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Editorial: Money Smarts in Vermont

Sunday, January 04, 2015
What you don’t know about money can hurt you — badly. That unfortunate truth was underscored for millions of Americans during the Great Recession, when their personal finances were reduced to a shambles, sometimes because they had made bad choices about mortgage borrowing, credit card debt, savings or investments.

Against this backdrop, a report issued last month by the Vermont Financial Literacy Task Force takes on special urgency. It concluded that far too many Vermonters of all ages lack the knowledge and skills they need to successfully manage their personal finances. The committee, assembled under the auspices of Champlain College’s Center for Financial Literacy and composed of leaders in education, government, business and the nonprofit sector, laid out a series of recommendations to remedy this situation, starting in the K-12 public schools and continuing throughout college into adult life.

Among the striking statistics included in the report are these: 47 percent of adult Vermonters have a subprime credit rating; less than half of Vermont workers participate in an employment-based retirement plan; and adult Vermonters have an average credit card debt of $9,667. The extent to which this situation results from socio-economic factors beyond an individual’s control and how much is attributable to basic lack of knowledge about personal finance is unclear. But it’s reasonable to assume that a little more knowledge could go a long way.

At a time when the burden of financing higher education and saving for retirement is becoming ever heavier for hard-pressed American families struggling along on stagnant wages, the economic future will depend more and more on how well they manage that task. After all, when the cards are stacked against you, it’s all the more important to play the hand you are dealt skillfully.

One particularly arresting aspect of the report was its emphasis on how increased financial literacy could not only help individual Vermonters to become wiser consumers, savers and investors, but also contribute to the state’s growth and future prosperity. To take but one example, the task force’s recommendations include increasing the opportunities and incentives for low-income Vermonters to save and to build assets. It noted that, “Access to emergency savings is essential to weather crises in the short term.” And families that encounter a crisis without reserves often have nowhere to turn other than public support in its various forms.

This is not to suggest that low-income residents are the only ones who suffer from a lack of financial acumen. Plenty of older and decidedly middle-class people are now coming up on retirement without any very good understanding of how Social Security and Medicare work and whether their savings are adequate to secure their “golden” — if that’s what they turn out to be — years.

Financial literacy is certainly not rocket science. In fact, the report quotes Bill Clinton to the effect that it’s “a very fancy term for saying spend it smart, don’t blow it, save what you can and know how the economy works.” But there are sufficient financial complexities and so many ways to go wrong in today’s world that just about everybody could use some impartial help sorting it all out. We welcome this Vermont initiative and hope policymakers and educators will give the task force’s recommendations careful consideration.

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