Financial Literacy and Education Commission Public Meeting
Financial Literacy and Education Commission
Public Meeting
Thursday, May 29, 2014
Key Topics & Takeaways
- Miller and Cordray both stressed the need to promote financial literacy and retirement savings for young people.
- Mensah suggested a system of life-long retirement savings, to begin at birth with a child savings account.
- Iwry lauded the myRA program as a way for new savers to build up savings before eventually transitioning to private sector IRAs.
- Busette said the CFPB is working with other agencies, state officials, and local organizations to promote financial education across all communities.
Speakers
- Mary Miller, Under Secretary for Domestic Finance, Treasury Department
- Richard Cordray, Director, Consumer Financial Protection Bureau
- Lisa Mensah, Director of Financial Security, Aspen Institute
- Mark Iwry, Deputy Assistant Secretary for Retirement and Health Policy, Treasury Department
- Yvonne Yancy, Commissioner of Human Resources, City of Atlanta, Georgia
- Louisa Quittman, Director of Financial Education, Office of Consumer Policy, Treasury Department
- Camille Busette, Assistant Director of the Office of Financial Education, Consumer Financial Protection Bureau
Opening Remarks
In her opening remarks, Treasury Department Under Secretary for Domestic Finance Mary Miller said the Financial Literacy and Education Commission (FLEC) is focused on building the financial capability of young people. She stressed that financial education goes beyond making decisions for today to setting a foundation for tomorrow.
Miller said the Administration has made college affordability and retirement savings its two areas of focus for young people’s financial education. Retirement savings, she said, provide a financial cushion and peace of mind, but many young people are not building up substantial savings. She noted the Treasury’s myRA program as a tool to encourage retirement savings for temporary or part-time workers.
In his opening remarks, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray voiced his support for the myRA program and professed his confidence that it would become an effective tool for Americans seeking to build retirement accounts.
Cordray said FLEC should promote K-12 financial education and emphasized the need to work with state officials to achieve its goals. He said that in order to strengthen America’s financial system, you must start from the bottom-up, with individuals.
First Panel
Lisa Mensah, Director of Financial Security at the Aspen Institute, commended FLEC for taking the initiative to discuss young people and retirement, a combination she said is very rare. She said that in order to transform retirement in America, “we need to start early.”
Mensah discussed the Aspen Institute’s “Savings for Life” initiative, whose basic contention is that savings needs to take place at all stages of the life cycle. She argued that savings need to be easier, and should start at birth with child accounts. Once a person has developed a habit of saving early on, she said, that person is far more likely to retain the habit.
While many Americans look to Social Security for their retirement, Mensah continued, “an additional layer” is needed. She said now is the moment to add children to the system through simple, automatic accounts that would be a “serious down payment” on their future.
Mark Iwry, a senior advisor at the Treasury Department, said too many Americans are unprepared or not even on a path to planning for retirement because of a lack of financial education, capability, and confidence. To address retirement concerns, he continued, the President announced a new Treasury savings bond specifically designed to promote savings by new savers in a government-sponsored Roth IRA program, as the private sector might not be interested in servicing some of these new savers.
The new myRA would be simple and affordable, and allow for contributions to be made through payroll deposits, Iwry said. Keeping the system automatic and safe through government-backed bonds would allow for any person to start saving for retirement without anxiety, he said. Iwry noted that people saving through myRA would be “nudged” to the private sector after they have accumulated a sufficiently-sized fund – making the myRA program a sort of “incubation idea.”
Yvonne Yancy, Commissioner of Human Resources for the city of Atlanta, Georgia, said Atlanta has designed a comprehensive process for employee financial education. She said her department has created metrics to ensure that people are actually engaged and informed in retirement decisions.
Noting that young people do not typically think about their retirement savings, Yancy stressed the need to frame the conversation differently so that they are more willing to pay attention. She said that making the conversation more about general savings and making sure young people have enough money for “what’s next” in their lives is far more effective. Overall, Yancy said engaging employers directly is the best way to ensure proper financial education and preparedness for retirement.
Asked for any insights into tools or learning styles that are particularly useful for young people, Mensah said the most important thing is to keep retirement savings systems as automatic as possible. She said it is hard to get excited about planning for retirement as a teenager, and the most successful approach to planning for young people is when they do not have to think about it.
Second Panel
Louisa Quittman, Director of Financial Education in the Treasury Department’s Office of Consumer Policy, discussed research commissioned by the Treasury to better understand the effects of financial education on children and low-income adults. One study looked at youth to see whether a financial education curriculum and access to a bank or credit union would improve children’s financial understanding and attitudes towards financial institutions. A second study looked at the impact of financial counseling on low-income, unbanked adults transitioning off of public benefits.
In both cases, Quittman said, the financial education and counseling helped. She explained children tested better and were more likely to open savings accounts after going through a financial education curriculum, while even modest counseling for adults resulted in improved credit scores within six months and increased financial planning behaviors.
Camille Busette, Assistant Director of the Office of Financial Education for the CFPB noted that the day’s meeting was an opportunity to reflect on the way financial education can contribute to a well-functioning financial marketplace.
Busette said the CFPB has acknowledged a need to reach out to other federal agencies, community organizations, schools, employers and other groups in a collective effort to promote financial literacy. As part of this initiative, she said the CFPB has formed a partnership with libraries to provide consumers with unbiased resources on financial management, and has also posted a range of resources in both English and Spanish on its website.
Busette said the CFPB is working to identify when and why people are most receptive to counseling and financial education. Simply offering information, she stated, would not be sufficient. She also said the CFPB is putting a specific emphasis on conducting high-quality research into best practices to promote financial literacy.
