story by Rose Ann Pearce, special to The City Wire
Arkansas ranks among the least financially literate states in the U.S. according to a 2015 study from WalletHub. The 49th ranking for Arkansas prompted Mark Foster, educational director at Credit Counseling of Arkansas, to quip, “I’m surprised we’re that high.”
Arkansas is in the basement in the ranking of knowledge and education and 47th in planning and daily habits. Arkansas also ranks 48th in the number of unbanked households. WalletHub, a leading personal finance website, analyzed financial education and consumer habits in all 50 states and the District of Columbia.
The knowledge and education component included factors such as the high school dropout rate, population with bachelor’s degree or higher and the number of library branches per 100,000 population. In the planning and daily habits segment, the study looked at factors such as percentage of people who spend more than they make; percentage of people with a rainy day fund; and paying only minimum amounts on credit cards.
The most financially literate state, according to the rankings, is New Hampshire. The only states ranked below Arkansas are Nevada and Mississippi. Arkansas is joined by the other least financially literate states of Texas, Alabama, Kansas, Oklahoma, Kentucky, New Mexico and Louisiana.
Arkansas’ ranking doesn’t surprise Foster or others, such as bankers, educators and librarians, all of who provide programming to help Arkansans get a better handle on their money and credit management. The lack of understanding may be a generational issue, especially for Boomers who were raised in households where discussion of family finances was taboo. The level of poverty may be a root cause as well.
Foster pointed to a story about year ago from the Associated Press, stating that 35% of Americans have unpaid bills or bills referred for collection. In Arkansas that number was 40%.
“Money is something we have to deal with but not many people have had any kind of education on how to deal with it,” Foster said.
Children, especially, may be learning money habits by observing parents.
“You are teaching children about money because they are watching you, even if you don’t say anything,” Foster said. “They observe positive or negative behavior.”
CCOA is one agency that offers a series of classes in Bentonville, Fayetteville and Fort Smith to help people with money management, budgeting, basics of credit, home buying, identify theft and couples and money management, Foster said. Since its’ inception nearly 20 years ago, CCOA has taught financial classes to some 200,000 people in its service area, Foster said. The classes may be offered in schools, colleges, churches, libraries or businesses.
“We try to find locations out in the community,” he said.
One of those locations is the Springdale Public Library which was one of 17 libraries in the U.S. to receive a $30,000 grant from the American Library Association in 2014 to support a series of financial workshops, said Laura Speer, reference librarian.
Through partnerships with CCOA, the Arkansas State Securities Department and Economics Arkansas, the workshops have been offered to students and adults, including special programming for the city’s Marshallese population.
“We are providing resources people need to make the best informed decisions,” Speer said. “We want you to realize you are not in this alone. We’re giving you the resources.”
EARLY EDUCATION
A young adult series of workshops help high school students to prepare for college and the financial issues they may face, like receiving unsolicited credit cards, Speer said. For younger children, there is a program to encourage saving money while learning to be the master of their financial future.
“This is not a new problem,” said Karen Gray, marketing director for Arvest Bank.
And, it’s not a problem limited to Northwest Arkansas or the Fort Smith area, but is prevalent in other parts of the state because of a lower poverty level.
“Our thought is that if a child is old enough to learn, he is old enough to start learning financial lessons,” Gray said.
The bank first started teaching financial lessons at Root Elementary School in Fayetteville about 20 years ago. The program reached into other elementary schools in Northwest Arkansas over the years. The bank now offers an eight-week program, called Dollars and Cents, to fifth-graders in local schools. In other areas, the bank offers one-day savings presentations for elementary students in Prairie Grove and Farmington and banking classes for high school students in Siloam Springs and Benton County.
“We need to teach at all levels,” Gray said.
The bank offers money management skills through its “Money Skills” website, and also offers other programs help people better manage money and other issues through its Education Center.
OTHER OUTREACH
The bank has offered course at 7 Hills Homeless Center and Ozark Literacy Council and has partnered with CCOA and other businesses to reach potential students in their financial management programs.
Many schools are teaching a financial management curriculum to students of all ages. One of the most far-reaching programs is in the Springdale School District where economics classes for all students are under the direction of Jo Vanderspikken, the gifted and talented director and economics education coordinator. Economics education started in Springdale schools over 30 years ago.
Springdale schools has fostered partnerships with Economics Arkansas, National Council on Economic Education, Winthrop University, and the Federal Reserve Bank of St. Louis Little Rock Branch, according to the district website.
Economics Arkansas encourages teachers to develop programs to increase K-12 economic literacy and wise decision-making of Arkansas students in kindergarten through 12th grade. The Springdale district joins Economic Arkansas to provide economic teacher training.
Teaching in Springdale schools starts in kindergarten and first grade with economics vocabulary. The curriculum climaxes with the annual Stickhorse Rodeo at the Parsons Stadium rodeo grounds.
By ninth grade, school districts are required by state education mandates to offer an economics course, Vanderspikken said. The district also works with Speer at the Springdale library to provide economic education to sixth and seventh grade students and their parents.
Third-graders are now preparing for the annual economics fair at the Jones Center on May 8 where the students put together presentations focused on a durable product they have designed and marketed, Vanderspikken said.
The district also partners with John Brown University and NorthWest Arkansas Community College to provide entrepreneurial programs that reach many of the district’s 22,000 students, she said,
Economic education is an important component in public education because the economic way of thinking and financial management is not taught in the home, she said.
“Children truly don’t learn at home,” she said. “We want to prepare them so that when they go to college, they don’t get sucked in. I hear from so many young people, especially women who ask, ‘How do I get out of credit card debt?’”
“Often we learn from the school of hard knocks,” Foster added. “Education is really key. It takes people to be proactive.”
BETTER OUTCOMES
A recent Wharton study conducted by Olivia Mitchell and Annamaria Lusardi over a 10-year period found that financial knowledge correlates with better outcomes.
The research indicates the financially savvy tend to take on less credit card debt and pay balances off each month. They’re more likely to refinance a mortgage when it is profitable to do so, are less likely to fall prey to high-cost debt like payday loans and are more likely to plan for retirement.
Mitchell and Lusardi write: “Our analysis of financial knowledge and investor performance showed that more knowledgeable individuals invest in more sophisticated assets, suggesting that they can expect to earn higher returns on their retirement savings accounts.”
“It’s our belief that you really have to start financial education at a young age,” Mitchell noted in the report.
The researchers said much remains to be done in this young field of financial literacy.
“Curing and preventing financial illiteracy is not costless, but investing in financial literacy is likely to bring high payoffs,” Mitchell said.