At the Wharton conference that I described in my previous blog, I sat down with Michelle Greene for an interview with Knowledge@Wharton. The link to the interview is provided below, but in this blog I wanted to discuss a few topics that have come up many times in this and other discussions.
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2496
In case you do not know Michelle, she is the Deputy Assistant Secretary for Financial Education and Financial Access at the U.S. Treasury Department. The title may look long, and it is for a good reason: she heads the office at Treasury which is in charge of financial literacy and financial education. One of the issues that office has to deal with is that many Americans are unbanked or underbanked and do not participate in traditional financial markets, hence the attention to financial access in addition to financial literacy.
Many people have asked me why financial literacy is so low and why we appear to be getting worse in terms of financial knowledge. In my view, it is not the case that financial knowledge has worsened, rather that the world has changed. Individuals have been put in charge of decisions that were—in the past—the responsibility of employers or the government (such as determining how much to put aside for retirement and how to manage pension wealth). Individuals have to make these decisions while facing much more complex financial markets. For example, ETFs, REITS, and 403(b)s were not in vogue twenty years ago and yet, while the acronyms are not exactly appealing, they have become part of what an average worker has to deal with in their financial planning. In the past, a CFO with an MBA in finance was making decisions about how to allocate investments in order that the company be able to pay a pension to the firms' employees; now workers John and Jane Doe are in charge of making these decisions. This means that every single worker now has to spend time and effort in collecting information and searching for the best conditions.
Given these changes, it may be obvious why the office that Michelle Greene heads is so important: we need to equip people with the tools to make financial decisions and increase financial knowledge if we are asking them to be in charge of their financial well-being after retirement. But, it is not enough to put them in charge. These are difficult decisions—even for a CFO with adequate training—and we cannot expect the average worker to navigate the financial markets if he/she does not know the difference between a bond and a stock or what an annuity is.
As Michelle stated in the interview, if there is a silver lining to the financial crisis, it is that there is a renewed sense among people that they need to understand their own finances. They need to engage in better behaviors and think more about the future. The financial crisis has also taught us the cost of financial mistakes. While we have not yet witnessed what may happen if workers with defined contribution pensions accumulate too little for retirement or make bad decisions on how to draw down the money from their retirement accounts, we have seen that choosing the wrong mortgage can end with the sheriff at the door and the furniture for sale on the lawn.
Michelle also spoke of the importance of starting to learn and to save when young and the need for inserting financial education into our schools. In my view, this is critically important as people need to have a basis on which to build their financial knowledge. Schools cannot teach every concept that will be of importance for making financial decisions in the future. But they can make people appreciate the importance of financial knowledge and the need to build on it over time. I am often asked what we should teach in high school to improve financial knowledge and my short answer is that we should teach people to be curious and to be interested in financial literacy. We do not teach literature expecting students to write the next War and Peace but rather to appreciate a good book. Similarly, we should teach financial literacy so that students appreciate the need to be informed before making financial decisions.
I want to end by saying that I am extremely proud of the work that Michelle is doing. Her work can and is having an impact on the lives of people, on the decisions that John and Jane Doe have to face—decisions that are part of a very different system than the one encountered by previous generations. There is a lot at stake here, and I hope that people will realize that inside the gray and imposing Treasury building alongside the White House, there is an office devoted to improving financial literacy and financial access.
Why Get A Car Insurance Quote For New Driver In Canada?
If you want to be able to drive freely on the roads of Canada then you need to have the proper car insurance coverage. A car insurance quote for new driver in Canada is the best way to go if you want to reap all of the benefits of auto insurance. Take a look here in order to unlock all of those benefits and tips you need!
Just like every country in the world, Canada has set laws and limitations that need to be followed when you are driving on the road. A certain amount of vehicle insurance and proof is necessary in order to stay out of trouble. Your insurance will also work to keep you and all passengers safe as long as you are paying for the premium.
Car insurance quotes are very easy to find. Most major car insurance companies will give you all of the quotes that you could ever want on various cars. Once you gather all of your vehicle information, you can easily begin the quote process. This can also be looked at as a great way to find out how much owning a brand new car can be.
Your goal is to save as much money as you possibly can on your car insurance. The car insurance quote for new driver in Canada that you look over will show you your payment options. Many people will choose for a 6 month payment plan simply because the payments are lower and easy to pay. However, if you do have the extra cash put it all down on your premium so you have definite insurance for 6 months at a time.
If a down payment is required make sure that you find the lowest down payment around. Each insurance company is going to quote a different number. This number is based on a number of aspects including your overall credit history. Sign up with the company that can save you the most money and asks for little to no money down on car insurance.
