The painful financial crisis that we are facing is due, at least in part, to the lack of oversight of a financial-services sector too eager to take on unadvised risk for great gain.
But the problem started with individuals who similarly took on the unadvised risk of subprime mortgages that they could only repay if the stars aligned perfectly. No such luck. The real estate bubble burst, the rate adjustments built into the mortgages continue to go up and foreclosures abound. Some of those who took the gamble knew what they were doing, in the same way that patrons of casinos are optimistic that they are the ones who will beat the house. But many more had no idea what they were getting themselves into.
The Jump$tart Coalition for Personal Financial Literacy, a national consortium of finance professionals and educators, and its local affiliate, Rhode Island Jump$tart, recognize that the road to personal financial solvency starts early. Yet a recent survey of high school seniors showed that only 26 percent (29 percent in Rhode Island) achieved a passing mark in financial literacy. There is much work to be done.
And the need has never been greater: individuals face increasingly complex financial options at the same time that they are assuming more responsibility for their own financial futures as employer-based pensions evaporate.
One place to start would be to join the eight states that require students to pass a personal finance course as a prerequisite for receiving a high school diploma. Come to think of it, if the state’s legislators had met such a standard, they might be doing a better job balancing the state’s budget. •
