By Blaise Mazurkiewicz, guest columnist

According to our firm’s annual CPA/Wealth Advisor Confidence Survey three out of five (63%) respondents believed that financial literacy and awareness has not improved over the past two years. Even more troubling, the data found financial advisors were more pessimistic about the younger generation’s financial future than any other generation.

Why?

As a member of Gen Z, I’m not sure I agree entirely with that assessment. I do agree with the survey findings that our educational system is not doing nearly enough to prepare young people to be financially responsible adults. For instance, the State Department of Education does not require personal finance to be taught in schools unless there is a bill created by a state legislature and passed by the state’s voters.

Case in point: The high school I attended offers a basic one-semester class on financial literacy. I heard the class was okay, but not great. Since the class wasn’t required and I had a heavy academic load and sports commitments every semester, I didn’t take it. In fact, our firm’s report pointed out that less than half of U.S. states require their K-12 students to take a class in personal finance.

Does lack of financial literacy stem from school system neglect?

Absolutely. It’s an issue that needs to be addressed, not only by elementary and secondary schools, but also by colleges and universities. As our firm’s data showed, nearly seven in eight (86%) financial advisors believe that K-12 school, colleges, and universities could collectively make a bigger positive impact on America’s financial awareness and literacy than any other institution in our society – by far. But don’t just take it from me.

“Our school systems haven’t done enough,” agreed Bismaad Gulati, a Fordham University Gabelli School of Business student. “Most of my friends have gone through the same classes I have but aren’t as interested in finance or business as I am.” Gulati told me recently. “I think they’re not as well equipped, which is an obvious issue.”

Although bills have been passed to improve the gap in financial literacy education, it seems like lawmakers haven’t reached a large enough audience to make a significant change so far. As stated in our firm’s report, financial advisors overwhelmingly felt K-12 schools – more than any other institution in our society – could make the biggest impact on America’s financial literacy. Nearly three in five respondents (58%) agreed.

This needs to change.

Owen Brennan, marketing major at the University of Connecticut School of Business recently told me that personal finance classes should NOT be optional and that there should be more of them. “We shouldn’t be expected to fall back on material from our math courses in order to understand what’s going on. At a younger age, and especially in high school, we need somebody to help connect those dots for us,” Added Brennan.

From where I sit, the more dots that younger generations can connect, the better we can see the whole financial picture. Whether it’s student loans, personal investments, or just managing our money. It’s not just about doing the math, but understanding what the clear drivers of our financial well-being are.

What will the future landscape of financial literacy look like, especially for Gen Z and other younger members of society? Gulati said he hopes to see more required personal finance courses in schools, in addition to people taking better advantage of resources available to them. “The internet is a big place and our generation loves to use it,” said Gulati. “I just hope we can collectively figure out how to use it for more than just entertainment and leisure purposes though. If not, that’s sort of on you. Everyone is the master of their own destiny,” he added.

It’s hard to argue with Gulati here. Our generation has more access to (and willingness to use) information than any other generation in history. The way that we can quickly access information explains why overall literacy is higher than before. That being said, hopefully this will translate into higher financial literacy in the near future.

As Brennan said: “ The bright spot comes from our resources. We have access to great tools like YouTube, online courses, and social media influencers that can all help to generate higher levels of literacy,” added Brennan. With these tools in the hands of Gen-Z and other aging generations, the future offers a myriad of opportunities to improve our financial literacy.

How confident are you that the world’s younger generations can improve their financial literacy and overcome the disconnect between financial literacy and education?

Tell me what you think.

Blaise Mazurkiewicz is a marketing associate at HB Publishing & Marketing Company, LLC in Norwalk, CT

# Financialliteracy, #GenZ, #Education, #Finance

April and National Financial Literacy Month are in the rearview mirror. But that doesn’t we should take our feet off the gas pedal when it comes to addressing the nation’s financial literacy epidemic. According to our annual CPA/Wealth Advisor Confidence Survey, just one-third of financial advisors (38%) believe America’s financial awareness has improved in the two years since COVID surfaced – and they’re particularly worried about the lack of money skills among Millennials and Gen Z.