For more information on this event, please click here.
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Financial Literacy and Education Commission
Public Meeting
Thursday, May 29, 2014
Key Topics & Takeaways
- Miller and Cordray both stressed the need to promote financial literacy and retirement savings for young people.
- Mensah suggested a system of life-long retirement savings, to begin at birth with a child savings account.
- Iwry lauded the myRA program as a way for new savers to build up savings before eventually transitioning to private sector IRAs.
- Busette said the CFPB is working with other agencies, state officials, and local organizations to promote financial education across all communities.
Speakers
- Mary Miller, Under Secretary for Domestic Finance, Treasury Department
- Richard Cordray, Director, Consumer Financial Protection Bureau
- Lisa Mensah, Director of Financial Security, Aspen Institute
- Mark Iwry, Deputy Assistant Secretary for Retirement and Health Policy, Treasury Department
- Yvonne Yancy, Commissioner of Human Resources, City of Atlanta, Georgia
- Louisa Quittman, Director of Financial Education, Office of Consumer Policy, Treasury Department
- Camille Busette, Assistant Director of the Office of Financial Education, Consumer Financial Protection Bureau
Opening Remarks
In her opening remarks, Treasury Department Under Secretary for Domestic Finance Mary Miller said the Financial Literacy and Education Commission (FLEC) is focused on building the financial capability of young people. She stressed that financial education goes beyond making decisions for today to setting a foundation for tomorrow.
Miller said the Administration has made college affordability and retirement savings its two areas of focus for young people’s financial education. Retirement savings, she said, provide a financial cushion and peace of mind, but many young people are not building up substantial savings. She noted the Treasury’s myRA program as a tool to encourage retirement savings for temporary or part-time workers.
In his opening remarks, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray voiced his support for the myRA program and professed his confidence that it would become an effective tool for Americans seeking to build retirement accounts.
Cordray said FLEC should promote K-12 financial education and emphasized the need to work with state officials to achieve its goals. He said that in order to strengthen America’s financial system, you must start from the bottom-up, with individuals.
First Panel
Lisa Mensah, Director of Financial Security at the Aspen Institute, commended FLEC for taking the initiative to discuss young people and retirement, a combination she said is very rare. She said that in order to transform retirement in America, “we need to start early.”
Mensah discussed the Aspen Institute’s “Savings for Life” initiative, whose basic contention is that savings needs to take place at all stages of the life cycle. She argued that savings need to be easier, and should start at birth with child accounts. Once a person has developed a habit of saving early on, she said, that person is far more likely to retain the habit.
While many Americans look to Social Security for their retirement, Mensah continued, “an additional layer” is needed. She said now is the moment to add children to the system through simple, automatic accounts that would be a “serious down payment” on their future.
Mark Iwry, a senior advisor at the Treasury Department, said too many Americans are unprepared or not even on a path to planning for retirement because of a lack of financial education, capability, and confidence. To address retirement concerns, he continued, the President announced a new Treasury savings bond specifically designed to promote savings by new savers in a government-sponsored Roth IRA program, as the private sector might not be interested in servicing some of these new savers.
The new myRA would be simple and affordable, and allow for contributions to be made through payroll deposits, Iwry said. Keeping the system automatic and safe through government-backed bonds would allow for any person to start saving for retirement without anxiety, he said. Iwry noted that people saving through myRA would be “nudged” to the private sector after they have accumulated a sufficiently-sized fund – making the myRA program a sort of “incubation idea.”
Yvonne Yancy, Commissioner of Human Resources for the city of Atlanta, Georgia, said Atlanta has designed a comprehensive process for employee financial education. She said her department has created metrics to ensure that people are actually engaged and informed in retirement decisions.
Noting that young people do not typically think about their retirement savings, Yancy stressed the need to frame the conversation differently so that they are more willing to pay attention. She said that making the conversation more about general savings and making sure young people have enough money for “what’s next” in their lives is far more effective. Overall, Yancy said engaging employers directly is the best way to ensure proper financial education and preparedness for retirement.
Asked for any insights into tools or learning styles that are particularly useful for young people, Mensah said the most important thing is to keep retirement savings systems as automatic as possible. She said it is hard to get excited about planning for retirement as a teenager, and the most successful approach to planning for young people is when they do not have to think about it.
Second Panel
Louisa Quittman, Director of Financial Education in the Treasury Department’s Office of Consumer Policy, discussed research commissioned by the Treasury to better understand the effects of financial education on children and low-income adults. One study looked at youth to see whether a financial education curriculum and access to a bank or credit union would improve children’s financial understanding and attitudes towards financial institutions. A second study looked at the impact of financial counseling on low-income, unbanked adults transitioning off of public benefits.
In both cases, Quittman said, the financial education and counseling helped. She explained children tested better and were more likely to open savings accounts after going through a financial education curriculum, while even modest counseling for adults resulted in improved credit scores within six months and increased financial planning behaviors.
Camille Busette, Assistant Director of the Office of Financial Education for the CFPB noted that the day’s meeting was an opportunity to reflect on the way financial education can contribute to a well-functioning financial marketplace.
Busette said the CFPB has acknowledged a need to reach out to other federal agencies, community organizations, schools, employers and other groups in a collective effort to promote financial literacy. As part of this initiative, she said the CFPB has formed a partnership with libraries to provide consumers with unbiased resources on financial management, and has also posted a range of resources in both English and Spanish on its website.
Busette said the CFPB is working to identify when and why people are most receptive to counseling and financial education. Simply offering information, she stated, would not be sufficient. She also said the CFPB is putting a specific emphasis on conducting high-quality research into best practices to promote financial literacy.
For more information on this event, please click here.