Only Coordinated Action Can Improve Financial Literacy Outcomes (14:31)
Action among various stakeholders, including government agencies, financial institutions, and community organizations, is essential
Broadcast Retirement Network’s Jeffrey Snyder discusses financially literacy efforts across the United States with Tim Rouse, Snezana Zlatar and Michael Ellison of The SPARK Institute.
Jeffrey Snyder, Broadcast Retirement Network
This morning on BRN Finance, only coordinated action can improve financial literacy outcomes. Joining me now to discuss this and a lot more, Tim Rouse is the Executive Director of the SPARK Institute, and Snezana Zlatar and Michael Ellison are both members of the SPARK Financial Literacy Committee. Michael, Snezana, Tim, so great to see you again.
Thanks for joining us on the program this morning.
Michael Ellison, The SPARK Institute
Thank you.
Jeffrey Snyder, Broadcast Retirement Network
Tim, I want to start with you and just to pick up the conversation from last year, we’re going to be talking about some survey results from SPARC Corporate Insight. Why is financial literacy an important issue for our industry, the retirement industry?
Tim Rouse, The SPARK Institute
Well, great question, Jeff. American workers, whether already in the workforce or entering for the first time, need basic financial education to make important decisions about their future. Often these workers’ first critical financial decision is when to begin to save for retirement and how much.
But to make this decision, they typically weigh it against other financial demands on their income. This is where the retirement industry comes in. And it helps with financial wellness programs and other education.
However, the retirement industry is filling an important gap in the basic financial education these workers need. The gap really, honestly, can be better addressed as these workers are going through school.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, a really good point. And just to kind of pick up on something you touched on, Tim, just how is the industry, you mentioned some of the education, the financial wellness initiatives, but how has the industry contributed to this financial literacy equation?
Tim Rouse, The SPARK Institute
Well, this committee that Snezana and Mike are part of is a good example of the industry’s commitment to that. A year and a half ago, one of our members had approached us and said, we are all doing financial literacy programs on our own. Wouldn’t it be better and wouldn’t there be some sort of a force multiplier, if you will, by combining forces and ask Spark to be the conduit for that?
And so this is the industry stepping in and trying to push financial literacy forward across the board.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, and we do need a force multiplier. So it’s always great to have the contributions of the financial services in the retirement industry. Mike, I want to come to you because you’re like the I’m going to call you the brainiac and the data guru here.
You looked at that. You were the one who helped lead the survey. I know it’s a team effort, but you helped lead the survey.
Were there any results that caught you off guard or really surprised you that maybe were different from the prior survey?
Michael Ellison, The SPARK Institute
Yeah, there were a couple of things. One thing that was confirmed based on that matches some other surveys out there, we’re really facing across all cohorts that we studied. So high school, college and what we added this year were recent recent hires into the workforce.
Over half of everybody really did have experiences or displays lower literacy, lower financial literacy based on the surveys that we had. And so there’s you know, I think that’s something consistent that we with what we found last year. But a couple of surprising things was when we we asked when they thought it made sense to start retiring or start saving for retirement, the people with who displayed lower literacy were saying like 32 or 30 and some groups even said 40 was when they should start retiring.
And these add up to a million dollar mistakes in your portfolio later later in life. And then another area, we also look at where they’re getting their advice from, their financial advice and your parents. Parents is still a big issue, a big source of information.
Obviously, Internet, unfortunately, things like social media, YouTube are very high. But what was really interesting, particularly as we added in the recent hires, one of the lowest things was employers and teachers. So here we have these new people starting out at work.
They are getting on boarded into retirement plans. And yet the employer is the last people they’re going to to find to learn about financial literacy and financial issues.
Jeffrey Snyder, Broadcast Retirement Network
And Mike, just to follow up on that, where does financial stress we’re coming through? I think for most people, very difficult time, high inflation. You know, the price of gas at one point was was much higher than it is today.
Food prices. How about that financial stress? How does that kind of play in to these survey results or does it?
Michael Ellison, The SPARK Institute
Oh, it absolutely does. So, you know, we did touch on that and where what are kind of the stressors that are preventing you from from saving? And some things like I just don’t make enough money to save for retirement.
So they think that they can’t save for retirement at any level or I don’t need to start planning retirement yet. The people who said this, they thought, you know, when when we asked, when do you think you need to plan? It was 40.
So, you know, there’s just there’s a lot of stressors there. And the one is that I don’t have the time to I still have time to save for retirement. I have expenses that take too long.
My employer doesn’t provide one. So, you know, there’s this the stress level, I think, really probably is one of the bigger drivers in preventing people from saving for retirement. Yeah, it’s such interesting data.
Jeffrey Snyder, Broadcast Retirement Network
Snezana, how the 50 states, I think Tim alluded to this. Look, the teachers, the curricula in school, really important. Have the 50 states made any progress this year in terms of adding financial literacy curricula to their school, high school, middle school students?
Snezana Zlatar, The SPARK Institute
Great question, Jeff. First of all, I would say, as Mike just shared, there is clearly an opportunity for our schools to do much more to prepare young people to make good financial decisions and to achieve that financial retirement security. We are definitely seeing some positive trends as of late, according to the Council for Economic Education.
Thirty six states today have some form of financial education requirements in place for high school students. We have actually seen a surge of this type of state legislation, especially in the past couple of years. But there are noticeable differences in the approach to this issue.
