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Fighting (Financial) Illiteracy 

Getting By: How Vermonters Are Surviving the Recession

April is National Financial Literacy Month. Here’s a pop quiz in honor of the occasion: This year, the average American is more likely to a) graduate from college, or b) file for bankruptcy.

The correct answer is “b”.

It’s not just a recession thing. The personal bankruptcy rate has risen steadily since the 1980s. It dropped after an overhaul of the bankruptcy laws passed in 2006, but now it’s going up again. In 2008, nearly 1.1 million personal bankruptcies were filed in the U.S.; couples accounted for more than 40 percent of them.

What’s pushing the rate so high? Gregg Mousley, director of the Resource Center at the Vermont Student Assistance Corporation, suggests the increase is driven in part by a lack of financial literacy, particularly among 18- to 25-year-olds, who are the most likely to max out credit cards and fall behind on student loan payments.

One of many people working to reverse the trend, Mousley is also the president of Vermont Jump$tart Coalition, a volunteer-run group that promotes financial literacy education in schools. It’s the local chapter of the national Jump$tart Coalition for Personal Financial Literacy, founded in 1995.

Jump$tart encourages schools to step up their teaching of dollars and sense. Mousley points out that Vermont students can currently graduate high school without ever receiving a lesson in money management. Though Vermont includes financial literacy in its official educational standards, the state doesn’t test students on it. Sometimes motivated teachers take the initiative, Mousley reports, but others may not broach the money subject because they don’t feel comfortable with it themselves.

A 2008 Jump$tart survey, released a year ago this month, proved his point. The multiple-choice test asked graduating seniors about savings, investing and basic money management. The average score was just 50.3 percent — a failing grade. Only 3 percent of students who took the test scored 75 percent or higher.

And it’s not like the questions covered complex financial instruments such as mortgage securities and credit default swaps. Here’s a sample: “Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income? a) When you need to buy a car to get to a much better paying job; b) when you really need a week vacation; c) when some clothes you like go on sale; d) when the interest on the loan is greater than the interest you get on your savings.”

Slightly more than half of Vermont seniors sampled chose the correct answer, “a.” Unfortunately, a third of the kids who took the test picked “d.” Apparently they believe that taking out a risky loan makes more sense than saving prudently. Yikes.

A recent survey conducted by the Girl Scouts of the Green and White Mountains and the Vermont Commission on Women drives home the point that financial education usually takes place at home — if at all. Of the 100 Vermont girls from 42 schools who were surveyed, nine in 10 reported getting most of their financial info from their parents. While nearly all said they accessed some kind of financial services, only one in five knew how to read a bank statement or balance a checkbook.

For the past four years, Jump$tart has focused on providing resources to teachers and parents to help them help their kids. The group hosts conferences for parents and teachers and a daylong “financial fitness fair” for teens that covers budgeting, spending plans and debt management. The next fair will take place in the fall.

This year, Jump$tart is also reaching out to kids through activities such as “The Reserve Cup,” a May event in Montpelier. Mousley describes it as a “game-show-type competition hosted by the Federal Reserve.” Now, does that sound fun, or what?

But schools shouldn’t be the only focus, says Jump$tart board member Judy Branch, a family and youth development specialist from the University of Vermont Extension Program. Branch says she’d like to see parents take a more active role in teaching their kids about money. She speculates that some adults may be too worried about their own financial woes to raise the subject. “It’s almost like parents don’t want to talk about money any more than they want to talk about sex,” she says. “But it’s a conversation that is absolutely necessary.”

And, according to Branch, it’s never too early to start talking. “At the time that Mom pulls out her credit card to pay for her groceries, and the preschooler asks something or looks at the credit card, Mom can say, ‘This credit card represents money that we’ve earned, or will earn, and we will pay for that,’” she says.

Branch cites a program called Thrive by Five, sponsored by the Credit Union National Association. “It talks about how parents can, with very few props, just incorporate those conversations into everyday life with their preschoolers,” she explains, “so that by the time they get to kindergarten, they know a lot about money.”

The Thrive by Five website includes activities designed to teach preschoolers fundamental lessons such as “Having fun does not have to cost money” and “When money is spent, it is gone.” Some parents might need a little refresher in those concepts, too.