Roadside assistance, medical coverage and rental car expenses might all be covered under the coverage plan that you are looking at. With each car insurance quote for new driver in Canada there are features that need to be looked at closely. A rental car will surely help you get back on your feet and keep your routine even if your car is stuck in the shop!
Being safe is what it is all about and when you choose car insurance quotes you are taking the right steps! Make sure to choose the proper medical coverage on your policy that you can keep you and your friends safe while driving. Insurance companies can also make recommendations during the quoting process in order to keep you from spending too much money each month.
As you can see there are many advantages that come with having car insurance. A car insurance quote for new driver in Canada can really come in handy if you do not have a lot of money. Take the time to look around today and see which companies will work best for you!
Just like every country in the world, Canada has set laws and limitations that need to be followed when you are driving on the road. A certain amount of vehicle insurance and proof is necessary in order to stay out of trouble. Your insurance will also work to keep you and all passengers safe as long as you are paying for the premium.
Car insurance quotes are very easy to find. Most major car insurance companies will give you all of the quotes that you could ever want on various cars. Once you gather all of your vehicle information, you can easily begin the quote process. This can also be looked at as a great way to find out how much owning a brand new car can be.
Your goal is to save as much money as you possibly can on your car insurance. The car insurance quote for new driver in Canada that you look over will show you your payment options. Many people will choose for a 6 month payment plan simply because the payments are lower and easy to pay. However, if you do have the extra cash put it all down on your premium so you have definite insurance for 6 months at a time.
If a down payment is required make sure that you find the lowest down payment around. Each insurance company is going to quote a different number. This number is based on a number of aspects including your overall credit history. Sign up with the company that can save you the most money and asks for little to no money down on car insurance.
Roadside assistance, medical coverage and rental car expenses might all be covered under the coverage plan that you are looking at. With each car insurance quote for new driver in Canada there are features that need to be looked at closely. A rental car will surely help you get back on your feet and keep your routine even if your car is stuck in the shop!
Being safe is what it is all about and when you choose car insurance quotes you are taking the right steps! Make sure to choose the proper medical coverage on your policy that you can keep you and your friends safe while driving. Insurance companies can also make recommendations during the quoting process in order to keep you from spending too much money each month.
As you can see there are many advantages that come with having car insurance. A car insurance quote for new driver in Canada can really come in handy if you do not have a lot of money. Take the time to look around today and see which companies will work best for you!
Finding cheap hotels
How to find cheap hotels? That’s a question that I’ve heard quite a bit during my years as a traveler, expediter, and adventurer. Flashy, I know.
When going on vacation, I make it a priority to find hotels that have my preferred balance of affordability and desirability – in other words, I like hotels that keep both me and my wallet satisfied. For some people, this may seem like a difficult task – after all, what constitutes “cheap”? Getting a good deal for one person may be a very different kind of deal for another. Taking into account that all things in this world are relative, it can be comprehensively agreed upon that the earlier you start booking your hotels, the better of a deal you get.
So how early do most people start reserving their rooms?
When I ask that question to my friends, their answer, unfailingly, is “three days before the start of my vacation”. That, in my opinion, is not nearly enough time to come to a well-informed decision as to where to stay during your vacation. If your vacation is 2 weeks long and you decide to start booking your rooms three days before, you’re going to end up with a room that may be affordable but isn’t desirable, and vice-versa.
The question then becomes – when SHOULD you start booking your rooms?
Two to three months before. It may SEEM erratic at first, but think about it – the sooner you start, the more time you have to do a little research, read some reviews, look at the prices, the availabilities, and then come to a decision. Taking three days to do so is just ludicrous.
Let’s take an example – suppose you’re planning an epic trip to Toronto and you’re looking for Toronto hotels with a picturesque view of the Toronto skyline – the CN Tower, Rogers’ Centre, you know the deal. If you start looking for hotels three days before, you might end up on a website searching for Mississauga hotels. Why? You didn’t allocate enough time to actually RESEARCH potential hotels in the downtown area. Instead, you’re left with a “filler” hotel – accommodations that have been booked due to sheer desperation.
So how do you keep up with the rapidly changing industry trends and the constantly varying prices? Simple – you visit various hotel resource websites which provide you with the necessary information to make well-informed choices. From providing information on hotel development all the way to hotel realty, these resources can really make your vacation special because of the amount of objectivity they can provide.
