News Column

Remarks of Under Secretary for Domestic Finance Mary Miller at the U.S. Release of PISA Financial Literacy Data

July 9, 2014

WASHINGTON, July 9 -- The U.S. Department of the Treasury issued the text of the following remarks by Under Secretary for Domestic Finance Mary Miller:

Thank you, it's great to be here. I want to express my appreciation to Anna Lusardi for hosting the event and to Secretary Duncan and Director Cordray for their leadership in financial education. It is also wonderful to see so many members of the President's Advisory Council on Financial Capability for Young Americans here today.

I take every opportunity to talk about financial literacy, and events like this one provide an important forum to share ideas and shape policy.

Prior to my time at Treasury, I spent over 25 years working in the financial sector, at an investment management firm. I watched the development of 401(k) plans, IRAs, target date retirement plans and college savings plans, all part of the evolution of putting individuals in charge of their financial decisions. But financial literacy underpins all of these decisions. As we can see today, we have a long way to go before we can say with confidence that Americans are well prepared to take on these challenges.

Yet, as you know, tackling these challenges is far from simple. In an increasingly electronic, mobile, and fast-paced world we are constantly making financial choices, but are seldom forced to sit-down and review those decisions in a comprehensive way. We often make smaller financial decisions impulsively or absent-mindedly - like picking up our morning coffee - but these decisions add up. They also help cement financial habits that stick with us throughout our lives.

That is why it is so critical that we provide more Americans, in particular our youth, with the tools they need to navigate these choices responsibly. As policymakers, it is our challenge, and our opportunity, to better prepare the next generation.

Today, many young people have never balanced a checkbook, and rarely write checks. Instead, they manage their bank accounts online on their computers or their mobile devices. While that convenience is remarkable, this new user experience can influence one's understanding of how checking accounts operate. When young people can access their checking accounts immediately, there's a certain expectation that their account balance is updated in real-time. The notion that it takes time for checks to clear or for debits to post is not always obvious to younger users. Learning to balance a checkbook provided a natural and memorable teaching moment to prior generations.

However, technology has reshaped our experience as consumers of financial services. We need to make sure young people understand their account balances. And we need to do that in the world we live in today, not the one that shaped my generation's experience. This is why PISA's insights into how and what school-aged youth are learning are so valuable.

While we mark PISA's review of financial literacy as an important milestone, the results make clear that we can and must do better as a nation. Despite having the strongest, most developed financial system in the world, on several measures we rank in the middle of the pack when it comes to preparing our young people to navigate that system.

Of particular concern is the percentage of U.S. students clustered at the bottom of financial learning. Nearly one in five students assessed did not exceed a baseline of proficiency in applying their financial knowledge in everyday situations. This knowledge includes basic skills like building a simple budget, comparison shopping, and understanding an invoice. Students who do not attain this basic proficiency are ill-equipped to understand more complex documents and transactions and are likely to face significant challenges if they don't gain these skills before they finish high school.

PISA, however, doesn't merely illuminate where we are falling short. The data offers insights into areas where we can build on the experiences of other countries. For example, New Zealand and Australia are both showing leadership in developing the financial capability of their youth.

In New Zealand, financial education is considered a theme for cross-curricular teaching. It spans the social sciences, math, English, business, and technology, and provides a context for strengthening literacy and numeracy skills. The PISA data shows a correlation between financial knowledge and performance across other academic subjects. The data also allows researchers to identify specific strategies for improving financial education.

Including financial topics in core subjects like math and reading may provide added value and make both subjects more interesting and engaging to students. For example, this approach may help students see the real-life value of algebra and also heighten quantitative skills used in financial decision-making. The ability to read and understand the terms of a contract might be boosted by more exercises in critical reading throughout schooling.

Looking to another leader, Australia, provides further useful models. The Australian Securities and Investments Commission offers a national educators' portal that provides free workshops, online training and other resources to enhance the ability of teachers to teach financial concepts. Such an approach might be useful in the United States, where many educators have not received such preparation, even with the wide array of resources already available.

