Heading for Another Financial Crisis?
Not if DoughMain Education Foundation Has Anything to Say About It
By Donald Gilpin
“Those who cannot learn from history are doomed to repeat it,” wrote philosopher and essayist George Santayana. Have we learned anything from the financial crisis that devastated so many families and crippled our economy in 2008? Have our financial institutions and government organizations heeded the important lessons that arose from the financial irresponsibility that brought on that crisis? Have we learned our lessons about managing credit and debt, about saving and investing, about borrowing and budgeting that will help to keep us financially secure in future uncertain economic times? And, most importantly perhaps, do young people, graduating from high school, embarking on their lives of earning, spending, borrowing and saving, know what they need to know to provide the financial foundations necessary for stable, happy lives?
The answers to the above questions are apparently a resounding “No,” and the consequences of this lack of knowledge could be disastrous for individuals, their families, communities, and our country.
Financial literacy is important not only for students’ happiness and prosperity but also for their future benefit if they decide to start their own business. Not to mention, while some companies assist businesses in debt management through various solutions, tracking data into databases, and assisting companies to emerge to the best of their ability, individuals must also learn how to manage debt and finance efficiently on their own. Besides, companies such as Debtwire expands to provide new services that may be even more beneficial to people. So, knowing the terminologies and fundamentals will always help students and individuals understand their finances better.
A recent National Capability Study by the FINRA foundation, which surveyed 27,564 Americans from June to October, 2015, revealed that 63 percent of respondents could answer no more than three out of five basic questions about money, and only 37 percent could answer four out of five. “Individuals need at least a fundamental level of financial knowledge,” the FINRA report stated. “This knowledge, paired with financial decision-making skills, can best ensure an individual’s financial capability.” But on the five basic survey questions, covering aspects of economics encountered in everyday life–compound interest, inflation, risk and diversification, interest rates, and mortgage payments–that fundamental level of knowledge was lacking. This essentially indicates that people would face issues with regard to budgeting and maintaining financial stability in their lives. For instance, somebody who wants to buy a house and desires to make the purchase on a mortgage might go through a hard time just to understand the nitty-gritty of the concept, if they have no prior knowledge about the subject matter. This is when they would need to consult professionals from firms like Moreira Team (considered one of the most renowned mortgage companies in ga) who can guide them throughout the process. But not everyone might be fortunate enough to come across an expert like the one mentioned above. Such people would have to struggle a bit in this regard. Unfortunately, that seems to be the case for Americans because the percentage of Americans answering more than three out of five questions correctly actually declined from 42 percent to 37 percent between 2009 and 2015–perhaps because they have nobody to teach them the concepts.
That said, this financial knowledge deficit helps to explain disturbing reports on Americans’ financial state, which include: *18 percent reporting that they spend more than their income; *21 percent reporting medical bills overdue; *9 percent having an “underwater” mortgage, with the balance on the mortgage higher than the value of the home; *50 percent having no rainy day fund of money set aside to cover expenses for three months in case of emergencies; *more than half rating their current financial situation as fair or poor. However, it should be noted to lack of financial knowledge doesn’t always correlate with making money. Many individuals have comprehensive knowledge about making money online through various means, and some of the best poker sites make a bigger contribution in this regard. However, poker sites are just one example of how one can make money on the Web. There are many more! For instance, those with an in-depth knowledge of the sports world can try their hands at NY mobile sports betting to aid the process of making money.
Anyway, all of the above make it impossible for many Americans to make ends meet, to save money and to plan for the future.
“Many people don’t understand budgeting, investing or how simple financial products like loans work,” according to Tom Sagissor, president of RBC Wealth Management-US, in an article last spring in The Street. “That puts them at a disadvantage not only during their working years, but as they begin to contemplate retirement.”
TEACHING FINANCIAL LITERACY
Ken Damato, chairman of the board of DoughMain Education Foundation (DMEF) and Rob Church, DMEF executive director, are not surprised by the abysmal state of financial literacy in this country, and they have a plan to help students learn the financial skills they need to survive and flourish in the 21st century-and to ensure that the great recession of 2008 is not repeated.
“The goal of DMEF,” says Mr. Church, “is to build financial literacy in students and prepare them for a lifetime of financial responsibility. By developing effective financial literacy skills in students, we empower them to take control of their lives.”
Mr. Damato, in his DoughMain office in Research Park across from Princeton Airport, blames “financial irresponsibility on the part of both consumers and the industry” for the 2008 crisis.The U.S. government-first President Bush, then President Obama-realized we had to do something, he says, and it had to start early in people’s lives. So they started to encourage the States through the Department of Education to take action to help teach children about money.
Mr. Damato goes on to explain, however, that in spite of government and school efforts, “financial literacy is still getting a failing grade in this country. It’s hard to teach about money. Most adults don’t feel comfortable about their own money situations. Most people would give themselves a ‘C’ or below for their own knowledge of money. These are the same people-in debt, trying to pay their mortgages -who walk into the classroom and try to explain finances to students.”
There are other reasons for the large gaps in financial knowledge in the 21st century. “The way you learn is through doing,” Mr. Damato points out. “When you were younger you walked into the bank with mom and dad. You pulled the bank book out of its plastic sleeve, pulled the card out and wrote in your $15 deposit. You had a sense of pride and accomplishment. And mom and dad deposited their check, and you watched how they spent money.”
“That’s all gone,” Mr. Damato says. “Over the past 20-25 years money is becoming less visible.It’s more and more difficult to engage with children about money because we’re paying bills online. We all love that we can take a picture of a check and it deposits automatically. You’re not balancing your checkbook in front of them. You’re not walking into that bank branch. The bank is not encouraging mom and dad to open accounts for their children. All that’s disappearing. You walk up to a money machine. You put in a piece of plastic. It’s like magic. Money spits out at you. You pull out a piece of plastic for all your purchases. And that’s what this generation is seeing.
