“Paradoxically, the opposite may be true. Participating in (financial literacy) programs can increase risky behavior as people gain a misplaced confidence in their ability to make financial decisions. The chasm between the skill levels of most Americans and what the marketplace demands is just too wide…

…Credit card and other consumer contracts are written at a 12th-grade level to a graduate-degree level, even though the average American reads at the eighth-grade level or below. Even many who attend college do not understand their student loans, and 14% of students with federal loans believe they have no student loan debt at all. Trying to educate every American out of these problems is an abdication of our collective social responsibility. We don’t expect people to be their own doctors or lawyers; why would we expect them to be their own financial advisors? When experts cannot agree on answers to the questions, pretending that we will teach artists and architects, farmers and flight attendants, police officers and plumbers to find good answers is a cruel joke. If financial literacy education isn’t the answer, what is? The financial marketplace must be structured so that ordinary people — people with limited time, math skills, attention and willpower, and an abundance of those wonderful American traits of trust and optimism — can navigate it safely and effectively. Financial industry incentives must be brought into alignment with the interests of consumers. At a minimum, we should outlaw commission structures that reward financial salespeople at the expense of their customers (as Britain has done). Beyond that, financial services firms should be required to demonstrate that their customers understand the costs, benefits and risks of financial products.”, Lauren E. Willis and Theresa Amato, “What your bank owes you: clarity”, The Los Angeles Times

Posted on January 13, 2015, in Postings. Bookmark the permalink. Leave a comment.

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