor in getting a loan.
65% of respondents could not identify what would remain if you subtracted 25% from 8. One in three respondents could not identify what 1% of 50,000 was.
75% did not know that when in need of short-term emergency cash, bouncing a check costs more than wire transfers, credit card advances, and short-term payday loans.
Half of respondents have overdrafted their checking account at one time, while a third of respondents have paid a bill late in the past year.
35% of respondents admitted to not having a family or personal budget that would allow them to conceivably eliminate their credit card debt by the end of 2009.

More details can be found at www.econ4u.org.

Next week CEEL will release a special Christmas economic literacy survey that further illustrates Americans‘ lack of knowledge regarding their personal finances this holiday season.

“Economic illiteracy is at the heart of our current economic crisis,” said James Bowers, managing director for CEEL. “Many Americans find themselves knee-deep in mortgages that are far too expensive and that they don’t understand. It’s troubling to see just how deep adult economic illiteracy runs. A majority of Americans don’t understand the most basic facts about the economic crisis and many don’t have the tools to manage their personal finances.”

“It is clear that we need to increase personal finance education for adults so we have better informed employees, borrowers, and voters.”

This press release presents the findings of a telephone survey conducted by Opinion Research Corporation among 1,004 adults living in private households in the continental United States.

Find more fast facts about personal finance and take our economics quizzes at www.econ4u.org.

10/01/08 - Amidst Economic Crisis More Than 8 in 10 Congressmen Have No Background In Economics or Business

Capitol Hill Reflects The Public’s Economic Illiteracy

WASHINGTON DC – A Center for Economic and Entrepreneurial Literacy (CEEL) analysis of economic education among congressional members revealed that fewer than 15% of current members have degrees in the business, economics, or finance fields. The research showed that 30.5% of congressional members studied politics and government, while 18.1% majored in humanities. In fact there are more members who studied science (7.5%) than economics (6.7%).

The lack of personal finance education in America has resulted in widespread financial illiteracy throughout the country. That illiteracy has been partly to blame for the current credit crunch, as Americans at all income levels acted recklessly by taking on too much debt.

CEEL’s economic literacy project, Econ4U, has been advertising in the subway station that serves the U.S. Congress as a way to promote financial literacy. The Econ4U quizzes ask basic personal finance questions and direct congressmen and hill staffers to “get the facts.” You can learn more about our economic literacy programs at www.econ4u.org

“Financial literacy is woefully inadequate in this country and we have been advocating for increased education in economics and personal finance in American public schools,” said James Bowers, managing director of the Center for Economic and Entrepreneurial Literacy. “But after watching the events of this week, a crash course on Capitol Hill might not be a bad place to start.”

“More than 8 in 10 congressmen received no formal schooling in economics or business; it’s interesting that those who are responsible for solving the biggest economic crisis in generations don’t have the educational background to know the difference between commercial paper and copy machine paper.”

“It is time we increased our commitment to financial literacy for Americans in all walks of life,” Bowers concluded.

5/22/08 - National Survey Finds Low Economic Literacy

WASHINGTON DC – The Center for Economic and Entrepreneurial Literacy (CEEL) today released a public service announcement (PSA) along with a new survey that both underscore the need for increased education on personal finance and economic issues. The national survey conducted this month shows that an overwhelming number of Americans are unable to answer even the most basic questions about borrowing and interest rates.

Startling highlights from the survey include:

69% of respondents do NOT know that you have to pay both the interest on your entire balance as well as a late fee when making a late credit card payment;

97% of respondents can NOT identify the percentage that service fees typically take out of a $20 ATM withdrawal. Over 90% either didn't know how much the fee would be or thought it was less than it really is.

Nearly 70% of respondents did NOT identify "FICO score" as the most important factor in obtaining a home loan, when asked to choose from a list of four factors;

Only 16% of respondents knew that you can withdraw money from a Roth IRA for education expenses, your first home purchase, and retirement spending.

In order to highlight this problem, CEEL's public service announcement will be distributed to over 1000 local television channels across the country. The PSA features three children discussing what their loan options would be when purchasing a doll house. The ad illustrates how confusing getting a mortgage can be especially for those who haven't been educated on the subject matter. You can view the ad at http://econ4u.org/

"When so many Americans are unable to answer the most basic questions about personal finance and debt, it is clear that economic illiteracy is a problem that needs to be corrected in this country," said Kristen Lopez Eastlick, senior economic analyst for the Center for Economic and Entrepreneurial Literacy. "You don't have to watch the Suze Orman Show to realize just how important it is that we increase personal finance education at a young age so we have better informed employees, borrowers, and voters."