Therefore, to eloquently sum up – to travel smart, find accommodations that are both affordable and desirable. Start early and don’t look back – a bit of punctuality can make a world of difference.
Financial Literacy: Implications for Retirement Security and the Financial Marketplace
Olivia Mitchell and I organized a conference at Wharton last Thursday and Friday, April 29–30, titled “Financial Literacy: Implications for Retirement Security and the Financial Marketplace.” This seems a good way to end Financial Literacy Month and reflect on the importance and role of financial literacy.
There are 3 ingredients to a successful conference: (1) good people, (2) good papers, and (3) good food. We provided a good lunch and we had dinner, surrounded by Chinese art, in a large hall in the University of Pennsylvania museum. But the people and papers were more than good, and I left Philadelphia with a lot of ideas and projects I want to pursue.
Our keynote speaker, who opened the conference, was Michelle Greene, the Deputy Assistant Secretary for Financial Education and Financial Access at the U.S. Treasury. She told the audience about the initiatives and the approach of the office she heads at the U.S. Treasury. Several things resonated with me. She stressed the importance of evidence-based policies and cited several studies, from the FINRA Financial Capability Survey to the FDIC Survey of Unbanked and Underbanked Households. She also stressed that the U.S. Treasury wants to put financial education where it works and where it is most needed. In my view, these criteria are not only critically important but also offer a way for research to make a real difference and to impact policy. She discussed the work that the Treasury is doing with state and local governments and with the private and nonprofit sectors. This is a reminder that while we need a national financial literacy policy, a lot of work is done at the local level, thus a grassroots approach when dealing with financial literacy is important. The U.S. Treasury is also coordinating the many federal agencies that are doing financial education programs. I was particularly pleased to know that the White House has joined the Financial Literacy and Education Commission and, in particular, that the White House Council on Women and Girls has become involved in financial literacy. As I have mentioned in many of my blogs, there is a real need to focus attention on women and girls and to address the existing gender gap in financial literacy. Michelle also mentioned that the website www.mymoney.gov has been revamped. This is the website to go to obtain financial information, and, again, I cannot stress enough the importance of having a trusted and independent source of information to rely on.
The papers that were presented at the conference spanned many topics. Some documented individuals’ financial mistakes. While the experience with subprime mortgages has made us acutely aware of the problem of financial errors, evidence about the use of credit cards and payday loans adds reasons to worry about the behavior of households who use high-cost methods of borrowing. Families have also started to borrow from their 401(k) plans, i.e., they are now borrowing from themselves and the money they have put away for retirement. And financial literacy seems to be a contributing factor: those with low levels of financial literacy are found to be more likely to borrow from themselves. Low literacy is also found to keep people from investing in the stock market. While one has to understand and be aware of the risks of investing in stocks, it is problematic to shy away from the stock market, particularly when investing for the long run. Moreover, when selecting a pension fund from a menu of possible offerings, those with low financial literacy are shown to rely more on the advice of employers, friends, and coworkers than on cost fundamentals. Those with low financial literacy are also more sensitive to how information is framed when interpreting the relative benefits of different investment choices. Given the choices that people have to make on their DC (defined contribution) pensions, these are worrisome findings.
Other papers documented other aspects of financial literacy. For example, when surveyed individuals are asked to rank their own financial knowledge, many give themselves high rankings, yet responses to a set of financial literacy quiz questions result in relatively low scores for many individuals. This type of overconfidence can negatively influence financial behavior.
Still other papers looked at the effectiveness of financial education initiatives provided by employers or by counseling agencies. Paraphrasing Michelle Greene’s message, we need these studies and rigorous evaluations of financial education programs to be able to allocate our resources to where they are needed, to where programs are proven to work!
The conference did not focus on the U.S. experience only. The retirement commissioner from New Zealand described some of the successful strategies that have been used to promote financial literacy among Kiwis (I mean the citizens of New Zealand, not those delicious fruits). The OECD has been a pioneer in promoting financial literacy and financial education programs and has worked on this topic since 2003. They have been not only a major force behind many important initiatives but are also working on promoting financial literacy in many emerging nations, from India to China to Latin America. Most importantly, they are serving as the coordinator of the activities that many countries are engaging in and serve as a clearinghouse for data and information. The World Bank has recently joined that effort and is devoting resources and expertise to promoting financial literacy among developing countries; in my view, an important and necessary effort.
In the closing panel, one representative of the Social Security Administration remarked that “he had not heard yet that financial literacy hurts.” I would very much agree that there are no obvious downsides to financial literacy.