From a consumer standpoint, the best thing about Thrive by Five is, it’s free. That’s the good news — if you’re feeling financially illiterate, plenty of resources can help you catch up. Surprisingly, Mousley recommends www.practicalmoneyskills.com, a website sponsored by Visa. “They’re actually one of the better places to get financial literacy information,” he says. “Believe it or not, Visa and Citibank have the money, and they do want educated borrowers.”

Mousley and Branch contributed their suggestions to the list of resources included with this article. “There are a lot of good materials available online for free,” says Mousley. “You just have to have the initiative to go out there.”

Nothing like a little financial crisis to motivate you, right?

The Money Issue

It’s true what they say: Money makes the world go ’round. It’s also true that in recent months unfathomable sums have gone down the drain — and more are circling it — in the world economy. Unfortunately, that’s no April Fool’s joke.

Like everyone else, Vermonters have tightened their belts and hunkered down to ride out the recession … we hope. But not all is grim in the Green Mountain State, as some of our stories in this issue report. So, we’re watching the bottom line and counting our blessings.

Click here for other Money Issue stories.

Learn to Manage Your Moolah

Interested in learning more about interest? These resources are good places to start.

Websites:

practicalmoneyskills.com: This website may be funded by a credit card company (Visa), but don’t let that stop you from clicking. Take the “Money Personality Quiz” to help you determine which areas of the site will help you most. You’ll also find financial tips for teachers and small businesses. And you can register to watch a free webcast of the 2009 Financial Literacy and Education Summit on April 20.

www.myfico.com: Use this site to learn more about your credit report and your rights as a consumer. But Vermont Jump$tart Coalition President Gregg Mousley advises against heeding the site’s prompts to pay for more information.

www.extension.org: This educational partnership of 74 schools offers info, online classes and access to experts at land-grant universities. The site has an entire section called “Financial Crisis.”

www.stretcher.com: The Dollar Stretcher website promises tips on “Living Better ... for Less,” and it delivers. Look here for practical advice from articles such as “How to Have a Blowout Yard Sale,” “Fix a Leaking Faucet” and “Bail Yourself Out — Here’s How.” The site also supports an active user community, so if you’ve got a question, you can ask it in the forums. Current topics include “Growing Strawberries” and “Selling Extra Things for Cash.”

www.creditunion.coop/pre_k: Here you’ll find the “Thrive by Five” program, sponsored by the Credit Union National Association. Use it to teach your preschoolers about money.

www.aarp.org/states/vt: How will the financial crisis affect your retirement? The Vermont AARP website addresses that topic and more.

www.vtjumpstart.org: Find out more about the Vermont Jump$tart Coalition.

www.vermonttreasurer.gov: The Vermont Treasurer’s Office also has a section on financial literacy that includes a clearinghouse of classes and events, sorted by county. It includes a link to “Bad Credit Hotel,” a spooky multimedia presentation about maintaining good credit. Click if you dare.

Classes:

A variety of local institutions hold free or low-cost financial literacy classes, including the New England Federal Credit Union, Mercy Connections, VSAC and Opportunities Credit Union.

In April, Opportunities offers a series of afternoon and evening “Money$ense” financial fitness seminars with titles such as “Check It Out: Managing Your Checking Account” and “Control Your Money: Making Ends Meet.” The classes are free for credit union members, $10 for everyone else. Click here, or call 865-3404, ext. 127, for a schedule.

Media: Looking for an explanation of the subprime mortgage mess and the credit crunch? Spend a few hours listening to three episodes of “This American Life,” an hour-long Public Radio International show. It’ll make you feel smarter.

Go to www.thislife.org and search for episode 355 (“The Giant Pool of Money”); episode 365 (“Another Frightening Show About the Economy”); and episode 375 (“Bad Bank”). You can stream the shows from the website for free or pay a small fee to download them to your iPod.

The reporters who contributed to those segments also write National Public Radio’s Planet Money blog and produce a podcast three times a week. Download it for free at iTunes and listen to it while you work out. The adrenaline rush of pure terror will keep you moving.

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About The Author

Cathy Resmer

Cathy Resmer

Bio:
Deputy publisher Cathy Resmer is an organizer of the Vermont Tech Jam, and compiles a weekly tech e-newsletter. She also oversees Seven Days' parenting publication, Kids VT, and created the Good Citizen Challenge, a youth civics initiative. Resmer began her career at Seven Days as a freelance writer in 2001. Hired... more

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