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Poor literacy contributes to poor finances

April 01, 2002

Poor literacy contributes to poor finances


By Sen. Paul S. Sarbanes

Literacy - the ability to read, to comprehend and to analyze a written text - is widely recognized to be indispensable in a modern society, and yet the critical importance in our modern economy of financial literacy - the comparable ability to read, grasp and analyze financial information - is regularly overlooked.

Indeed, there is growing evidence that Americans do not have an adequate basis for making sound decisions about their personal and household finances, especially given the myriad of choices they face. This issue touches all Americans - at every age and income level - as they attempt to make sound financial decisions in their everyday lives. And in this increasingly complex financial marketplace, too many people are victims of scam artists and unscrupulous operators, in part because they lack adequate financial education.

Recently, in my capacity as the Chairman of the Senate Banking, Housing, and Urban Affairs Committee, I convened two days of Congressional hearings on the issue of financial literacy and education. Among our witnesses were Alan Greenspan, the Chairman of the Federal Reserve, Treasury Secretary Paul O'Neill, Securities and Exchange Commission Chair Harvey Pitt, and individuals from outside groups who are working with school-aged children to young people who are handling credit for the first time, first-time mortgage borrowers, and those trying to save enough for retirement.

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Some interesting facts were raised during the hearings to highlight these concerns:

- As was pointed out in a Wall Street Journal story, a bank account today constitutes "a passport required for admission to the mainstream economy." Yet an estimated 10 million people in this nation do not have bank accounts;

- The average American high-school senior failed a personal financial quiz. Yet 40 percent of our 12-19 year-olds have access to a credit card; and

- Among adults, average credit card debt per household exceeds $8,100 - triple the amount of a decade ago. Regular payment on credit cards now takes about one dollar in every seven of Americans' disposable income.

We know that the largest generation in this nation's history is approaching retirement. One example of the challenges facing us with respect to retirement is the status of women who face particular financial hurdles, as they grow older. Millions of women through widowhood or divorce find themselves in charge of their household's finances at or near retirement age, without having any financial education. These women are then expected to make complex financial choices that will affect them throughout their retirement.

While financial literacy is not a magical solution that will solve all the problems consumers face in making their financial decisions, it is critical to our future. Many Americans are too often spending for consumption now, with little thought to the years ahead. In fact, America's personal savings rate has averaged only 1.6 percent for the last year, while consumer debt has grown at a much faster rate of 10.2 percent.

It is my strong belief that higher levels of financial literacy will help Americans approach the decisions they must make in a responsible and productive manner. The time has come to bring the public and private sectors together in a national strategy to raise the level of financial education in our nation.

U.S. Sen. Paul S. Sarbanes is a Democrat representing Maryland.

Humane Society needs to be accountable


To the editor:

I believe that it is time for new leadership at the Humane Society of Washington County. Some concerns that I have include employee morale, health of the shelter animals and adherence to laws. Current management forbids interaction between staff and members of the Board. Under this system, there are no checks and balances. When concerns have been brought to the attention of the board and/or the executive director, the response has been very negative.

The by-laws of this non-profit organization clearly state that the election of the directors is supposed to take place at a general membership meeting that is supposed to be held during the month of October. The HSWC has not followed its by-laws for several years in regards to this yearly meeting. Why?

How can employees be expected to have respect for management when management doesn't follow its own laws, state laws, and county laws? Could this be a primary reason for the large turnover in staff under the new management?

There hasn't been a newsletter in more than a year. The Website hasn't been maintained for more than a year. Even though the new building has been in use for several months, there hasn't been an open house. Why?

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