Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services...

What We’re Reading

May 5, 2011
/   Spotlight

Below are interesting stories the staff has been reading over the past week. What have you been reading? Let...

Do you feel more financially literate?

It’s a valid question—we’re at the end of Financial Literacy Month, designated as such by the government. So has it worked? Have Washington and the all the state capitals involved moved us to make things better?

Let’s start with the designation itself. Everything about the government is byzantine, of course, and even something as innocuous as encouraging people to become more money-savvy is no exception. Turns out this initiative was actually by a non-profit group back in 200, and the U.S. Senate signed on to a youth-oriented version in 2003, although by that time at least eight states already had their own version. A few years later, the National Foundation for Credit Counseling took up the cause.

In 2006, the Financial Literacy and Education Commission, backed by a lengthy roll call of government agencies and departments, delivered a comprehensive study titled Taking Ownership of the Future: The National Strategy for Financial Literacy. Supported by reams of data and credible subject matter experts, the report lays out a broad series of initiatives and goals that are designed specifically to help individuals enhance their management of financial issues.

The report also serves a perfect snapshot in time, not because it’s obsolete now—in fact, the advice may be even more valid in today’s difficult market—but because it captures the apparent widening gulf between the real and the aspirational. The resources, the desires, and the motives are all there to do things better than we should. And yet. . .

One good example is how much money we put away without spending. The report bemoans the steep decline in this area, pointing out that 35 years earlier, in the mid-’70s, 9.4% of disposable income was set aside for personal savings (some estimates have it even higher.) By 2004, the figure had plummeted to 1.3% (some estimates have it even lower.) Then Chairman of the Federal Reserve Board Alan Greenspan is quoted as saying that while domestic savings will be critically important, actual performance in this area would be dictated by largely by the “behavior of the members of the baby-boom cohort during their retirement years.”

Of course, the year 2006 could be seen as increasingly distant from the dot-com crash at the turn of the century and closer to the financial meltdown that began, at least publicly, in 2008. But where are we now?

Savings got closer to 6% during that period (dubbed the “new frugality”) but went back down to 3.5% late last year. That’s much lower than most retirement groups recommend. In fact, those who get started late in life—say, the age of 45—at the savings game need to put away a good 18% of annual income to assure a comfortable retirement after turning 70.

Can we do this? The current Chairman of the Federal Reserve Board, Ben Bernanke, had an interesting take on this before taking the job: As an economist at Princeton University, he theorized that the problem isn’t Americans saving too little, it’s foreigners saving too much. In particular, excess savings by Chinese individuals caused them to lend money to the U.S. at low rates, which effectively financed American consumption and caused a mountain of debt.

Of course, there’s much more to financial literacy than just personal savings—we need a better handle on everything from home mortgages and health insurance to tax rates and student loans. The irony is that all these issues are playing out on a national stage right now, courtesy of the presidential election.

In sum, the information and resources exist for us to learn more and do better. It’s in our own best interest to make the effort. Otherwise, every month—including those dedicated to helping us become more financially literate—will be like the one that came before.


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Compelling voices and contributed content from around the web

Andy Brown

Andy is marketing director for payments at NCR. He has nearly 30 years' experience in e-payment systems from the delivery and support of systems in the Far East and Europe, from both the product management and marketing perspectives. Based in the UK, Andy is responsible for marketing NCR payment solutions.

Dena Hamilton

Dena is NCR's Director of Enterprise Fraud & Security Software Solutions. She specializes in fraud, risk, compliance and security, with over 35 years of experience in the financial services space. Her focus is the development and deployment of enterprise financial crime solutions optimized in prevention, detection and back office efficiency.

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Neill Harris

Neill Harris is product marketing director for ATM solutions at NCR. He travels extensively to many of the world's leading banks and financial institutions, articulating how self-service technology and innovation can inform and support strategies and solve challenges.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Brad Strothkamp

Cleopatra Mavredis

Cleopatra is NCR’s Global Marketing Manager for Channel Solutions and has more than 20 years of experience in the ATM industry. NCR’s channel solution portfolio is comprised of APTRA Vision, Inetco Insight and OptiSuite solutions.

Edward Wade

Edward is a freelance writer from Sheffield. Now living in London, he focuses on business and finance.