The financial reform bill Congress hopes to finally pass by the Fourth of July includes establishing a new Office of Financial Literacy. The new Dodd-Frank financial reform bill also involves a new Consumer Financial Protection Bureau to enforce ethical behavior from banks. But ultimately; consumers are going to have to educate themselves about money management to stay out of financial trouble. The Office of Financial Literacy is trying to make it easier for them.
Financial literacy national strategy
The Office of Financial Literacy as written to the Dodd-Frank financial reform bill isn’t really the first effort by the government to encourage financial management from consumers. A 2003 law that provided people a free credit report also established the Financial Literacy and Education Commission, which was charged with creating a national strategy for financial literacy. In 2004 the FLEC launched the MyMoney.gov site to provide a location where consumers can discover money management tools and also some useful government financial information.
The financial literacy site for the FLEC
Recently the FLEC’s financial literacy site got a new look. The new version of the site creates online access where users can discover out all sorts of information about how to plan for life events that have financial implications, such as birth or adoption of a child, home ownership or retirement. There are also answers to questions users may have about a variety of personal or professional situations. MyMoney.gov offers money-management tools including a savings calculator, household spending budget worksheets and a college prep checklist.
Americans lazy about finances
The government has pushed knowledge a lot more than regulation. The hypothesis is the more high-quality data and money management tools consumers have, the better choices they will make. But Americans seem to be financially lazy. It’s common knowledge that we should spend less, save a lot more and shop around for the best credit card rates. Most of us do not.
Lacking is the American financial literacy
In a survey that was done about American financial literacy, the Wall Street Journal reports the Finra Investor Education Foundation — the research arm of the securities industry regulator — found that about half of those 45 or older hadn’t tried to calculate their retirement needs. About half of almost 1,500 people surveyed also admitted to occasionally carrying a credit-card balance and paying interest. Only five knew that when interest rates rise, bond prices fall. The survey also found that 57 percent of adults who earn more than $ 75,000 a year don’t shop around for credit cards, and 46 percent don’t compare prices on automotive loans. Also, each year, adults do not typically check their credit.
Key is debt to income ratio
Debt is one of the most painful consequence of inadequate financial literacy. It was reported by Seerpress.com that despite the fact that the current average debt-to-income ratio of in The US is down to 122 percent from 133 percent in 2007, it nevertheless should be below 100 percent. To compare to that, from 1960 to 1985, the debt-to-income ratio in The US stayed well below 70 percent. The government is trying to do its part by imposing stricter policies and offering free advice. Financial literacy might be as simple as spending less than you make. That is your personal responsibility.
Citations:
FLEC website
205.168.45.52/
Wall Street Journal
online.wsj.com/article/SB10001424052748703280004575309143171720002.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsTop
Seerpress.com
seerpress.com/four-things-that-could-help-you-financially-understand-money-save-money-stop-borrowing-money-and-think-outside-of-the-financial-box/1795/