“With this situation, transactions become frictionless. Life seems easier because there’s no friction in our day. But the reality is that lack of friction is the enemy to education.”
Another factor driving DoughMain’s quest is that schools, in New Jersey and elsewhere, are struggling to meet newly adopted financial literacy standards. Over the past five years 35 states have adopted some sort of financial literacy standards, and 17 states, including New Jersey, now require 60 hours of financial instruction.
“Teachers’ resources are being challenged,” Mr. Damato says. “They aren’t really equipped for what they need to do. The schools are trying to figure it out, but the materials aren’t very good. So you come back to the fact that 80 percent of Americans give themselves a financial literacy rating of C or below.”
THE DOUGHMAIN MISSION
DoughMain is addressing the challenges head-on, Mr. Church explains. Saying that “nothing has changed” despite much discussion in government and education arenas over the past eight years, he claims, “Our approach is a drastic change in the way financial education has been approached. We believe that the best learning takes place within the classroom and it’s led by skilled educators who are knowledgeable, understand teaching, understand their students, then have the opportunity to engage their students in the classroom-not a workshop, not somebody from the outside coming in for just two hours.
Over the past three years DMEF has been piloting a financial literacy curriculum with a game model that makes the learning fun. It has been used by middle and high school students in the Montgomery School District, resulting in dramatic improvement in financial literacy scores, according to Mr. Church.
In the summer of 2015 DMEF recruited a team of educators to develop and refine their Youth Financial Literacy Program called FitKit, a model, comprehensive, standards-based curriculum, with original videos, micro-economy gaming, teach-the-teacher tools and student assessments to gauge the learning.
Chris Giddes, a member of the FitKit curriculum teacher team, states, “I am very excited about the work that is being done by the DoughMain Education Foundation on this project.” A teacher of AP US History and personal financial literacy at Metuchen High School, Mr. Giddes is in his second summer at DoughMain. “Our teacher team,” he points out, “consists of very knowledgeable individuals, who have a lot of experience with the content of this course as well as the needs and interests of high school students. As we collaborate, really good ideas continue to evolve into great ideas.”
Mr. Giddes, 34, emphasizes the importance of this endeavor. “The skills and content that students learn about in personal financial literacy courses are imperative for their futures, as well as the futures of our country and the world. Too many people were not as prepared as they could have been leading up to and during the great recession. I know that my generation would have benefited from having these types of courses in high school, as many of us entered our adult lives underprepared for the financial responsibilities of adulthood.”
IN THE CLASSROOM
Mr. Giddes goes on to describe the efforts of the DoughMain educator team to make this curriculum “relatable and exciting” for the students. “Only reading about and hearing lectures on the content is not enough. The financial literacy course content needs to be presented to students in an engaging way, providing them with opportunities to complete activities that are hands-on and have real life connections.”
Franklin Township middle school teacher Juan Swift, also in his second summer as DoughMain consultant and curriculum writer, explains how the FitKit curriculum allows students to apply their knowledge and information in real-life scenarios like paying taxes, receiving a pay check with deductions, budgeting, investing for the future, paying for college, getting a loan, using a credit card, and career planning.
“It’s fun for the students and comprehensive in meeting the state standards,” Mr. Swift says. “College debt is serious, and students need to be able to figure out how to handle that. They need to know what grants and loans and scholarships are available. I didn’t know that when I went to college (Rutgers ’06) and I wish I had. I now have a large debt. “
Mr. Swift, 32, looks forward to teaching the FitKit curriculum at Franklin Middle School this fall. “I am excited to play the game with the students and interact in a fun setting to help them make important financial decisions. DoughMain provides a valuable, outstanding view of what financial literacy is and how to help.”
DMEF offers over 1000 pages of teach-the- teacher tools, with background information, teaching cues, pre and post assessments, and everything teachers need to know to teach the curriculum effectively, meet the needs of their classrooms, and address the state standards, according to Mr. Church.
“We look at the students first and see what their needs are, how they learn and what skills they want and need to develop. The curriculum is focused on individual learning styles.”
Noting constant ongoing improvements in the DoughMain curriculum and its adaptability to different schools and different students, Mr. Damato states, “Our curriculum, free of charge to the schools, will always need to be modified and enhanced, but we’re ready to take this into a dozen communities in the fall.”
Teachers who have been involved as consultants and curriculum writers will be implementing that curriculum in their schools. “We’re starting with word of mouth,” Mr. Church explains. “We never have any intention of charging the schools. Right now our energy is directed to making the curriculum materials better, connecting with the schools, and raising money to be sustainable. We need people in the community to listen to us and support us.”
About 40 schools so far have expressed interest in the DoughMain curriculum, according to Mr. Church, and he and Mr. Damato are hoping “to expand to 30-40 schools, then eventually distributing our materials into thousands of schools around the country.” Initially, Mr. Damato says, 90 percent of the funding must come from individuals, but in the future most of the money to support the DoughMain financial literacy endeavor will come from banks and financial services companies.
Annamaria Lusardi, academic director of the Global Financial Literacy Excellence Center at George Washington University, commented recently in a blog on the state of financial literacy education, “It is critically important to have financial literacy in school. This is how we learn any other topic – history, math, science. We start early and as simple as possible and build upon it.”
She said that disappointing data from recent surveys is “a call for action. We know now that most students are not financially literate; they lack this basic but fundamental skill to live in the 21st century.” She went on to call for parents and the business community to demand financial education programs in the schools with well trained teachers to lead them.
Ken Damato, Rob Church and their DoughMain team are answering that call to action.