Financial Education

The conventional wisdom is that allowances make children responsible money managers as they learn to budget so they don't run out of cash. But Lewis Mandell, professor emeritus of finance and former dean of business at the State University of New York in Buffalo, says that's not always the case. In fact, says Mandell, who has studied financial literacy, certain allowances may even be hurting kids. According to Mandell, high school students who didn't get an allowance performed better on a financial literacy test than those who did, especially teens who received stipends with no strings attached.

Tisa L. Silver-Canady, who counsels University of Maryland, Baltimore students about loan repayments and runs other financial education programs at the school, realized toward the end of last year that she had not used about a third of her vacation time. Last year, the assistant director of financial eduction and wellness in the university's office of student financial assistance and education took two brief trips, one for work, the other a vacation that included a conference related to her job. And she took two days off to move to a new house.

There is no question that financial education is sorely needed in our educational system ("No-frills financial primer — for adults," Sept. 5). However, to focus on consumers' need for skepticism is to skew our understanding of the problem such teaching is meant to correct. People who trust others are frequently blamed for their naiveté when their trust is betrayed, a common form of blaming the victim. In advising us to recognize that mortgage brokers, loan officers, et al., are not "just being nice" when they fail to verify loan-worthiness and thus put us at risk, financial experts obscure the elephant in the room: the fact that those who control the gateways to our financial security will lie, cheat and steal in order to make more money for themselves.

Freeman A. Hrabowski III, president of the University of Maryland, Baltimore County, has joined the board of T. Rowe Price Group as an independent director, the Baltimore-based investment firm announced Thursday. Hrabowski has led the university since 1992, and was recognized last year by Time magazine as one of the 100 most influential people in the world. According to Price, Hrabowski sits on a number of civic boards, including the Alfred P. Sloan Foundation, the Urban Institute, the Marguerite Casey Foundation and the France-Merrick Foundation.

Most high schools don't spend much time teaching financial literacy, which could explain the reason why personal bankruptcy rates among 25-year-olds have been climbing at an alarming rate. To help combat that situation, the National Endowment for Financial Education has created a virtual course for students and teachers on its Web site: www.nefe.org/hsfppportal/index.html. Called the NEFE High School Campus, the program offers a six-part lesson plan that covers the importance of financial planning, having a career, creating a budget, understanding credit and getting insurance.

It might have been trash-talking, but Jamal Lewis made good on his promise. The young Baltimore Raven broke the single-day rushing record by running for 295 yards in the 2003 home opener at the stadium newly rechristened for the company that had bought the naming rights, M&T Bank. Today, though, the now retired Lewis and M&T are linked in court rather than on the field. Lewis filed for bankruptcy in Georgia in April, listing $14.5 million in assets and $10.6 million in debts — among them, a more than $350,000 judgment on a defaulted loan from the bank whose name hangs over the Ravens' stadium.

Tisa L. Silver-Canady, who counsels University of Maryland, Baltimore students about loan repayments and runs other financial education programs at the school, realized toward the end of last year that she had not used about a third of her vacation time. Last year, the assistant director of financial eduction and wellness in the university's office of student financial assistance and education took two brief trips, one for work, the other a vacation that included a conference related to her job. And she took two days off to move to a new house.

Citigroup, the country's largest financial institution, launched a $200 million campaign yesterday to support consumer education programs in nearly 100 countries around the world over the next decade. The new financial education program will create an Office of Financial Education to coordinate programs globally and add a volunteerism initiative, which has been designed to encourage Citigroup's 275,000 employees to devote time to supporting financial education and other charitable causes.

YOU DON'T hear many good things about Enron Corp. these days. But if there's one positive aspect, says AARP's president, it's that the Enron debacle has highlighted the need for Americans to understand the investment process. Numerous studies and surveys in recent years have revealed that Americans' financial knowledge is inadequate for a world where they must fund their own retirement and face a growing choice of mortgages, credit cards and investments. The consequences of not knowing financial basics are costly, according to statistics compiled by the Senate Committee on Banking, Housing and Urban Affairs: As many as half of those who borrow from subprime lenders could actually qualify for cheaper conventional loans.

FEW, IF ANY, would disagree that Americans could use some financial education. Steep levels of credit-card debt, inadequate retirement savings and even rising bankruptcy filings during good economic times indicate we can use some help with understanding finances. Nevertheless, bankruptcy legislation that requires debtors to undergo credit counseling and financial education - believed to be the first federal mandate for financial lessons - raises some questions. Who will provide the counseling and education?

