I’ve been involved in a national group studying financial literacy education in public schools. The statistics demonstrating the consumerism and indebtedness of the American public are astounding. It’s no wonder our federal government isn’t fiscally responsible–a good number of our citizens aren’t either.

The Problem

Americans carry about $800 billion in consumer debt. [1] At the end of 2004, nearly half (46.2%) of all families carry credit card balances month-to-month, and that percentage is increasing. The average balance has risen 15.9% over three years to $5,100. (The median was $2,200, which indicates the mean is skewed high; some consumers are in well over their head.) [2]

We’re spending more than we make. The U.S. Bureau of Economic Analysis is reporting a negative personal savings rate. [3] A CNN/Money article from the tail end of 2005 offers some good commentary:

The Commerce Department calculates the savings rate by taking the difference between after-tax income and all expenditures, including housing, food and clothing.

June was only the second month the rate was at zero since the monthly figure started being calculated in 1959. The annual rate for 2004 was 1.8 percent; the last time the annual rate was lower was 1934. [Emphasis added.]

CNN/Money, “The zero-savings problem” by Chris Isidore, August 3, 2005
Referenced Tues, 18 July 2006, 15:42 (MDT)

We’ve seen large national companies go bankrupt. Our national debt is expanding, and government agencies bond to cover recurring costs. Our government isn’t setting a good example. Parents making poor credit choices are ill-equiped to teach their children solid financial skills.

As home prices increase, Americans are borrowing against the equity of their home for more purchases. The increased spending has stimulated the economy, but the negative consequences are looming.

It’s a problem that needs fixing. Is public education the proper place for a solution?

Posted in Education, Financial Literacy