We ended the conference with a quote that Michelle Greene had included in her presentation slides. She cited President Obama, who said, “If you work hard your whole life, you ought to have every opportunity to retire with dignity and financial security.” We hope that the government, academics, the financial community, and not-for-profit institutions will all work to make that opportunity possible.
There are 3 ingredients to a successful conference: (1) good people, (2) good papers, and (3) good food. We provided a good lunch and we had dinner, surrounded by Chinese art, in a large hall in the University of Pennsylvania museum. But the people and papers were more than good, and I left Philadelphia with a lot of ideas and projects I want to pursue.
Our keynote speaker, who opened the conference, was Michelle Greene, the Deputy Assistant Secretary for Financial Education and Financial Access at the U.S. Treasury. She told the audience about the initiatives and the approach of the office she heads at the U.S. Treasury. Several things resonated with me. She stressed the importance of evidence-based policies and cited several studies, from the FINRA Financial Capability Survey to the FDIC Survey of Unbanked and Underbanked Households. She also stressed that the U.S. Treasury wants to put financial education where it works and where it is most needed. In my view, these criteria are not only critically important but also offer a way for research to make a real difference and to impact policy. She discussed the work that the Treasury is doing with state and local governments and with the private and nonprofit sectors. This is a reminder that while we need a national financial literacy policy, a lot of work is done at the local level, thus a grassroots approach when dealing with financial literacy is important. The U.S. Treasury is also coordinating the many federal agencies that are doing financial education programs. I was particularly pleased to know that the White House has joined the Financial Literacy and Education Commission and, in particular, that the White House Council on Women and Girls has become involved in financial literacy. As I have mentioned in many of my blogs, there is a real need to focus attention on women and girls and to address the existing gender gap in financial literacy. Michelle also mentioned that the website www.mymoney.gov has been revamped. This is the website to go to obtain financial information, and, again, I cannot stress enough the importance of having a trusted and independent source of information to rely on.
The papers that were presented at the conference spanned many topics. Some documented individuals’ financial mistakes. While the experience with subprime mortgages has made us acutely aware of the problem of financial errors, evidence about the use of credit cards and payday loans adds reasons to worry about the behavior of households who use high-cost methods of borrowing. Families have also started to borrow from their 401(k) plans, i.e., they are now borrowing from themselves and the money they have put away for retirement. And financial literacy seems to be a contributing factor: those with low levels of financial literacy are found to be more likely to borrow from themselves. Low literacy is also found to keep people from investing in the stock market. While one has to understand and be aware of the risks of investing in stocks, it is problematic to shy away from the stock market, particularly when investing for the long run. Moreover, when selecting a pension fund from a menu of possible offerings, those with low financial literacy are shown to rely more on the advice of employers, friends, and coworkers than on cost fundamentals. Those with low financial literacy are also more sensitive to how information is framed when interpreting the relative benefits of different investment choices. Given the choices that people have to make on their DC (defined contribution) pensions, these are worrisome findings.
Other papers documented other aspects of financial literacy. For example, when surveyed individuals are asked to rank their own financial knowledge, many give themselves high rankings, yet responses to a set of financial literacy quiz questions result in relatively low scores for many individuals. This type of overconfidence can negatively influence financial behavior.
Still other papers looked at the effectiveness of financial education initiatives provided by employers or by counseling agencies. Paraphrasing Michelle Greene’s message, we need these studies and rigorous evaluations of financial education programs to be able to allocate our resources to where they are needed, to where programs are proven to work!
The conference did not focus on the U.S. experience only. The retirement commissioner from New Zealand described some of the successful strategies that have been used to promote financial literacy among Kiwis (I mean the citizens of New Zealand, not those delicious fruits). The OECD has been a pioneer in promoting financial literacy and financial education programs and has worked on this topic since 2003. They have been not only a major force behind many important initiatives but are also working on promoting financial literacy in many emerging nations, from India to China to Latin America. Most importantly, they are serving as the coordinator of the activities that many countries are engaging in and serve as a clearinghouse for data and information. The World Bank has recently joined that effort and is devoting resources and expertise to promoting financial literacy among developing countries; in my view, an important and necessary effort.
In the closing panel, one representative of the Social Security Administration remarked that “he had not heard yet that financial literacy hurts.” I would very much agree that there are no obvious downsides to financial literacy.
We ended the conference with a quote that Michelle Greene had included in her presentation slides. She cited President Obama, who said, “If you work hard your whole life, you ought to have every opportunity to retire with dignity and financial security.” We hope that the government, academics, the financial community, and not-for-profit institutions will all work to make that opportunity possible.
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