It might have been trash-talking, but Jamal Lewis made good on his promise. The young Baltimore Raven broke the single-day rushing record by running for 295 yards in the 2003 home opener at the stadium newly rechristened for the company that had bought the naming rights, M&T Bank. Today, though, the now retired Lewis and M&T are linked in court rather than on the field. Lewis filed for bankruptcy in Georgia in April, listing $14.5 million in assets and $10.6 million in debts — among them, a more than $350,000 judgment on a defaulted loan from the bank whose name hangs over the Ravens' stadium.

The conventional wisdom is that allowances make children responsible money managers as they learn to budget so they don't run out of cash. But Lewis Mandell, professor emeritus of finance and former dean of business at the State University of New York in Buffalo, says that's not always the case. In fact, says Mandell, who has studied financial literacy, certain allowances may even be hurting kids. According to Mandell, high school students who didn't get an allowance performed better on a financial literacy test than those who did, especially teens who received stipends with no strings attached.

Lime Kiln eighth-grader Clare Napoli set out to be a big spender, envisioning herself with an expensive house and a sporty Ford Mustang. Then the Junior Achievement online economics education program, called JA Finance Park, gave her a virtual identity, and Napoli discovered that she was a parent of two children. "It told me that I should plan better because I have to pay for their education," said Clare, who with other Howard County eighth-graders is using JA Finance Park as part of their consumer science curriculum.

Military service members are often taken advantage of by unscrupulous lenders. It's so bad, that Congress required that the new Consumer Financial Protection Bureau have a special office designed just to deal with the education and protection of service members and their families. Now the CFPB is seeking public input on products and services tailored to service members so it can use the information to design education and outreach programs for the military. This initiative is headed up by Holly Petraeus, the CFPB's Assistant Director for the Office of Servicemembers Affairs and, yes, the wife of the former general.

Active-duty service members and their families have a new financial tool in their arsenal: free FICO credit scores. The FINRA Investor Education Foundation is making the widely used credit score and other financial tools from myFICO.com available for free as part of its military outreach program. The usual price for this FICO standard service is $19.95. Scores play a big role in the credit decisions of banks and others, making this three-digit number critical to service members and civilians alike.

There is no question that financial education is sorely needed in our educational system ("No-frills financial primer — for adults," Sept. 5). However, to focus on consumers' need for skepticism is to skew our understanding of the problem such teaching is meant to correct. People who trust others are frequently blamed for their naiveté when their trust is betrayed, a common form of blaming the victim. In advising us to recognize that mortgage brokers, loan officers, et al., are not "just being nice" when they fail to verify loan-worthiness and thus put us at risk, financial experts obscure the elephant in the room: the fact that those who control the gateways to our financial security will lie, cheat and steal in order to make more money for themselves.

Military service members are often taken advantage of by unscrupulous lenders. It's so bad, that Congress required that the new Consumer Financial Protection Bureau have a special office designed just to deal with the education and protection of service members and their families. Now the CFPB is seeking public input on products and services tailored to service members so it can use the information to design education and outreach programs for the military. This initiative is headed up by Holly Petraeus, the CFPB's Assistant Director for the Office of Servicemembers Affairs and, yes, the wife of the former general.

Freeman A. Hrabowski III, president of the University of Maryland, Baltimore County, has joined the board of T. Rowe Price Group as an independent director, the Baltimore-based investment firm announced Thursday. Hrabowski has led the university since 1992, and was recognized last year by Time magazine as one of the 100 most influential people in the world. According to Price, Hrabowski sits on a number of civic boards, including the Alfred P. Sloan Foundation, the Urban Institute, the Marguerite Casey Foundation and the France-Merrick Foundation.

Dreaming of retiring and then sailing the world? You may want to try it the other way around. Big-ticket purchases at or early into retirement can crush even well-financed portfolios, experts say, particularly if they're accompanied by a period of poor performance in the financial markets. Some retirement advisers are beginning to urge clients to take the cruise, buy the new home or renovate the kitchen before retirement, not after. Even if it means forgoing retirement account contributions in the final year or two of employment, getting those costly items out of the way while you still are earning paychecks can be worth it, said Christine Fahlund, senior financial planner for T. Rowe Price.

When Don Phillips, a managing director of Morningstar Inc., was 13 his father bought him 100 shares in a mutual fund. It was Phillips' first investment. And though not the most exciting gift at the time, it became invaluable to him. "My dad sat me down and explained what a mutual fund is," he said. "But more importantly, I saw that investing was something he did and that it was part of being a responsible adult." Parents teach us a lot about money management, even if we never discuss with them the finer points of investing.