Wednesday, August 24, 2011

African Americans and Life Insurance

The Coalition for Financial Security has done a substantial amount of work looking at why some communities take advantage of basic financial products like life insurance and why others who have the resources do not.

The Pittsburgh Post-Gazette this week has an interesting look at African Americans and the community's relationship with life insurance.

It is well-worth a read. One key graph:

Researchers found the main reasons African-Americans remained so loyal to life insurance stem from a deep desire to avoid burdening others with burial expenses, as well as the fact that often life insurance is the only means of leaving an inheritance to their loved ones.

Wednesday, August 17, 2011

Teachable Moment

While there is a lot of bad economic news out there, the Washington Post has some advice about how to turn it all into a teachable moment to educate kids about financial literacy.

Here's one snippet: excellent way to teach children how to take part in the new family effort is to encourage them to come up with cost-cutting ideas. “For example, children can learn to turn off lights, fans, and computers when they are not in use and only buy the things that they truly need.”

Wednesday, August 10, 2011

How to Close the Wealth Gap?

NPR recently hosted financial expert Louis Barajas to talk about the PEW poll on the Hispanic wealth gap. The whole interview is worth a listen or a read. One key identified by Barajas is more education about how to build wealth.

It's really important that we understand that we need to somehow get education out there to this community, that they need to diversify and they need to build their wealth and they need to do it not just all in real estate. Nobody says that real estate is bad. I'm just saying is that they need to diversify it into other types of things like their, you know, mutual funds and their 401Ks.

Friday, August 5, 2011

The Wealth Gap Explored - Seniors

Late last month, we noted an updated look at the 'wealth gap' in America that was recently published. This week, USA Today, examines the gap among seniors. The results are consistent with earlier findings, but given the aging nature of the population, even more severe.

One look at California:

Among the state's single adults age 65 and older, 76% of Latinos and 69% of African Americans are unable to meet basic needs, compared with 44% of whites, says UCLA's Center for Health Policy Research and the Insight Center for Community Economic Development.

The article delves into some causes of the gap, including higher health care costs and fewer retirement savings. It also notes this issue:

It's also harder for minorities to navigate the complex financial world because they tend to lack adequate financial literacy, the Greenlining Institute report says. For the same reason, they're often victimized by predatory lenders that strip them of wealth and assets.
Part of CFS's core mission is making sure all Americans have access to financial knowledge and qualified advice. It is why we advocate for more financial literacy instruction in schools and for the industry and regulatory community to place a priority on ensuring all communities have access to sound financial advice.

Wednesday, August 3, 2011

Maryland Gears Up for Teaching Financial Literacy in School

As reported by the, Maryland schools will start teaching financial literacy this year. Students in grades 3-12 will be taught financial knowledge throughout their time in schools. This effort in Maryland was supported by CFS.

Here's how it will work:

Among many specific requirements, students will be expected to "describe the services financial institutions provide, such as savings, checking, and money market accounts" by the end of Grade 5. By the end of Grade 8, students are expected to be able to compare credit products and services and describe predatory lending practices.At the end of Grade 12, students should have learned how credit scores can be used to leverage better products, services and employment opportunities -- such as security clearances.

This effort in Maryland was supported by CFS.

DOL Fiduciary Rule and Unintended Consequences

Cathy Weatherford of the Insured Retirement Institute has a column out today on the unintended consequences of the DOL's redefinition of fiduciary.

Key quote:

Ostensibly, the DOL wants to expand the ranks of fiduciaries to ensure that financial institutions avoid any potential conflicts of interest that might influence investment recommendations. Admittedly, this sounds appealing. A fiduciary standard is the highest and best the law allows, similar to what is imposed on trustees and guardians. The trouble is that fiduciary status triggers a little-known IRS regulation, making it nearly impossible for broker-dealers to handle IRAs held by average investors. These firms cannot satisfy the labyrinth of rules unleashed by fiduciary status except by (1) curtailing investment advice or (2) forcing IRAs into “advisory accounts” overseen by a registered investment advisor.

Monday, August 1, 2011

Massachusetts Tackles Financial Literacy

The state of Massachusetts is the latest to tackle financial literacy legislation. In supporting the bill, the Metro West Daily News makes a convincing case that holds for the Commonwealth and every other state.

Some students will borrow money to buy a car while still in high school. They need to know what interest is, and how to calculate how much interest payments will add to the sticker price. As soon as they hit college, they will be deluged with credit card offers many won't know how to weigh. Most will end up borrowing money for college - the average student graduates owing $20,000 - and many will be surprised when the bill comes due.

Later, they may be expected to manage their retirement accounts, but few will have been taught anything about investment strategies. They will have to make decisions on insurance and mortgages - and we've seen in recent years how easy it is for people to make poor decisions when buying homes.

That's why it is long past time Massachusetts incorporated financial literacy into the public school curriculum. We do no service to our children by sending them out into the world knowing all about geometry and history, but nothing about how to balance a checkbook.

Kudos to the Commonwealth for taking this step. It's too late for the 2011-2012 school year, but here's hoping the 2013 curriculm includes topics like interest, debt and savings.