Financial Literacy Month

February was Black History Month; March, women's history month? Anyone have a clue what April is? Hint: It's the title of this blog post!

I view the idea of Financial Literacy Month the same way I view the other "months" celebrating ethnic heritage, gender solidarity or any other cause or purpose. It's nice to take 30 days to emphasize the need for a basic level of financial smarts in this country. You need only look at our abysmal personal savings rate, how many adults live on credit and how many of our young people lack basic consumer skills like how to create and live by a budget to know that there's a serious need for financial education in this country. But having a "month" is only a start. What happens when April is over and all the marketing campaigns go away?

I'm a big advocate of making financial literacy a mandatory and integral part of the school curriculum from the earliest levels. No one should be able to graduate from high school without demonstrating that they can manage the wages they'll earn on a job. But more on that in a later post.

Here, I just want to create a list of links to Financial Literacy Month sites and other programs that are focused on personal finance education. It'll start short, and grow as people point me in the direction of more links, so be sure to tweet me any you have.

Financial Literacy Now: A campaign for financial literacy sponsored by The McGraw-Hill Companies, The New York Public Library, Working in Support of Education (W!SE), Literacy Partners, and Talking FinLit

FinancialLiteracyMonth.com: A site promoting the month, it's purpose and events from the nonprofit Money Management International

America Saves: "A nationwide campaign in which a broad coalition of nonprofit, corporate, and government groups helps individuals and families save and build wealth" -- from the site's "About Us" page. 

More to come...

Invest on behalf of a child

Last week, a young reader wanted advice on investing for themselves after college. That prompted a different question about investing on behalf of someone younger:

What would be your advice on someone investing for their child? Is there a good long term low risk investment choice?

It'd be the same for anyone considering investing: do your homework first. Plunging money into anything you don't understand is a fail waiting to happen. Just ask anyone who got greedy during the housing bubble.

Second, you need to determine what exactly you're investing for: so the kid will have savings later? College? First house downpayment? Remember that different investment choices make sense for different goals, for example 529s & certain IRAs have tax benefits for education savings.

On the other hand depending on the child's age and when you'll want him or her to use the cash, you might want to buy stocks, which can be riskier but provide better returns over the long-term, or bonds or money market funds which have the goal of protecting your principal (the amount you initially invest) and could make sense if you want access to money in the shorter term shorter term.

I have to warn you, though, that I think looking for a long-term/low risk investment might be misguided. You always need to invest to your own sensibilities and risk tolerance and keep in mind the length of time before you'll want to cash out of your investment.

Remember, though, that as a general rule the longer the investment horizon, more risk you can afford. You can stand to have significant equity positions (stocks) in a portfolio if you're not planning on using that money until 10 years from now, because of the likelihood that long-term gains in the market will more than make up for short-term losses. But if you're trying to stash away some cash for something you want to buy next year, putting that money in the market would be foolhardy.

Have we forgotten MLK was a champion for economic justice?

I should've posted this on MLK Day or last week on King's actual birthday. But I must've been thinking the same thing as NYT columnist Bob Herbert with regard to the King holiday this year. Herbert writes that despite all the celebration, from the school & workdays off, to the speechifying to the ridiculous MLK parties thrown by promoters in every city, we all seem to have lost sight of the part of King's vision that's perhaps most relevant of our time: the fight for economic justice.

I've written numerous times that a man who once impressed me (but later disappointed) told me in the early months after my college graduation that "the civil rights movement of the 21st Century is economic." That turned out to be prophetic: with the first decade of the millennium in the books, a devastating recession is eroding gains made in home ownership, income and employment equity that for the better part of two generations were the legacy of Dr. King's civil rights era. In short, we're moving backwards and despite a Black prez, there isn't much in the way of progressive economic policy being done to help, Herbert argues.

Amen. He's right and that hints at the reason for this blog's very existence: As with other hard-fought social gains, the only true way to maintain economic gains is through education, and financial education is woefully inadequate at any level in our system, from pre-K through college. So, not to be too high-minded, but when you read this blog and think about how you can transform your finances, remember that there are people who marched, fought and died for your right to do that, too.

image: free-stock-photo.com

In book promo, CNN gives helpful financial tips

Over the weekend, CNN ran a special called "Gimme My Money Back", which was half a "special report" on what consumers need to understand during the financial crisis and half promo for business correspondent Ali Velshi's new book, of the same name.

They managed to keep it pretty un-infomercial-ish, save for Velshi's plugs of the book, with the experts and reporters they had on offering some pretty helpful tips about the basics of investing. The unfortunate thing, though, is that basic concepts like portfolio diversification and making debt elimination a higher priority than spending are things that people should know about before they enter high school, not once they're grown and managing retirement accounts that have already taken a beating in a financial crisis. Actually, we're probably in as deep of a recession as we are precisely because so many people are uneducated about even the basics of handling money.

You can't have a successful economy in which people are equipped to make money, only to piss it away because of their financial ignorance.

Either way, watch the video. It's a pretty good primer with a lot of plain language addressing what's happening with the financial markets and what you should know now, and many of the topics are things we've discussed here.

Why isn't financial literacy a public school requirement?

