Financial Planning

‘This country needs a big dose of financial literacy’

Finance I spent some time recently discussing the economic insights of NYSE Euronext CEO Duncan Niederauer, who told an FEI Summit crowd in Dallas that every financial downturn gives rise to countless opportunities.

He's right, of course, and one of those opportunities is to preach the good word of financial literacy. Maybe if we can show people how to take charge of their finances, they'll be better equipped to deal with the next downturn.

Niederauer agrees. During his Dallas speech, he told an eye-opening story that speaks directly to the importance of financial literacy.

He and his 9-year-old daughter were watching the news one evening when a reporter began telling the story of a homeowner who was in danger of losing her home. She had made the first two $4,000-per-month mortgage payments but couldn't afford to make another.

Her income? About $30,000 per year.

Niederauer's daughter paused, did some quick calculations in her head and said, "Daddy, I'm confused. Isn't four times 12 more than 30?" She had simply multiplied the woman's mortgage by 12 months and realized the result exceeded her income.

Here's a fourth-grader who figured out what so many Americans don't know -- or choose to ignore: If you buy something you can't afford, you're going to get into trouble.

"Right now, this country needs a big dose of financial literacy," Niederauer said. "(Americans) need to say, 'Yeah, I know this is the American dream, but I can't afford it. If they understood even the basics of personal finance, a lot of these people wouldn't be having these problems."

Amen. Any hope we have of avoiding a repeat of this economic fiasco rests in large part with individual Americans and their ability to manage their own finances. To do that, we need to learn some financial basics ... and a bit of common sense, too.

These resources might be a good place to start.


Bill Sheridan