“One positive that came out of the pandemic is the spotlight on personal finance as an important lifelong skill for everyone,” said respondent Marie Burns a financial advocate. “Now more states than ever are proposing legislation to teach financial literacy in schools.” Once again, our survey respondents felt K-12 schools could make a bigger impact on America’s financial literacy than any other institution in our society.

But who knows how to teach financial literacy?

As a result of the school system’s lack of modernization, survey co-author Valentino Sabuco, Executive Director of The Financial Awareness Foundation, said experts who teach financial literacy are few and far between. “Many teachers unfortunately lack the knowledge themselves on financial literacy,” said Sabuco. “They are ill prepared to teach it to the next generation of students. For those that say they are teaching personal finance, we ask them: ‘Are your materials up to date? Are you touching all the bases?” More often than not, the answer is NO, lamented Sabuco.

Jim Stovall, motivational speaker and author of Millionaire Map told us that there is more information than ever about financial awareness, but we are bombarded with confusing, mixed messages as not all information is accurate and valid. “It’s not a matter of getting information, it’s a matter of getting the right information,” said Stovall.

According to Sabuco, many educators believe financial literacy only deals with savings, budgeting and debt management. They don’t address ways to help students get and stay organized, establish personal and financial goals, save for college or plan for other major expenditures such as cars and house down-payments. “So how do financially illiterate teachers successfully teach personal finance to students?” asked Sabuco.

Dr. Guy Baker, CFP, Ph. D, founder of Wealth Teams Alliance in Irvine, California told me quite simply that most Americans are financially illiterate. “A home economics course should be a core class for high schoolers,” said Baker. “It needs to teach students how to bank, how to save, how to invest and how to use a credit card.” Baker said it should teach them about buying a home vs. renting, buying a car. In other words, “All of the essentials responsibilities that are required to live a productive life.”

Dr. Christopher Sparks, Ph. D, of Academic Investment Management thinks there may be too many constraints on public schools to teach financial literacy effectively and that colleges and universities, may be better equipped. He’d also like to see financial advisors more involved with teaching financial literacy to the masses, but they tend to target those with significant investable assets. “Those who don’t have much to invest are largely ignored,” Sparks observed.

The simple answer to this complex question, said Sabuco, is to provide our youth with the “necessary life skills and problem-solving skills to have the best chance of living a successful life, without outliving their wealth.”

Many of these topics, said Sabuco, are built around the financial elements identified on The FA Infinity Lifelong Learning Symbol shown below

“If all the allied professions (attorneys, CPAs, financial planners, insurance consultants, etc.) took a collaborative and holistic approach, consumers would hear a similar message from several different perspectives and would be more likely to hear the message and act on it,” said attorney Martin M. Shenkman.

Lionel Shipman, a financial and life empowerment professional, told us that financial literacy education should start as early as elementary school. “As children continue their education through middle and high school, their knowledge and experience of financial literacy skills can be broadened and strengthen, preparing them to succeed financially in adulthood,” added Shipman. Ryan Vogel, CFP, Partner, Chief Planning Officer, Novi Wealth in Princeton, New Jersey, agreed. Even among schools that do have financial literacy requirements, Vogel said teaching good lifelong money habits should be part of ongoing curriculum, not a one-off required course like health or driver’s ed.

“In addition to teaching it in high school, there should be a more basic version taught in middle school and some type of financial literacy curriculum in 4th or 5th grade to get them started on the right path,” suggested Vogel.

Conclusion

Bottom line: Everyone from early childhood educators to high schools and university instructors, financial advisors, spiritual advisors and most importantly, parents setting a good example for their children, need to do their part. “We must change the system to help all children from a very young age to develop the financial literacy skill so that it will be part of their lifelong DNA,” said survey respondent Elena Zee, President & CEO Arizona Council of Economic Education (ACEE). Curing the financial illiteracy epidemic in this country takes a village. Are you willing to step up?

