Financial Literacy

By Dian Vujovich

I’m a big proponent of financial literacy. Tried to present a program to the State of Florida about it a few years back. Couldn’t get to first base. Went to the local school system as well and was told that the kids in Palm Beach County already know that stuff. Right. But hey, I keep on pushing the subject because a) I know better and b) financial literacy is something I believe in.

One of the troubles with the whole subject, however, is that it isn’t sexy. Scandals, on the other hand, are. We’d much rather read, listen and gossip about them than figure out what the simple Rule of 72 has to do with anything in our lives.(Look it up.)

There’s also typically something lurking inside us that sends conflicting money messages: One voice tells us that we’re already supposed to know everything about money and another says we know nothing. Then there’s the shame or embarrassment about feeling like such a dolt that rears its ugly head and a sheepishness that follows for not wanting to admit that or ask for help.

Study after study show folks know very little about managing money or creating wealth. Company after company says that they’re interested in teaching their employees about money but do little to fund the idea. But little by little things change.

Last week, for instance, the NFL Players Association announced it was partnering with Financial Finesse, an outfit that teaches financial education, in hope of teaching football players how to manage and keep their money. A pretty good idea since big money earned quickly often disappears just as fast. Since the average salary for an NFL player is $1.1 million, and includes tons of fringe benefits including dental, severance to pension pay, according to NFL.com, I’d qualify that as big money.

Forgetting the big wage earners for a moment, there is also a feature story about financial literacy in the October issue of SFO magazine. Mellody Hobson, president of Ariel Investments, was interviewed about a study her firm co-sponsored with Hewitt Associations to look at American’s 401(k) savings and investment behavior based on race and ethnicity.

The study gleaned data from 3 million employees at 57 companies around the country and was groundbreaking in that it looked at investing patterns based upon race and ethnicity. Turns out, for employees with annual salaries ranging from $30,000 to $59,000, the average balance in 401(k)’s ranged from $35,551 for Whites, to $32,590 for Asians, to $22,017 for Hispanic employees and $21,224 for African Americans. Asians had more of their 401(k) monies invested in equities (73 percent); African Americans, the least (66 percent).

Setting aside income differentials between the races (it didn’t appear that the study looked at that) African Americans were nearly four times as likely to take hardship withdrawals from their 401(k)’s than Whites—2.1 percent to 7.8 percent respectively.

Bottom line: Financial literacy ought to be every family’s, every individual’s and every company’s goal #1 in America. Why? Because it impacts each of us personally no matter our age, gender, job, career, income level, race or ethnicity.