Greenspan: Financial Knowledge Essential Arizona Republic, Wednesday, February 6, 2002 Associated Press

WASHINGTON -- Schools need to do better at teaching basic mathematics to reduce an alarming lack of knowledge about fundamental financial concepts, Federal Reserve Chairman Alan Greenspan said Tuesday.

Greenspan said many studies have pointed to a critical need to improve financial literacy, the lack of which Greenspan said leaves millions of Americans vulnerable to financial losses from unscrupulous business practices.

"Any informed borrower is simply less vulnerable to fraud and abuse," Greenspan told the Senate Banking Committee.

He said schools should teach basic financial concepts better in elementary and secondary schools.

A good foundation in math, Greenspan said, would improve financial literacy and "help prevent younger people from making poor financial decisions that can take years to overcome."

Greenspan told the senators he learned as a child to work with percentages by keeping up with baseball batting averages.

"It has been my experience that competency in mathematics, both in numerical manipulations and in understanding its conceptual foundations, enhances a person's ability to hand the more ambiguous and qualitative relationships that dominate our day-to-day financial decision-making," he said.

Treasury Secretary Paul O'Neill told the committee that boosting financial literacy is part of President Bush's overall effort to improve education in the country.

O'Neill said all the new investment offers add to the complexity that investors face and represent a dramatic change from the financial world of the past, when mortgage rates were fixed and savings went into passbook accounts.

Now, he said, Americans inhabit a more complex world where mortgage rates are offered in a variety of ways, the use of credit cards is universal and savings instruments range from certificates of deposits at makes to mutual funds to individual stocks to annuities.

"People need to be able to read, write and speak basic financial concepts in order to make informed investment decisions," he said.

Treasury officers later said the administration was considering a public service advertising campaign to promote financial literacy as well as closer coordination with the financial services industry to develop a code of practices that would help crack down on predatory lenders.

O'Neill said financial literacy is more important now with the decline in the number of companies offering defined benefit pension plans and the growth in pension plans in which workers make their own investing decisions.

The issue of employee pensions has been a key controversy involved in the collapse of Houston energy giant Enron Corporation.

In that case, Enron employees were blocked from selling company stock during a critical time last fall when the price was plunging, even though top executives were able to unload their Enron holdings.


Each of these observations confirm the premise of Robert Kiyosaki in the Rich Dad Series that financial education is not taught in the schools. He explains these in Cashlow Quadrant and other Rich Dad books.

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