This is where I spent my morning yesterday: in a classroom at Winton Hills Academy, a public Cincinnati middle school. All over Ohio yesterday schools participated in "Accounting for Kids Day", a special promotion where people in finance-related jobs went to school and played a game about the stock market to show the kids about investing.

I could have gone to any school but I'm glad it was Winton Hills I went to because it reminded me of my own elementary school: public, mostly black, near a housing project and with many students who don't get much, if any, exposure to something like the stock market. It was a great experience; I had a lot of fun and the students all said they learned something.

The drawback is that financial education for ALL students needs to be integrated into the curriculum. One day of playing a game about the stock market isn't enough, not when we live in a country with a negative savings rate, where so many people made terrible home buying decisions over the past few years, and where so many kids like the ones at Winton Hills are likely to not have access to basic financial tools like checking or savings accounts.

The state of Ohio is going to implement some form of mandatory financial literacy class in the coming years, but one state isn't enough. One of the top education priorities of the Obama administration should be a mandatory financial literacy curriculum.

Where are the lobbyists pushing for that? )Oh, yeah, they're all out begging for bailout money right now.)

Are there any teachers, principals or parents reading this? If so, do your students get any training in financial literacy at all? If so, tell us about it.

Do you know what investing means?

Most people want to grow their wealth. Many believe investing is a good way to do so, and they're right.

The problem is many people don't understand what investing is. I came to that unscientific conclusion after a conversation this weekend with a Money Corner reader who had questions about everything from insurance to credit cards. Her most telling questions, though, were about investing: how to get started and isn't that really risky anyway?

The second question illustrates how a large number of people think about one of the most basic ways to put their money to work for them. Most young people who talk to me me about investing do so in terms that show they view the capital markets more like casinos than places where careful thought goes into making long-term decisions that mitigate risk. Many have actually said to me that they don't see a difference between playing the lottery and contributing to their 401(k)s or buying shares of companies they regularly patronize.

That's a scary and dangerous line of thinking, since in effect it helps keep people on the sidelines and in the case of most young people, that happens at a critical time because their youth puts long-term investing principles like compound interest and dividend reinvestment in their favor.

So I'm curious. If you were given a test with one question on it: "What's your definition of investing?", how would you answer it?

After I get a few answers from readers, I'll post my own personal definition.

My three economic challenges to President Elect Barack Obama

The election is over. Obama won by a landslide, no doubt with the help of many readers of this blog.

But even having won a majority of the popular vote and with his party in control of both houses of Congress, making the kinds of changes that Barack Obama promises won't be easy and will require more than political maneuvering. Especially on the economy, much work and sacrifice will have to be made by the same electorate the ushered Obama to power. Here's my top three things that I think Obama will focus on to right the economy, what it will take to get them done, and a few suggestions for all of us to take heed of.

To ensure our economic future, Obama MUST:

1. Push through Congress meaningful healthcare reform that can actually be implemented. His campaign platform called for an aggressive plan to cover all Americans that is sure to be costly, but the challenges are many. A Democrat-controlled Congress will likely support his plan, but the healthcare lobby still looms large. Obama will have to be careful -- and rightfully so -- to make meaningful reform that is affordable to taxpayers and consumers but doesn't deter investment in the medical sciences or cause a catastrophic loss of jobs in the medical care industry.

Our responsibility -- Get healthier. Obesity, high blood pressure, heart disease, diabetes, cancers, HIV infection: For its wealth and relative prevalence of available medical facilities, America is one of the sickest nations of earth. Many of those ailments are not just extremely costly, but preventable. We'd all do ourselves and the new president a favor by eating better and taking a damn walk every day.

2. Re-regulate the financial markets -- but not too much. Wall Street's become too much like a casino, less a place where people take calculated risks that pay off when sound management or daring innovations are successful and more like a gambling parlor where bettors wager (and often lose) money only to sell their bad debts to the next sucker who comes along. Those suckers ultimately ended up being the American taxpayer and that can't continue. Obama's choice for Treasury secretary will be his most important cabinet pick besides outside Secretary of State.

Our responsibility: Continue investing, but do so responsibly. Panicking, abandoning banks that are still solvent and pulling out of 401(k)s is not the way to go. Neither, however, are irrationally bidding up the prices of IPO shares like during the tech boom, or homes like what happened in the earlier part of this decade. Weaning ourselves off credit won't hurt, either, but I'll come back to that later this week.

3. Mandate a financial literacy curriculum in elementary and high schools. Yes, this is a wild-card that wasn't part of Obama's election platform. But it stands, in my opinion, as the number-one challenge to our economic future. The housing bust and credit crisis both have roots in the fact that American schools continue to churn out workers educated enough to earn decent salaries but woefully equipped to know how to handle the money. Obama fails to make this a national priority at the peril of us all.

Our responsibility: First, make sure you understand the basics of personal finance. Pick up 401(k)s for Dummies or Investing for Dummies. Bookmark this blog. Watch CNBC or read the Wall Street Journal then look up terms you don't understand. Then teach your kids what you're learning. By the time they get out of elementary school, your child should have a savings account, a college fund and understanding that using a credit card doesn't mean the money won't have to be paid back.