Banking | Investing in Financial Literacy

Many Kentuckians struggle to understand financial matters and make sound decisions with their money. In fact, Kentuckians’ financial literacy ranked 48th in 2017 study by WalletHub of financial education programs and consumer habits in all 50 states.

Kentucky’s General Assembly passed legislation in March designed to attack the problem by requiring public high schools to teach students how to budget, save and invest money. House Bill 132, sponsored by Rep. Jim DuPlessis, R-Elizabethtown, makes completion of courses or programs that meet financial literacy standards a graduation requirement, beginning with students entering ninth grade in fall 2020. It passed both chambers by large margins.

Poor financial literacy and decision making can have devastating effects on Kentucky families, but it also hurts the state’s economy, DuPlessis said.

“If we want our state economy to be healthy, we must have financially healthy families. When families struggle with making smart money decisions, it has long-term effects that inhibits their ability to buy things, which in turn hurts our economy,” he said.

Courses required by HB 132 focus on budgeting, compounding interest, debt and proper use of credit, saving for the future, financial planning methods, earning income potential, and how to use insurance to protect finances.

“Equipping our youth for successful adulthood is the primary focus of education,” DuPlessis said. “We must empower our kids to control their finances, or their finances will ultimately control them. I can think of no more important skill than one that will lead to financial freedom during adulthood.” 

State Sen. Dennis Parrett, D-Elizabethtown, is DuPlessis’ ally, having filed similar financial literacy instruction bills in previous sessions. This was the third year the Hardin County lawmakers pushed the issue.

In the Senate, where there was concern the instruction requirement posed an unfunded mandate, amendments created flexibility to allow programs such as Junior Achievement teach the financial literacy standards and include public charter schools in HG 132’s provisions.

DuPlessis learned about the need for such courses from his daughter, who took a high school elective taught by Alex Todd, a high school teacher and financial literacy advocate in DuPlessis’ district. Todd taught his students about compounding interest and the impact saving money now could have on their lives.

“As a 17-year-old girl, she saw how easily she could use compounding interest to become a millionaire by age 40,” DuPlessis said. “She saw that budgeting that included savings gave her a path to that goal.”

Implementation of HB 132 aims to improve Kentucky’s economy, help stop the poverty cycle and offer a chance at financial freedom to hundreds of thousands of Kentuckians, DuPlessis said.

In its 2017 Financial Literacy Survey, the National Foundation for Credit Counseling found an increase in Americans’ credit card debt, decreases in the number of people with non-retirement savings, and higher levels of concern about long-term financial stability, including retirement savings.

Kentuckians scored low in areas of retirement readiness, credit usage, and saving and spending on the 2016 National Report Card on Adult Financial Literacy, produced by Champlain University. Overall, Kentucky received a D+.

Nine percent of Kentucky households have no bank account, a 2015 FDIC survey found, and 18.2 percent are “underbanked” – despite an insured institution account, the household uses non-banking system products such as payday loans, money orders, rent-to-own services, etc. The national average of unbanked and underbanked households is 7 percent and 19.9, respectively.

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The national Bank On program, which has three Kentucky coalitions, seeks to address the problems of predatory financial services. It helped Kentuckians who received government benefits prepare as the government phased out paper checks in 2013. Bank On helps provide access to the traditional banking system and provides financial literacy education.

Kentucky Farmers Bank in Ashland spearheaded the 2012 effort to establish a Bank On program to reach Appalachian residents, who are more likely to be unbanked or underbanked. Administered through United Way of Northeast Kentucky, it helps those without access to mainstream financial institutions. It offers Bank On accounts and uses financial literacy curriculum developed by the Kentucky Technical and Community College System. The Bank On coalitions in Louisville and Central Kentucky provide similar services.

The Kentucky Jump$tart Coalition also works to raise awareness to the importance of financial literacy. The Kentucky Financial Literacy Initiative, which supported this year’s legislation, offers several educational resources for parents and teachers.

Lorie Hailey is a correspondent for The Lane Report. She can be reached at editorial@lanereport.com.