Don’t agree? Tell me why.

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TAGS: #financialliteracy, #financialawareness, #financialeducation, #smartmoney

Thanks to legislation approved on Wednesday, every year over 15,000 Connecticut infants born into low-income families will receive $3,200 government-funded savings accounts. The accounts are designed to provide qualifying children with an estimated $10,600 when they turn 18. The returns are based on a projected average rate of return on investment over 18 years of 6.9 percent, the same assumed rate of return for public pension plans in the Nutmeg State.

Under the bill, awaiting signature from Governor Lamont, $50 million a year will be directed toward providing accounts of $3,200 for about 15,600 children whose mothers are receiving insurance through HUSKY A, the state’s Medicaid program.

Connecticut is the first state in the nation to pass such a program.

While Connecticut has the highest annual income per capita in the country, it also has one of the highest rates of income inequality in the nation. The U.S. Census Bureau ranked Connecticut in 2018 as having the third-highest level of income inequality in the country, behind New York and Washington D.C, according to a report from Connecticut Voices for Children.

Once the qualifying children reach adulthood, they have until age 30 to decide what to do with the money.

The state gives recipient four options:

1. Pay for higher education.
2. Purchase a house within the state.
3. Start a business within the state
4. Put the money into a retirement account.

According to the legislation, beneficiaries must be CT state residents and must complete a basic financial literacy course (curriculum and passing grade still TBD) in order to access to the funds between the ages of 18 and 30. Allowable expenses include education, purchasing a home in the state, investing in a Connecticut-based business or “investing in financial assets or personal capital that provides long-term wage or wealth gains.”

There aren’t many other stipulations on the young adult beneficiaries.

It appears a recipient could use the money to flip houses rather than stay in the neighborhood and contribute to the community.  Yes, they could start a risky venture without having mentorship, a business plan or good banking relationships. They could trust unscrupulous partners, financial advisors or jealous spouses with the money. They could also invest in crypto or other “alternative assets” on the premise of generating outsize returns for their retirement.

Some will argue that doling out the money without sufficient oversight is too much for young adults to handle—young adults who haven’t received much in the way of financial literacy training from their schools or families. But you could also argue that they may earn valuable life lessons from financial mistakes made with the Baby Bond money—the same as trust fund kids do.

Then of course there’s the question of how to pay for the Baby Bond program.

CT State Representative Geoff Luxenberg—a leading proponent of the program– said a likely scenario is a “slightly higher tax on the wealthiest people.” No surprise there since CT is already one of the highest-taxed states in the nation. Shawn Woodson, Connecticut State Treasurer, said the state would also issue debt, since interest rates are at “historic lows”—but what if rates keep rising, as the Fed has hinted, down the road?

Not only could the state’s highest earning residents resent the program, but so might middle class and working-class families—who could narrowly miss out on the program while potentially strapped with student loans and other debt. Also, what happens if a family’s fortunes change for the better and a Baby Bond recipient is no longer in poverty at 18? On the flip side, suppose a family not born into poverty at the child’s birth falls into poverty a few years later and stays there?

“One of the most effective ways to narrow the racial wealth gap and break the cycle of poverty is for the State to establish saving accounts that directly invest in children born into poverty,” said Wooden in a press release. “By taking bold action now, we can change the life trajectories of thousands of Connecticut residents while also enhancing the economic trajectory of our State.”

Conclusion

We salute the bold thinking by the Nutmeg State to close the wealth gap. But why not take it a step further? Phase in the program gradually so you can make midcourse corrections and set up smaller accounts for children who are born just above the poverty line and still in need. That way a child’s future is not so heavily dependent on their family’s financial footing (or healthcare choices) exactly on the arbitrary day they are born.

The Full Version of today’s post has more.

What’s your take? I’d like to hear from you.

#wealthgap, #financialliteracy, #babybonds, #inequality