A nonprofit publication of the Kentucky Center for Public Service Journalism

Gena Bigler: Kentuckians need financial literacy; House Bill 223 can provide it


Nearly 70 percent of Americans are in debt. The average American family has over $7,000 in credit card debt and a recent study by the Brookings Institute found that 21 percent of Americans and 38 percent of those with incomes under $25,000 thought that winning the lottery was the most practical strategy for gathering money for retirement. Americans need financial literacy programs.
 
Kentuckians might get some help being a little smarter about money soon. House Bill 223 just passed the Kentucky Legislature and is waiting for the Senate to weigh in on its future. This bill would create a Kentucky Financial Literacy Commission. The bill was modeled after the very successful Tennessee bill that was enacted in 2010.
 
Our neighbors have seen huge benefits from their initiative. Tennessee was one of only seven states to receive an “A” in financial literacy education from The Center for Financial Literacy. Kentucky received a “C.”
 
Clearly, we need to do better in educating our citizens in financial basics.
 
Rep. Rita Smart (D-House District 81), co-sponsor along with Rep. Jim Glenn (D-House District 13) and Rep. Mary Lou Marzian (D-House District 34) of HB 223, said one of the reasons she sponsored the bill was that “like sports, without the basics, you can’t excel.” She hopes this bill will help Kentuckians gain a solid grasp of the fundamentals of personal finance.

 
The financially illiterate are less likely to have a retirement plan, an emergency fund or even a checking account. The financially illiterate are more likely to use payday loans, pay only the minimum balance on credit card debt and take on high-cost mortgages.
 
“Kentuckians are going to payday lenders and paying enormous interest rates and don’t even realize it. They need the money right then and will do what they have to, to get it without being aware of the consequences,” Smart said.
 
She’s right. Kentuckians’ dependence on payday lenders and the amount they were entrapped by debt to these lenders increased in 2012. A hefty 90 percent of payday lending borrowers have five or more loans and over 5000 borrowers were indebted to the payday lenders for at least 420 days for what was supposed to be a 14-day loan.
 
Similarly, college students are taking on debt they can’t afford and often don’t understand the long-term consequences.
 
The average college student graduates with a $27,000 debt. Student loan debt has nearly doubled since 1999. Currently, about 41 percent of students are delinquent during the first five years of their loan repayment.
 
Borrowers ages 40 to 60 have delinquency rates ranging from 9.4 percent to 12 percent.
 
This shows that student debt is a lifelong burden for many. Student loan debt is estimated at about $900 billion to $1 trillion in the United States. This is a huge amount of debt with a large delinquency rate that isn’t improving. A study found that high school students spent at least two weeks planning for prom and five hours or less learning about how to pay for college. 


 

There are even fewer states today that have high school required personal finance classes than there were in 2009. This should be a growing trend, not a shrinking one. Kentucky is poised to turn this around and improve the financial future of our citizens.
 

Increasing financial literacy benefits everyone. It improves the opportunities to get a college education, start a business and have a secure retirement.
 
Financial literacy increases the potential of all Americans to be self-reliant.
  
Americans agree that financial literacy should be included in the high school curriculum. A study found that 93 percent believed high school students should be required to take a class in personal finance.
 
Perhaps we should consider adding a class for Kentucky high school students. Knowledge is powerful and our young people deserve every opportunity we can give them. HB 223 is a step in the right direction.

 

Gena Bigler is passionate about public service and credits her time serving nonprofits in AmeriCorps and Volunteers in Service to America (V.I.S.T.A.) with teaching her extreme budgeting and bargain shopping. Gena is now CFO of McNay Settlement Group and serves on the board of the Lactation Improvement Network of Kentucky (L.I.N.K.). Gena would be happy to hear from you at lgbigler@gmail.com.

 

Click here to read more columns from Gena Bigler.


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