April 22, 2005

Saving Your Retirement Security

WASHINGTON , D.C. - Congresswoman Deborah Pryce (R-Upper Arlington) submitted the following letter to the editor:

With all of the talk about the Social Security system these days, it is sometimes easy to forget that Social Security is not the only way to pay for your retirement. Americans have a number of options for saving toward retirement, including employer-funded 401ks, individual retirement accounts, and the most basic of them all, bank savings accounts, to name a few. Unfortunately, many Americans don't take advantage of the opportunity to save for their future. In part, it's because we like to spend, but it is also because we lack the financial literacy and discipline. That is creating a society of consumption that threatens the future of our country nearly as much as the problem with Social Security.

In the United States today, nearly a third of high school seniors and more than three-fourths of college students already use a credit card. Yet only one in five say they ever took a money management or personal finance course at school. So what happens? We end up with a teenage population that spends more than $172 billion every year, more than the total exports of the country of Mexico. Many of our children-America's future retirees-are unable to balance a check book or have no insight into the basic survival principles involved with earning, spending, saving, and investing.  This inadequate knowledge of personal financial affairs is a danger to individuals' pocket books and to the economy as a whole. It's time we exercise some financial responsibility and teach our children the value of money. Just think of the benefits to the American economy if our citizens become financially literate.  If all Americans made some small investment in our economy! the growth would be astounding, creating more opportunities for our society as a whole.

My fellow Members in Congress recognize the importance of financial literacy. Earlier this year, I joined with several other members to form the House Financial and Economic Literacy Caucus. The caucus is a forum for lawmakers to advance the cause of financial literacy and economic education. The Caucus seeks to highlight successful policies at the federal, state and local levels, as well as private-sector and non-profit best practices for promoting financial and economic literacy nationwide. Also, this month the House passed a bill designating the month of April Financial Literacy Month. The resolution asks the President to issue a proclamation calling on federal, state and local governments to work with businesses and non-profit organizations to observe and promote Financial Literacy Month.

The goal of financial literacy programs is to increase awareness of basic financial concepts such as budgeting, saving, controlling spending, managing debt, borrowing responsibly, and record-keeping. The use of other financial concepts, like compound interest, dollar-cost averaging, diversification, and asset allocation, can make a significant difference in investment success. Many public and private programs have been developed to teach financial literacy. The Financial Literacy and Education Commission (FLEC) is a government organization has been formed to improve the financial literacy and education of Americans through the development of a national strategy. The Commission has a website, www.mymoney.gov, with plenty of information available to help people understand more about their money.

Unfortunately, in some cases no amount of financial savvy could prevent an individual from falling into debt. But in many instances, basic financial education can help an individual make wise decisions and avoid the pre-conditions of bankruptcy. Just as those who have a basic knowledge of health care are likely to lead healthy physical lives, individuals familiar with fiscal basics are likely to live healthy financial lives. By instilling the values of saving and wise spending at an early age, we can give America's youth the tools they need to live financially sound lives.