As the PISA data shows, more than 40 percent of students attended schools where no teachers attended professional development in financial education in the last 12 months. Although many states have shown leadership in adopting financial education standards for their schools, a survey of teachers nation-wide shows that approximately two thirds felt unqualified to teach their state's financial literacy standards.[1] We can and must do more to provide educators with the tools they need.

We are also working with our partners across the federal government and the private sector to create and promote real-life learning opportunities. Recent research conducted for the Treasury demonstrated that students who had access to an in-school branch of a bank or credit union developed a more positive outlook on their ability to save and manage their money. Those who had an account and had financial education in class had even stronger outcomes. This research indicates that the opportunity to manage money together with financial education in class empowers students, and may have positive effects on their behaviors and financial outcomes in the years ahead.

The President has also asked a group of leaders from industry, education, and government to provide ideas about what is needed to build the financial capability of young Americans. Many members of the President's Advisory Council are here today because this baseline data is so important to their work. The Council will make recommendations to help young people gain financial knowledge and make choices about two important pillars of economic stability - obtaining higher education affordably and enabling retirement security.

Young people face many financial choices that have long-term implications. Among the most critical are those around higher education - whether to attend college or pursue other avenues, where to study, what to study, and how to pay for it. The Treasury has partnered with the Department of Education, the CFPB, and other members of the Financial Literacy and Education Commission to disseminate useful resources to help students and their families better navigate these options. I know many of us wish that online tools like the CFPB's Know Before You Owe had been available when we were preparing for college. We are working together to make sure young Americans today know about these tools and are using them.

We know that a college degree provides many benefits to individuals, including higher lifetime earnings and lower unemployment. Higher education is also a benefit to the nation's economic growth and prosperity. Workers who are more educated are not only more efficient, they also develop innovations that make all workers more productive. At the same time, we are confronted with the stark fact that middle and lower income families are less able to afford a college degree than in the past.

Too many of our young adults who have completed their higher education are learning about the challenge of managing student loans only after they have taken on this debt. In addition to inhibiting savings, poorly-managed debt may impair credit scores, and impede young people's ability to fully participate in the economy, including delaying buying homes and starting businesses. As the President recently noted, many young people who believe they made the right choice to go to college are now struggling to pay off their student loan debt.

To help more young people manage their debt, the Treasury is working with the Department of Education to inform student loan borrowers about options that may reduce their monthly payments. We have already tested this concept, working with Intuit, a business and tax software developer, this past tax season to help taxpayers link to the Department of Education's income-based repayment plans.

We plan to do more, leveraging the good ideas of the private sector to make sure borrowers know that they have options. We will also collaborate with academia to examine the effectiveness of loan counseling resources, so that students understand their debt options and make good choices before they get into trouble.

In addition to helping young people make better choices about higher education and student loans, we are encouraging new solutions that enable more Americans, especially low-income Americans, to obtain the knowledge, information, and tools to take better control of their finances throughout their lives. This spring, we launched the Financial Empowerment Innovation Fund to solicit and study ideas and strategies that hold promise to expand the financial capability and well-being of low- and moderate-income individuals and families. We are now reviewing research proposals and we expect to announce which projects we will be supporting this fall.

Hard-working Americans should have opportunities to save for the future. Yet many, especially many low-income workers, do not have access to a retirement savings account. To address this issue, the President instructed the Treasury to create a new retirement savings option for working Americans. In response, we are developing the myRA program, which will offer a simple, safe, and affordable way to save for retirement.

myRA will allow workers to begin saving with a small voluntary minimum contribution and contribute $5 or more every payday automatically through payroll deductions. The principal saved through deposits into myRA accounts will be protected and backed by the U.S. government. Treasury encourages employers to work with us to make this product available to their employees.

As leaders concerned about the future prospects of our young people, your support is needed to help inform and encourage employers about the accounts, and to ensure that eligible individuals can use myRA to save for a more secure retirement.


Starting young is critical to giving each generation the education they need to lead the financial lives they wish and deserve to have. Our goal should be that all Americans have the knowledge and skills to confidently navigate the financial system so that they can manage their every-day finances and prepare for life's major milestones. We all have a seat at the table - government, the private sector, and educators - to make this happen. I look forward to continuing to work with all of you, using this new assessment, to achieve these goals.

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Source: Targeted News Service

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