Financial Literacy

Resolutions Submitted to the
American Association of Family and Consumer Sciences (Adopted 2002)

WHEREAS shifting demographics, the shift from defined benefit to defined contribution pension plans, the increasing complexity of the financial marketplace and other factors have increased the importance of being a financially literate consumer;

WHEREAS The American Savings Education Council in 1999 found in a Youth and Money survey that 15 percent of students said they understood financial matters very well, 67 percent said fairly well, and 18 percent said they did not understand financial manners at all;

WHEREAS in the Youth and Money survey, 18 percent thought they did a very good job of managing their money, 38 percent said they did a good job, 37 percent said they did an average job, and seven percent said they did a poor job;

WHEREAS in the Retirement Confidence Survey conducted by the Employee Benefit Research Institute, one-third of workers had a “high” level of financial knowledge, while 55 percent had a moderate level and 11 percent had a “very low” level of knowledge;

WHEREAS in 1998, the average consumer had five credit cards and a balance of $4,100 and in 2000 60 percent of U.S. households revolved a portion of their balance estimated as high as $8,000;

WHEREAS bankruptcy has risen over recent years from 1.27 million households in 1999-2000 to 1.38 million households in 2000-2001;

WHEREAS in it’s 2001 Retirement Confidence Survey, the Employee Benefit Research Institute found that only 39 percent had tried to calculate how much money they will need to save for retirement; and

WHEREAS data from the 1998 Survey of Consumer Finances showed that 56 percent of non-retired U.S. households had fewer assets than they would need to supplement Social Security and pension income throughout their retirement if they planned to maintain their level of living.

BE IT RESOLVED THAT AAFCS supports programs, services, and policies locally, statewide, and nationally that are designed to help members of households: 1) expand their knowledge and education on the issues of managing money and assets, banking, investments, credit, insurance, and taxes; 2) understand the basic concepts underlying the management of money and assets (e.g. the time value of money in investments and the pooling of risks in insurance; and 3)
use knowledge and understanding to plan and implement sound and responsible financial decisions across the life course; AND THAT

AAFCS function as a conduit for linking policy makers as well as members of households to research and learning resources; AND THAT

AAFCS engage in collaborative relationships including partnerships with the public and private sectors to effect dialogues and deliberation on financial literacy that takes place locally, statewide, or nationally; AND THAT

AAFCS members serve as resources to financial institutions in addressing financial literacy needs in local communities.


Financial literacy across the lifespan is a critical issue. There are stories in the press on a weekly basis describing the destitute financial plight of the elderly and the lack of financial knowledge of young people. This Association has from its earliest beginnings been at the forefront of teaching personal finance and encouraging financial stability.

Despite the critical importance of financial literacy to young people, the average student who graduates from high school lacks basic skills in the management of personal financial affairs. A nationwide survey conducted in 1997 by the Jump$tart Coalition for Personal Financial Literacy examined the financial knowledge of 1,509 12th graders. On average, survey respondents answered only 57 percent of the questions correctly, and only 5 percent of the respondents received a `C' grade or better. A more recent study conducted in 2001 reveals even more dismal results with only 50 percent of the questions being answered correctly. Further, the largest growing segment of the population declaring bankruptcy is in the age group 20-25. (Jump$tart Coalition for Personal Financial Literacy, 2001.)

The Consumer Federation of America and the Cooperative Extension system joined with the Consumer Literacy Consortium to quiz 1700 adults nationwide on a set of consumer skills; the average score was 75% correct but there was a wide variation in knowledge. (Hogarth, 2002) One of the glaring tragedies to emerge from the collapse of Enron Corporation is the demise of the financial security of its employees. ABC News reported that many employees invested their entire 401(k) retirement accounts in the corporation. This failure to diversify has resulted in many long time employees being essentially bankrupt. Financial counselors have strongly advised that employees diversity their retirement portfolios, however many employees continue their approach as a result of loyalty to the company.

Evidence would seem, therefore, to point to a lack of understanding of sound financial principles and the significant consequences of the lack of that knowledge. “Family financial failures have both personal and societal costs.” (Hira, 3) Certainly the additional stress on family members and family relationships is detrimental to overall health. And, there is a correlation between family violence and family stresses such as financial problems.

AAFCS serves as a board member on the Jump$tart Coalition for Personal Financial Literacy. The goal of the coalition is that every student should have the skills to be financially competent upon graduation from high school. Extension educators across the country offer seminars on personal financial literacy for young adults, young families, and for those preparing for retirement. This Association must continue its vigilance in helping individuals and families across the lifespan understand personal finance principles.


Duguay, Dara. “Graduating Money-Smart Students.” Vol. 94, No. 1, 2002. Journal of Family And Consumer Sciences, pg. 37.

Hira, Tahira. “Current Financial Environment and Financial Practices: Implications for Financial Heath.” Vol. 94, No. 1, 2002. Journal of Family and Consumer Sciences,pgs. 2-6.

Hogarth, Jeanne M., “Financial Literacy and Family and Consumer Sciences.” Vol 94, No. 1, 2002. Journal of Family and Consumer Sciences, pgs. 15-28.

Valenti, Catherine. “Retirement at Risk.” ABC News, December 4, 2001.

S. 807. “To Promote Youth Financial Education.” 5/1/2001. U.S. Senate.

Impact Statement

Well-informed, well-educated consumers have the potential to make better decisions for their families, increasing their economic security and overall well-being. Secure households and families are better able to contribute to vital, thriving communities and foster community economic development. An effective and efficient marketplace requires knowledgeable consumers who make informed choices. Therefore, financial literacy is important for the individual, family, and community.

Members have expertise in financial management, human development, community development, and/or the learning process. They live in communities and have the capacity to bring people, programs, and resources together in timely and meaningful ways. Policy occurs locally, statewide, and nationally. For example, school curricula decisions are made locally and therefore, it is important to inform parents, school personnel, and boards of education about the need for and options financial education can be provided.

  1. Passage of this resolution would not have a negative effect on the AAFCS budget because: Coordination, planning and resources are already an integral part of the sections, divisions, and committees such as Public Policy as well as affiliates and headquarter staff.
  2. Distribution of this resolution and other resources related to this issue to AAFCS members and affiliated organizations would occur through existing
    communication options. 
  3. Additional resources would not be required from headquarters staff unless a project was mounted from external funding sources and in that case,
    the project budget would include needed staff.
  4. Funds to support any new research initiative without external funding would be approved through existing channels.

Suggested Implementation Strategies

  1. Use this resolution and rationale in the Hogarth article to build partnerships such as the one in place with Jump$tart nationally as well as statewide and in communities. Be sure that both the public and private sectors are engaged and actively making contributions related to their mission. Create a shared vision among the partners so that it can be communicated with the broader public.
  2. Engage in policy actions that support and promote financial education in communities. Become involved in board of education decision making and assume leadership roles on statewide committees and task forces.
  3. Make financial education resources available to financial institutions and other entities with a commitment to an informed consumer. Build partnerships with the media and make research results available to the masses.
  4. Be involved in dialogue and deliberation on financial literacy that takes place locally, statewide, and nationally.