For example, in some states, personal finance content can be integrated into other high school courses, which frankly somewhat limits how much students can learn about specific financial topics. On the other hand, there are 21 states now that require students to take a separate financial education course in order to graduate, which is probably a much more effective approach. However, even when the state educational requirements are adopted, there is still an issue of funding the programs.
There is an issue of making sure that the curriculum is appropriately structured and also that the teachers are well prepared to deliver these personal finance courses, which is not necessarily in their second nature. So this is where we need much more significant partnership between the public and the private sector to resolve these obstacles and to drive successful outcomes.
Jeffrey Snyder, Broadcast Retirement Network
So it’s just a follow up on that, Snezana. So you mentioned, I think, 36 states. What do we need to do to get the other 14 states?
I think a lot of the, I mean, financial literacy, it comes in different forms. But aren’t there tools and things that people can leverage in these other states? Is it just that they may be, it hasn’t been on the legislative agenda or the school board agenda yet, or there’s not as much demand?
Snezana Zlatar, The SPARK Institute
Yeah, I think, you know, probably all of the above is a factor here in the mix. I would say that, you know, in some states the issue is, you know, if we put financial literacy into the curriculum, what do we take out of the curriculum? In some states, it is how do we fund the program?
In some other states, it’s the question of really how do we prepare our teachers? Because they really have no experience in teaching courses like this. But having said all of that, we’re moving the ball forward or we’re seeing the ball being moved forward, I should say.
For example, since 2023, Pennsylvania, Oklahoma and California are the states that passed financial education requirements for high schools, which is great news. There are currently similar efforts underway in the state of Washington and the state of New York. And again, just want to reiterate this point, why this matters.
There is evidence that in states that require a personal finance course to graduate, we have situations that are evidence rather that individuals’ credit scores improve, that their debt delinquency rates decrease, that, for example, payday lending declines, that low-income students are much more likely to apply for aid and receive lower cost student loans, that even student loan repayments increase and so forth and so on. So bottom line, you know, receiving appropriate financial education in high school and in college matters a lot.
And frankly, same applies to the workplace, especially for those who are just starting their jobs and their careers. So anything that our industry can do to support those efforts will have a significant, really positive payback in the long run. I strongly believe in that.
And that’s what our Financial Literacy Committee at SPARC is focused on. All these efforts will help us raise a new generation of savers and investors, hopefully, that are much more knowledgeable, empowered and confident.
Michael Ellison, The SPARK Institute
Yeah, Jeff, if I can just jump into just because our surveys kind of bore some of the benefits or showed some of the benefits of these, because we did ask students, how prepared do you feel going into to manage your financial finances? And those that had actually did participate in financial classes in high school, it was a seven point bump over those who didn’t. And in college it was a 14 point bump.
So clearly the classes do have an impact.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, I think it’s I think it’s exciting. Look, I’m a retirement nerd, a financial nerd, but I think it’s pretty exciting. And if you just kind of portray it as this is your independence and your future, I think it kind of hopefully the other 14 states will follow.
Tim, we’ve got some limited time left, but I do want to ask you, Tim, let’s start with you first. What’s on the 2025 agenda for SPARC when it comes to financial literacy? Because you’re doing a lot, but I imagine there’s more to be done.
Tim Rouse, The SPARK Institute
Sure, Jeff. Well, first of all, we’re going to continue this annual survey in partnership with Corporate Insights. Our goal is to expand this survey to better understand the most important underlying educational needs that Americans have when it comes to financial literacy.
Additionally, we have become a member of the Fined 50 coalition that SNESANA is working very closely with them and their efforts to promote financial literacy in high school education curriculum around the around the country.
Jeffrey Snyder, Broadcast Retirement Network
And from your perspective, what will you be focused on as a committee of SNESANA?
Snezana Zlatar, The SPARK Institute
Yeah, I would just second what Tim mentioned, and there are several things that we want to work on. We want to work on also on our own point of view, what we believe should be some core elements of financial literacy for students in high school and in college, frankly, to make them more effective participants in the workplace retirement plans eventually. So we look forward to continuing to engage SPARC member organizations through our committee and just continue to exchange best practices, because quite a few organizations are already focusing on this topic.
As you know, Jeff, we want to continue to support the research as it was mentioned a minute ago by Tim and all the great work that Mike and his team have been doing. We want to continue to partner with academia and also for not-for-profit organizations that are focused on financial literacy, such as Fined 50 coalition and Council for Economic Education. And then certainly we we want to also engage our members to provide public policy advocacy for these topics if and where it’s needed.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. Quick question for you guys, are they still teaching kids how to write checks? Because I haven’t written a check in like over a year.
So they’re still teaching kids how to do that.
Tim Rouse, The SPARK Institute
I don’t think so, Jeff, but.
Jeffrey Snyder, Broadcast Retirement Network
Now they’re all they’re all using one of these.
Tim Rouse, The SPARK Institute
Yeah, that’s right.
Jeffrey Snyder, Broadcast Retirement Network
That’s right. Well, that’s right. They’re all venmoing to each other.
Well, Tim stays out of my great to see a great work as always. And we look forward to catching up with you again very soon.
Tim Rouse, The SPARK Institute
Thank you, Jeff.
Jeffrey Snyder, Broadcast Retirement Network
Thank you, Tim. And don’t forget to subscribe to our daily newsletter, The Morning Pulse for all the news in one place. Details, of course, at our website.
And we’re back again tomorrow for another edition of BRN. Until then, I’m Jeff Snyder. Stay safe.
Keep up saving. And don’t forget, roll with the changes.