Why aren’t people getting smarter about their finances?

Financial Literacy Month

April is National Financial Literacy Month, a time for reflection on how much Americans know about their personal finances.

Turns out people don’t know a lot about budgeting, saving, credit reports and credit scores — important areas needed to be successful money managers, says the National Foundation for Credit Counseling.

So what’s your financial IQ?

Could you explain how credit scoring works? What’s in your budget? Or do you even have one?

Sixty-one percent of U.S. adults, the highest percentage in six years, admit to not having a budget, according to the foundation’s recent financial literacy survey timed for release this month. Forty-one percent of survey participants gave themselves low or failing grades based on their knowledge of personal finance.

“This year’s survey once again confirms what we already know: the need for financial education is great,” said Susan C. Keating, president and chief executive of the foundation. “Without a solid foundation on which to base everyday financial decisions, Americans are on a slippery slope as they begin to rebuild their financial lives following the Great Recession.”

But there’s a fallacy to financial literacy month, said Jill Schlesinger, a certified financial planner, who writes the blog “Jill on Money.”

“Despite millions being spent on financial education projects, people are not that much wiser about the subject,” Schlesinger wrote in a recent blog post. She bases her conclusion on revelations she found in Helaine Olen’s book, “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.” Olen’s book was the Color of Money Book Club selection in January 2013.Here’s my review.

So why, with so much effort and money being spent on financial literacy, aren’t people getting smarter about their finances?

The Consumer Financial Protection Bureau found that spending on financial education by nonprofit, corporate, and government organizations came to $670 million per year, or roughly $2 per American, reported Kelly Holland of CNBC.

“But financial services firms also spend $17 billion annually on marketing consumer financial products, the bureau found — an amount equivalent to $54 per American,” Holland wrote recently. “With that kind of disparity, the simple educational messages may simply get drowned out by marketing pitches offering quick profits and improbable returns.”

A lot of the money spent on the efforts comes from big financial institutions, Schlesinger wrote: “Many of these big companies promote their public education projects, while at the same time, [they] continue to sell murky and complicated products.”

But could it also be that it just takes time to educate people about what has increasingly become a complicated financial life?

That’s part of it, Annamaria Lusardi, professor at the George Washington University School of Business, told Kelly Holland of CNBC, who wrote recently about why it’s hard to get financial education to stick with folks.

“We don’t give financial education lessons and people run back to their offices and change their financial behaviors,” Lusardi said. “That’s not how it works.”

Color of Money Question of the Week

What do you think of the state of financial education in the U.S.? Send your comments with your name and city to colorofmoney@washpost.com.

Live Online Chat Today

Join me now for my regular online discussion about money. I’m all yours for an hour to answer questions you have about your personal finances. Or we can talk about the latest personal finance news.

Here’s the link to join the conversation or post a question.

Fearless Financial Ideas

On May 1, come learn how to spend well and live rich at my talk that’s part of the University of Maryland Alumni Association’s Fearless Event Series.

As an alum, I’ll be speaking and sharing practical advice to help you start living your best financial life. Your financial life doesn’t have to be a game of chance.

The event is being held from 6 to 9 p.m. at VisArts, 155 Gibbs St., Rockville. For more information and to register, click here.

Should Student Athletes Be Paid?

Last week I wrote about the comment by U-Conn. Huskies’ star guard, Shabazz Napier, who told reporters that sometimes he goes to bed “starving” because he can’t afford food.

Napier’s comments about being hungry came as he was talking to reporters about a ruling by the National Labor Relations Board that college football players on full scholarship at Northwestern University are school employees. It was a move that has sparked a debate about paying college athletes.

So I asked: Do you think college athletes should be paid?

Here’s what some of you wrote:

“As a sports fan of both college and pro sports, I think it’s a no-brainer that college athletes should be paid,” wrote Clinton Borland from Upper Marlboro, Md. “If you factor in all the revenue that these players bring into their appropriate schools, compared to the comparable expense of what the athlete receives (scholarship/meals) then you know why the schools don’t want to pay these kids. It’s all about the money, and they want to keep as much as they can.”

“Some (not all) student athletes receive a full scholarship for an education, for trading their time and talents to play a sport representing their school,” wrote Donna Robert of Louisville, Ky. “If their sport generates revenue for the school, the school uses those funds to subsidize other sports that do not generate revenue. If the school instead pays the student-athlete for their playing a sport, the school would then need to cut other sports from their budget.”

“I think they should be compensated by around $2,500 a month during the school year as long as they are academically eligible,” wrote Bill McCormick of Lake Oswego, Ore.

Steve Draper from Accident, Md., wrote, “I think that students in the revenue-generating sports should get a cut. The universities are getting millions, while the students get the scholarship. I think that students joining a union would be a good idea. I also think that if a university accepts a student into the athletic program the student should leave the program with some sort of degree. That could include the student returning [to] the school should the student be lucky enough to go into some sort of professional sport.”

Commenting on Facebook in response to my question, Harold Lawson from San Diego wrote, “I believe allowing college athletes to unionize will create the biggest change in college sports since Title IX went into effect. College athletes aren’t the only students on campus receiving scholarships. Universities give scholarships to exceptional math students, physics students, music majors and many other students whose presence the school feels would be beneficial. Yet college athletes are the only scholarship students who risk their health and often have their future employment prospects directly connected to the school. I’m not a fan of unions but the NCAA and some D-1 schools brought this onto themselves by treating student athletes as disposable, then treating them as adversaries when the student/athlete questioned or disagreed with the system.”

Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C., 20071, or michelle.singletary@washpost.com. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read previous Color of Money columns, go to www.postbusiness.com

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.”
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