Category Archives: Deborah M. Figart

Financial Literacy Month: How Capable Are We?

Financial Literacy Month: How Capable Are We?

Deborah M. Figart, Ph.D.

Special months can be designated by U.S. presidential proclamation. For example, February is Black History Month. March is Women’s History Month. June is Caribbean-American Heritage Month and Gay and Lesbian Pride Month. October is Breast Cancer Awareness Month and Domestic Violence Awareness Month.

In 2011, President Barak Obama declared April as National Financial Literacy Month. Four years later, like the many other special proclaimed weeks and months, it has stuck. April—the month that our income tax forms are due—is financial literacy month. In 2014, the United States Conference of Mayors joined the cause, declaring April 2014 to be their DollarWise Month.

Do we really need a month to focus on financial literacy? According to findings from national surveys, we do. The FINRA Investor Education Foundation piloted the first-ever National Financial Capability Study in 2009, and has updated the findings in 2012. The most recent results are startling: 36% of individuals surveyed spend all of their income, and 19% spend more than they earn. Only 40% of persons had access to a “rainy day” fund, a reserve of several months of expenses to carry them through a spell of unemployment or unexpected emergencies.

Compared to other industrialized countries with whom we increasingly do business, we have the lowest personal savings rates. According the Organization for Economic Cooperation and Development (OECD), the household net savings rate in the U.S. was 3.9%. Switzerland’s was 13.1%. Sweden and Australia were 10.9% and 10.0% respectively. The EU average was 7.8%, double the U.S.

It may not be surprising to find that Americans are not the greatest savers. We’re not very good managing debt, either. Because of compound interest, paying the minimum amount on a credit card bill can keep one indebted for a long time. Yet 34% of FINRA’s survey respondents paid just the minimum. And 6 out of 10 did not shop around to compare credit card offers, annual fees, interest rates, and other policies.

The financial behavior of those who live in New Jersey, a high-income and high-expense state, are more encouraging. (FINRA now actually conducts state-by-state studies and a military survey, as well as the national survey.) Fewer New Jerseyans spend more than their income. They also save more in rainy day funds, are more likely to pay their credit card bills in full, and are less burdened by have less outstanding medical debt. Yet when it came to answering five knowledge questions covering aspects of economics and finance encountered in everyday life: (1) compound interest, (2) inflation, (3) principles relating to risk and diversification, (4) the relationship between bond prices and interest rates, and (5) the impact that a shorter loan term can have on total interest payments over the life of a mortgage, New Jerseyans did worse than the national average. So there is still room for improvement in our financial literacy.

A Buy-Now-Pay-Later culture has fueled a U.S. consumption binge for the last 50 years of the twentieth century. This consumerism sustained several decades of prosperity and economic growth—and seemed manageable when we were buying products that we ourselves produced. Spending on goods “made in the USA”, at least, allowed money to circulate domestically and increase family incomes.

Though our financial knowledge and behaviors seem to be wanting in the twenty-first century, they are affected by our circumstances. We still are recovering from the worst economic crisis since the Great Depression of the 1930s. Survey answers reveal that in a typical month, 42% find it “difficult” to make ends meet, that is, cover expenses and pay all the bills. Another 16% find it “very difficult.” Medical debt, one of the chief causes of personal bankruptcy, is a major reason. Roughly three out of ten individuals face outstanding bills from a hospital, doctor’s office, or testing lab. And 54% of adult respondents with student loans have concerns about their student loan debt, which has been rising at the same time that a college degree has become more important for economic survival. Financial education can help, but it can’t solve all of these problems.

A 2013 Junior Achievement survey about teens and personal finances suggests that this dismal economic news is having an impact. Today’s teens don’t anticipate achieving financial independence from their parents until their mid-20s or even later. And 52% recognize that students are borrowing too much for college. Teens’ cautiousness about their financial future compared to their parents’ and grandparents’ generations may be the silver lining in this story. Financial Capability studies in ten years may show improvement.




Holes in the Airspace, Holes in our Infrastructure – Deborah M. Figart, Ph.D.

Holes in the Airspace, Holes in our Infrastructure

Deborah M. Figart, Ph.D., Professor of Education and Economics, The Richard Stockton College of New Jersey

With globalization, we thought the world was shrinking until the reality set in that a valuable and expensive asset, a Boeing 777 from Malaysia Airways, along with human beings can go missing from the skies. Why is it that Global Positioning Systems software (GPS) can track our children through their cell phones but we cannot instantaneously determine where a large jumbo jet is in the sky? Because air traffic control technology is over 70 years old.

Air traffic control uses ground-based radar (short for radio detection and ranging) to track the location of airplanes on the ground and in airspace. It is more precisely a transponder on a plane that broadcasts data through radio waves to the ground. While advances have improved accuracy, airplanes could still be hundreds of miles off from the sophisticated triangulation. (My apologies to scientists and engineers for this amateur explanation of radar.)

The United States is taking the lead in working on a new generation of satellite-based air traffic control system. The Next Generation Air Transportation System (NextGen) was authorized by Congress in the Century of Aviation Reauthorization Act of 2003. NextGen is expected in phases and seeks to fully provide the new system by 2025. It is a huge undertaking coordinated by the national Federal Aviation Administration (FAA), with the William J. Hughes Technical Center in Galloway Township, NJ, serving as the main facility supporting the research and testing for NextGen.

NextGen is one of the largest investments in infrastructure in U.S. history, totaling billions of dollars. The investment has been plagued by delays and difficulties, according to the U.S. General Accountability Office and the Department of Transportation’s Office of the Inspector General. At times, this bipartisan program has suffered from spending cuts or threats of spending cuts. This is not how to treat an investment project with such enormous potential.

When governments take leadership in investing in infrastructure, significant scientific advances can exert positive externalities and well-being throughout the globe. Witness the Netherlands and dike and floodgate construction. Or Germany’s national highway system. And the United States’ exploration of space. A similar high priority should be accorded to NextGen.

In fact, with our economy remaining relatively anemic, we should accelerate the NextGen timetable. In addition to making our skies safer, every dollar we spend will generate jobs, income, and technical expertise—all of which can help the private sector. People with jobs and income spend money. The knowledge gained from investments in scientific and technical projects can be translated into applications we have yet to imagine.