Investment In Knowledge

Americans at all life stages are failing the literacy test. On Jump$tart’s biennial Survey of Financial Literacy among 12th-graders, 2008’s score of 48.3 percent was the lowest ever.⁶ Among the more than 46,000 students taking last year’s inaugural National Financial Literacy Challenge, sponsored by the President’s Advisory Council on Financial Literacy, the average score was 56 percent.⁷

Adults miss the mark on easy targets: three-quarters of Americans eligible for the federal Earned Income Credit (EIC) fail to claim this low-hanging fruit. As explained by Council vice chairman John Bryant, the EIC, retroactively available for three years, can amount to $4,000 per year. For families earning less than $40,000 a year, that’s a missed windfall of $12,000.⁸ Consumers flunk in many other ways. Less financially knowledgeable individuals pay up to 46 percent more in credit card fees, Lusardi and Tufano report. A 2008 survey sponsored by the National Association of Insurance Commissioners found Americans lacking in basic insurance knowledge, averaging only 40 percent in response to basic questions on auto, health, home and life coverage.⁹ A motivating factor: 82 percent of respondents to a November 2008 poll from the American Psychological Association cited economic worries as their top cause of stress, up from 66 percent six months earlier.¹⁰

How are financial firms and companies responding, especially when such stress negatively impacts everything from customer engagement to revenue optimization? While some stay mum, others are taking steps to address the growing financial literacy problem.

The Value of Personal Connections

Visa/Wells Fargo
Since 1996, Visa USA’s free, award-winning online Practical Money Skills for Life program has helped millions of Americans master the fundamentals of budgeting, saving and the wise use of credit. In 2004, Visa supported Wells Fargo Card Services on its Early Intervention Education: Empower-ing the Wise Use of Credit, a research initiative aimed at first-time cardholders. The program’s pur-pose was to improve the understanding of responsible bor-rowing and credit management, while measuring the effects of education on credit behavior.