When Banks Put Their Own Spin on Money Matters
It starts with the difference between checking and savings accounts. But your bank manager can make even that distinction fuzzy, especially when interest rates are low and minimum balances are high. Of course he will urge you to get a credit card when he secretly gets a commission if you say "yes." The auto finance guy will promote credit as opportunity, without revealing the obligations of debt. Relying on banks to teach financial literacy is a bad idea.
The basics of managing money, creating a personal budget, understanding the arithmetic of interest rates, comprehending the relationship between credit and debt, knowing how and when to negotiate the price of a car - all of this can be overwhelming. Overwhelming at age 18. Or at age 28. Or even atage 58. Too many people go numb at the sight of numbers. But basic financial literacy is essential for living the American life.
The recession that started with the crash of 2008 raised the issue of financial literacy to a new level. But no sooner did the banks receive their bailout funds, than they began to hijack financial literacy programs. Finance companies which were promoting such programs in high schools and colleges across the country had their own interests at stake. Banks and credit card companies wanted to make sure the next generation got just as hooked on easy credit as their parents had done. Instead of teaching kids the dangers of debt, financial institutions turned the curriculum into an infomercial for banking products from which lenders continue to profit.
Washington Post writer Michelle Singletary says, "I go nuts when I see lesson plans that say getting a credit card can help students manage their money. No, it doesn’t. It teaches them the ways of a debtor — even a good one — too early in life." Singletary is absolutely right. A lesson plan like that is almost certainly part of a program promoted, written, or produced by a profit-driven bank.
The best financial literacy program out there is called FoolProof, says Singletary. "It’s such a complete program for teachers (even the grading is done for them), and it clearly favors the consumer protection of students. Too many of the materials I see don’t note enough of the dangers of debt." Teachers can get more information on Foolproof here.
Other resources are available through the website of the Consumer Financial Protection Bureau. But anyone interested in teaching financial literacy needs to take two precautions: (1) consider the source and (2) consider the delivery. The Foolproof program rates high on both counts. The non-profit organization is run by an independent board; and it is funded through private donations, grants, and court-approved cy pres from the residue of consumer class actions. Foolproof's message of fiscal responsibility comes through strong and clear in the voices of young people who ditch legal jargon and tell it like it is.
When banks put their own spin on money matters, their conflict of interest taints the curriculum, instilling the bad habit of perpetual debt. Programs like Foolproof provide an independent alternative. High school and college administrators should choose it and use it.