The Junior Achievement Financial Literacy Summit
presented by The Talbot Bank, Wye Financial & Trust, and sponsored by Atlantic Financial Group , Wells Fargo Advisors, and Chesapeake College)
We all know managing our money is important. And we know possessing the tools to do so is the foundation for success. Does it matter, however, if someone else is drowning in credit card debt? Is about to lose their house? Is living one paycheck away from financial ruin? Does the financial precipice upon which they teeter have anything to do with us? It absolutely does.
Poor individual financial choices and increased personal debt lead to higher incidences of bankruptcy and foreclosure. The cost from unpaid medical bills is passed on to everyone through rising costs and fees. The same is true for lenders regarding foreclosures. It takes approximately fifty-five paying households to make up for one bankruptcy, according to methodology outlined in The Rise in Personal Bankruptcy: Causes and Impact, Feldstein, 1998.
Financial illiteracy is a universal concern, and it needs to be addressed.
This was the message presented at the Junior Achievement Financial Literacy Summit held on April 21 at Chesapeake College. Numerous distinguished guests, including Maryland Comptroller Peter Franchot, Maryland Director of Homeland Security, Pete Landen; and host Geoff Oxnam, CEO of American Microgrid Solutions spoke and listened to the obstacles and opportunities Maryland faces. During the summit two panels of experts tackled the two halves of the issue. The first group: Eric Brotman of Brotman Financial Group; Mindy Schaffer of Chesapeake College; and Dr. Sarah Guy of Salisbury University BEACON, discussed the current need for financial literacy education. The second group: Deborah Owens of Owens Media Group; Ed Grenier, of Junior Achievement of Greater Washington; and Joanna Smith-Ramani of Aspen Institute theorized means of solving the problem.
“Happiness is not from income,” declared Comptroller Franchot in his opening remarks. He went on to declare that financial stability does, however, contribute to mental well-being. Expanding on that statement, guest speaker Mindy Schaffer of Chesapeake College said that college is not a conversation happening in poor socioeconomic situations anymore. And while this trend of non-education is occurring, most careers at present require some sort of higher education or training. Securing a career means securing one’s financial future, and “Once you take financial instability off the table,” said Schaffer, “you can work on finding things that make you happy.”
Panelist Brotman called the current lack of financial literacy an epidemic, stating, “If we had as many people reading illiterate in this country as financially illiterate, it would be front page news.” The issue, he states, is not the information, which is everywhere, but rather the digestion and comprehension of that information. Brotman noted college students can obtain high loans and credit cards before they are even allowed to drink. Students are starting life at a negative, many up to $500,000 in loan debt because of a lack of critical understanding of finances. At Chesapeake College, Schaffer sees many students who have made smart decisions to attend the lower-cost community college for two years and transfer to finish their four-year degree, or enter a career directly after receiving their associate degree. For each one of these students, however, there are countless others who “want what they want” in regard to a university and will sign for a loan without knowing the contents or considering their future income-to-debt ratio after graduation. Leaving college with a hefty debt can spiral students from financial instability into financial ruin.
Financial instability, in turn, can lead to poor decision making regarding credit. Those with no savings are forced to turn to credit to help them out of a car repair bill or a period of unemployment—compounding their financial instability. Dr. Guy noted the average Maryland household credit card debt is $6,500, and the foreclosure rate is 19%–over double the national rate of 8%. Maryland Comptroller Peter Franchot stated, “It is easier to get rid of your fingerprints than get rid of bad credit.”
Comptroller Franchot kicked off the “Addressing the Need” panel with the declaration, “Let’s get real!” Understanding the financial literacy crisis and finding ways to address it have been and remain a key concern. Panelist Deborah Owens stressed empowering average people to take control of their finances.
“Knowledge isn’t power. Knowledge correctly applied is power.”
Owens encouraged training people to apply knowledge to get their expected outcome, and to help them learn in non-judgmental, safe environments. Ramani of the Aspen Institute noted national studies show that putting adults in traditional classes does not help them learn, and more immersive, experiential lessons will help convey the knowledge. Removing judgment and promoting accountability support in education will go a long way toward encouraging people to become financially responsible.
From the summit came the universal agreement that there needs to be an increase in financial literacy education at all age levels and all stages of life. Programs like Junior Achievement begin this education early, and continue through middle and high school—crucial years for building sound financial literacy practices. Currently 50% of millennials feel debt is a top concern. 40% of them worry weekly that they will not be able to meet their debt obligations. Helping the next generation learn to understand the whole of their finances, income potential, and higher education costs now will keep them, and the rest of the economy in a positive and prosperous situation.
Junior Achievement of the Eastern Shore 