story by Kim Souza
ksouza@thecitywire.com
Financial literacy ratings assigned by WalletHub based on federal data indicates Arkansas is way behind the curve when it comes to overall financial knowledge in its consumer population.
The Natural State ranked 50th out 51 places in the recent study that looked at education efforts in financial literacy, high school dropout rates, percentages of people with college degrees, the unbanked and those who borrow from non-bank lenders.
Dr. William Bailey, a professor emeritus at the University of Arkansas, has taught consumer finance to college students for three decades. He is not surprised to see Arkansas rank near the bottom of the barrel in overall financial literacy. He said a financial literacy test routinely given to college students in consumer finance/family finance classes have low scores — 62% nationally and 60% locally.
The WalletHub report found Arkansas to have the following rankings:
40th – High school financial literacy program
29th – High school dropout rate
48th – Percentage of people with a bachelor’s degree
45th – FINRA financial literacy survey
37th – Percentage of people spending more than they make
32nd – Percentage of people with a rainy day fund
38th – Percentage of people borrowing from non-bank lenders
Financial literacy educators across the country agreed more has to be done to improve financial prowess among consumers, and they said the earlier the better.
“This is a life skill. These high schools, these schools are failing to understand this is a life skill. The sooner you can know about finances, investing and so forth the better off you will be, but with all this emphasis on standardized testing, they just don’t have time for it. Financial literacy should definitely be included in public school curricula,” Keith Weigelt, professor at Wharton School of the University of Pennsylvania, said in the WalletHub study.
Bailey told The City Wire that financial teaching should begin at home. He shared a story of a someone he knew who raised his two daughters alone after the wife died suddenly.
“He would sit those girls down at the table each month when he wrote the checks to pay the bills. In the early years they licked the stamps and as they grew older they helped to track expenses, keep spreadsheets and balance a checkbook. He never hid his finances from those girls and they were able to make sound financial decisions as young ladies,” Bailey said.
He said money topics have been viewed as taboo among family discussions for ages but he has seen those parents who teach financial literacy give their children a gift they take with them to college.
Dr. Ed Bashaw, dean of the College of Business at Arkansas Tech University, said higher poverty rates in the state are part of the reason financial literacy is also lagging. Bashaw said those families struggling to make ends meet, may not want to burden their children with that worry. He was not surprised to learn that Arkansas ranked high in the unbanked category (38), given its influx of immigrants and their general mistrust of financial institutions.
“Poverty is generational and with a lack of education the cycle continues. And in terms of non-bank lending, sometimes it may be cheaper to borrow from a payday lender than bounce several checks. But, once they borrow like that it’s easy to become enslaved,” Bashaw said.
Bailey is concerned about the lack of financial prowess among the general college student population. He advocates for courses to be taught each year at the collegiate level, starting with basic financial topics like credit card and debt management to more in-depth maneuvering cafeteria plans and 401(k) options for seniors about to enter the workforce. He said with student loan debt at $1.3 trillion, this young generation is saddled with a financial burden that could last for 20 years or more.
“With debt levels now between $20,000 to $35,000 owed per student they are looking at postponing home purchase, starting families and other major life events while they whittle down their student loans,” Bailey said.
Bailey said in an ideal world parents would give children a foundation of sound financial teaching that are age appropriate. He said K-12 educators could and should reinforce and extend those learnings at each grade level as part of the standard curriculum. Then those students who go on to college would get more teachings, but those who don’t pursue higher education would still have the basic foundations.
Kimberly Snipes, senior vice president-auditing at First National Bank of Fort Smith, has been an advocate for teaching basic consumer finance to children for the past decade. Snipes said the bank is active in the Fort Smith and surrounding communities working with local school systems to introduce children to savings principles and a wide variety of basic consumer finance information. It’s a program she has championed for 11 years. During that time, Snipes said the bank has helped 3,046 school children set up savings accounts, with a $5 initial deposit.
“We are in those elementary schools almost every week from September to May, teaching lessons on the discipline of savings, basic money principles and we look at the U.S. Mint. This program hopes to plant early seeds across many diverse socio-economic demographics, Snipes said.
Since 2003, she said First National has contributed $15,230 back into the communities with their $5 kick-start savings investments and they have contributed many hours teaching the weekly sessions and going to the schools to collect the students’ deposits. The teachings are geared to fourth grade and higher.
“We don’t stop at the elementary level. We go back in and teach a six-week course on personal finance to eighth and ninth graders, which is part of the mandated curriculum in Fort Smith schools,” Snipes said.
At the high school level Snipes said they teach the National Endowment Financial Education curriculum which builds on the earlier teachings. This summer Snipes and her team are working with the University of Arkansas at Fort Smith and 100 high schools students taking part in the federal Upward Bound program.
“These students come from lower income families and they are planning to attend college. We will teach the NEFE program that looks at a wide array of areas from credit, borrowing, savings, checking, career options, etc.,” Snipes said. “We know that teaching and reteaching, helping to build savings habits early and making money a topic of discussion is key to breaking the cycle of illiteracy.”
Arvest Bank conducts similar work with the public schools in Northwest Arkansas.