The huge cost of financial illiteracy
Literacy Month has drawn to a close, and Financial Literacy Month has begun. Time to put down your Mark Twain and Ernest Hemingway, and pick up your credit card statements and mortgage balances. See if you can figure out where you stand fiscally. If you're an average American, odds are you have no idea.
The Obama administration seems to agree. Deputy Treasury Secretary Neil Wolin recently appeared before the Chamber of Commerce to pitch the administration's case for financial reform. Though I can't agree with everything Wolin said, one portion of his speech in particular rang true.
"In the years leading up to the crisis, millions of Americans and small businesses were sold products they didn't understand and couldn't afford," he said. "Plenty of households made irresponsible choices."
As the Center for Economic and Entrepreneurial Literacy (CEEL) has shown, the average person's ignorance of basic financial terms is shocking. This fundamental financial foolishness has helped bury the country in a mountain of money woes. The problem starts early. A 2009 CEEL survey showed that college kids have a better understanding of playing cards than credit cards. That can be the only explanation for 42 percent of college freshmen being credit-card dependent, racking up high-interest debt that will haunt them for years. Of course, they might not realize their folly since 44 percent of those surveyed don't even know their primary card's APR, or annual percentage rate.
Credit card debt isn't the only problem facing college students. More than half had overdrawn their bank account, while almost two-thirds don't know that bouncing a check — at an average overdraft fee of over $27, according to
The Obama administration seems to agree. Deputy Treasury Secretary Neil Wolin recently appeared before the Chamber of Commerce to pitch the administration's case for financial reform. Though I can't agree with everything Wolin said, one portion of his speech in particular rang true.
"In the years leading up to the crisis, millions of Americans and small businesses were sold products they didn't understand and couldn't afford," he said. "Plenty of households made irresponsible choices."
As the Center for Economic and Entrepreneurial Literacy (CEEL) has shown, the average person's ignorance of basic financial terms is shocking. This fundamental financial foolishness has helped bury the country in a mountain of money woes. The problem starts early. A 2009 CEEL survey showed that college kids have a better understanding of playing cards than credit cards. That can be the only explanation for 42 percent of college freshmen being credit-card dependent, racking up high-interest debt that will haunt them for years. Of course, they might not realize their folly since 44 percent of those surveyed don't even know their primary card's APR, or annual percentage rate.
Credit card debt isn't the only problem facing college students. More than half had overdrawn their bank account, while almost two-thirds don't know that bouncing a check — at an average overdraft fee of over $27, according to
