Markets Explained

“Financial Education Can Empower Individuals”

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Economist Margaret Brooks Makes Case for Financial Literacy

While many academic economists focus on heavily theoretical work, Margaret Brooks, a professor of economics at Bridgewater State University (BSU) in Massachusetts, is engaged in the more hands-on practical world of promoting financial literacy and sound money management skills.

For her work in promoting financial literacy as the head of BSU’s Center for Economic Education and now as director of the Office of Financial Literacy launched last year, Brooks was named by the Institute for Financial Education as of one of two “Educators of the Year” for 2016.

Project Invested spoke with Dr. Brooks about her work in the area of financial literacy education shortly before the kickoff of the 2016 fall semester.

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First, let’s clarify our terminology: how do you define "financial literacy"?

Financial literacy encompasses a wide range of knowledge and skills necessary for informed decision-making at every stage of life. Standard financial literacy topics include budgeting, saving, investing, borrowing, insurance and taxes.

Fraud avoidance and maintaining online safety are important skills to teach, as well, because today’s consumers and financial institutions are increasingly reliant on technology.

In addition, including entrepreneurship in financial literacy training programs can be an effective way to encourage new ideas and innovations that can boost the economy, as well as train workers who may be participating in the “gig economy.”

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How well do young people today understand money management skills, and how well prepared are they to manage their own finances? What are the biggest challenges they face?

Avoiding high levels of student debt is one of the biggest financial challenges facing students today. At the same time, numerous studies have shown that financial literacy is often lacking among youth. The choices students make in high school, and even before, can significantly impact the opportunities that will be available to them after graduation.

As an economist, I am acutely aware of how the world operates with scarce resources. People of all ages are making choices every day about how to spend-and invest-their money and their time. It’s critical for all students to have ongoing access to age-appropriate financial education resources, as well as guidance from well-informed parents, educators and mentors, as they navigate their own college and career readiness paths.

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How would you assess the overall quality of financial literacy awareness and education in the United States right now? How can it be improved?

The U.S. is experiencing an increased public awareness of the need for financial literacy, especially with recent news stories about the problems of high student loan debt. Now is the time to think about how we can work together to reduce students’ college debt burdens, while making sure they continue to have opportunities to advance their education and job readiness skills.

It’s wrong to delay financial education until students reach age 18. By the time they reach adulthood, most students have already made a series of decisions that can significantly impact their future educational paths and student loan commitments, such as what college or career training to pursue (if any) at the post-secondary level. They, and their families, have already made numerous pre-college work, spending, and savings decisions.

CEE’s 2016 Survey of the States found that only 17 states require high school students to take a course in personal finance, and this number has remained unchanged since 2014.

Ideally, all 50 states should require economics and financial concepts to be included in the state’s K-12 standards, and all high schools should require their students to take a personal finance or economics course as a graduation requirement so that they can be better prepared for the challenges and opportunities they will soon be encountering as adults.

For example, Rhode Island adopted the Council for Economic Education’s National Standards for Financial Literacy for K-12 students in 2014, and the survey initial results show they’re having a real impact. That’s a promising model that other states should explore.

Likewise, colleges and universities can support students’ lifelong financial capability by offering a variety of easily accessible financial literacy courses, programs and activities on their campuses.

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You’ve written about the promise of online learning for improving education. How are online tools and technologies helping to improve financial literacy awareness and education?

Online tools and resources have tremendous potential to bring accurate and reliable financial literacy information to the public in a timely manner. Online learning platforms are great for people who don’t have the time or ability to attend an in-person class or go to the library to obtain information.

In addition, an online learning environment may be more comfortable for individuals who are too embarrassed to ask personal financial questions in a traditional class setting.

Consider, too, that financial markets are constantly evolving, which means some of the content that’s taught will be changing. And people’s financial literacy interests and needs change throughout life. Couples, families with children, college students, homebuyers, veterans, and seniors can all experience unique financial literacy challenges.

Web sites and other social media have tremendous capability to efficiently deliver up-to-date information to diverse consumers groups at every stage of their life cycle.

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You were appointed last year to head Bridgewater State’s newly established Office of Financial Literacy Initiatives. Tell us about what your new office is doing to advance financial literacy awareness and education.

Since its inception in September 2015, the BSU Office of Financial Literacy has developed a number of new programs to generate awareness and knowledge of financial literacy, both on and off campus.

At BSU, our office has worked with BSU Office of Financial Aid to encourage students to participate in the SALT online financial literacy program, which is available to them throughout the year.

Our office offered a very successful Financial Literacy Day for students in December 2015 with speakers, exhibits, and performances. In spring 2016 we offered the Securities Industry and Financial Markets Association (SIFMA) Foundation’s Stock Market Game to all BSU students as a university-wide competition.

We have also worked with external partners such as the Federal Deposit Insurance Corporation to run an informational event for non-profits, and with area school systems to offer teacher workshops and student competitions such as the Global Issues Symposium.

We co-sponsored the 2nd annual Financial Capability Conference at Rhode Island College in February, which attracted participants from both Rhode Island and Massachusetts. Currently, we are in the process of planning the 3rd Financial Capability Conference, which will take place December 10, 2016.

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What role can financial industry professionals play in helping to promote financial literacy awareness and education?

Because financial literacy has many dimensions, I believe a multi-faceted solution, involving collaboration among multiple stakeholders, is the most effective way to boost learning outcomes.

Financial industry professionals can greatly enhance financial literacy trainings by resisting the urge to take a “silo” approach, and instead, be willing to work collaboratively with others to share their knowledge and real-world experiences.

Communities gain when trained financial professionals volunteer their expertise at schools, educational programs and events, and when companies collaborate with other businesses, educational institutions and non-profit organizations to provide funding for financial literacy initiatives within their communities.

For example, Fidelity Investments has been a leading national advocate for financial literacy by providing financial support and expert volunteers for teacher trainings in Rhode Island, Massachusetts, and across the country, in program partnerships with Council for Economic Education and Jump$tart.

The SIFMA Foundation has also been very effective in promoting financial literacy across the US by supporting the Stock Market Game, an online game that can be used in a variety of academic settings to develop and improve students’ investing skills. The SIFMA Foundation also offers educators the opportunity to bring expert speakers to their schools through the Invest It Forward initiative.

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Congratulations on being named one of IFE’s “Financial Educators of the Year” for 2016. What led you to focus on financial literacy and economic education in your own academic work?

I have always been passionate about advancing economic education and financial literacy, knowing that increased understanding in these fields has the potential to make the world a better place.

Throughout my career, I have developed and taught a number of economics courses and financial literacy programs at BSU. I currently serve as economics professor and director of the Center for Economic Education at BSU, and most recently as the founding director of BSU’s Office of Financial Literacy Initiatives.

Since 2014, I have also worked to advance financial literacy in my non-profit leadership roles as president of the Rhode Island Jump$tart Coalition for Financial Literacy and president of the Rhode Island Council for Economic Education.

At the core, I believe that the economic and financial choices that people make can have real and lasting impacts on their lives and on the economy. Financial education can empower individuals and their communities to reach their economic and social goals.