Mr. AKAKA--Mr. President, I rise today to introduce a resolution designating April 2005, as Financial Literacy Month. As in previous years, this is a bipartisan effort, and I thank several of my colleagues for standing with me in advancing financial and economic literacy for our citizens.
We must raise public awareness about the importance of financial education in the U.S. and the serious consequences that may be associated with a lack of understanding about personal finances. Efforts to combat financial illiteracy are taking place in our school systems, across communities, in the business and banking sectors, and in Federal, state, and local government agencies, and I commend everyone in those areas for what they are doing.
For example, the School District of Philadelphia, Pennsylvania has implemented a financial literacy and financial independence curriculum for all grades. Hundreds of high school seniors in South Dakota will be getting a course in credit cards before they head off to college or start their first job. The National Black Caucus of States Institute recently launched a new financial literacy campaign to promote savings within the African American community in support of the expansion of financial education for African Americans. In my home state, the Hawaii Council on Economic Education continues to accomplish much in increasing the awareness of economic and financial literacy and pooling resources to combat economic and financial illiteracy. Entities like the HCEE are being assisted in their efforts for K through 12 education by funding through the Excellence in Economic Education Act. At the Federal government level, I continue to work closely with the Financial Literacy and Education Commission, and Office of Financial Education in the Department of the Treasury, as they continue to develop a national strategy and work to improve and expand economic and financial literacy tools and resources to people in this country.
Furthermore in education, a 2004 survey of States by the National Council on Economic Education found that 49 States include economics, and 38 States include personal finance, in their elementary and secondary education standards. This is an increase from 48 State and 31 States, respectively, in 2002. In addition, a 2004 study by the Jump$tart Coalition for Personal Financial Literacy found an increase since 1997 in high school seniors' scores on an exam about credit cards, retirement funds, insurance, and other personal finance basics. While progress needs to be recognized, much more needs to be done. Although the NCEE survey found that more states have standards in place, only 26 States measure progress in economic education and 9 States in personal finance education through testing. And for the Jump$tart study, 65 percent of students still earned failing grades. These figures do not bode well for the first National Assessment of Educational Progress in economics, which will have several questions based in personal finance and will be conducted in 2006.
There are other signs that we can do even more in economic and financial literacy. Credit is readily and abundantly available in the form of many different products with a multitude of features. Marketing campaigns by financial institutions, finance companies, and other credit extending businesses are aggressively pursuing consumers and marketing available credit as the answer to instant gratification--to take that dream vacation, to buy that plasma television, or satisfy some other indulgence--without fully understanding the financial ramifications of their actions. These successful marketing initiatives have led to unprecedented levels of borrowing. In addition, marketing campaigns are in place to promote the use of credit cards for small ticket, everyday items. Last year, Americans charged more than $35 billion in purchases of less than ten dollars, up from $23.7 billion in 2003. Credit or debit card sales of transactions of five dollars or less grew from $10.8 billion in 2003 to $13.5 billion in 2004. According to the Federal Reserve, consumer debt levels have more than doubled in the last ten years. A U.S. Public Interest Research Group and Consumer Federation of America analysis of Federal Reserve data indicates that the average household with debt carries approximately $10,000 to $12,000 in total revolving debt. Debt payments eat up more and more disposable income, while certain members of the financial industry encourage the use of more and more debt. Through financial literacy efforts, consumers are becoming aware of the pitfalls associated with excessive leverage and enter into debt relationships understanding the impact of additional debt on their current and future financial position. However, we must do more to enhance our efforts in this area.
Current statistics confirm that consumer debt remains more popular as ever. The present level of consumer debt, coupled with the lack of consumer savings, is indicative of the need to continue to support financial literacy in this country in an effort to get people to better understand the ramifications of their financial decisions. Part of the problem is that many people do not understand fully how consumer debt can overtake them. According to the Federal Reserve, as of year end 2004, there was over $2.1 trillion in consumer credit and $10.1 trillion in mortgage debt outstanding. Consumer credit increased 4.5 percent from its 2003 level. Of the total outstanding consumer debt, approximately $791 billion is revolving debt. Meanwhile, consumers paid out $24 billion in credit card fees last year, an 18 percent increase from 2003.
Compounding the debt pressures consumers are facing is the fact that they have cashed out an estimated $480 billion in home equity during the refinancing boom of 2001-2004. According to Freddie Mac, in hard-dollar terms, American homeowners converted $41 billion in real estate equity into spendable cash in the third quarter of 2004 alone. According to the Federal Reserve, as of June 30, 2004, Americans owed $766.2 billion on home equity loans and lines of credit, more than twice as much as in 1998. Lenders have reduced settlement fees and streamlined the closing process for loans dramatically, increasing the consumer friendliness and speed at which loans are originated. The days of using your home as a nest egg for life changing events, such as job loss, medical emergencies or divorce, are over. The home has become a catch all financing option, while increasing individual consumers debt burdens. Meanwhile, consumer savings is at one of the lowest levels in history, 0.2 percent.
The combination of increasing debt burdens and marginal savings in America has created a catalyst for bankruptcy. Through November 2004, nearly 1.9 million individuals filed for bankruptcy in the U.S., modestly below last year's record level, but at a level that continues to merit concern. In considering that statistic, it is important to remember that this number consists of affected individuals. When you add in non-filing spouses and children, the number of people impacted by bankruptcy can more than double. In reviewing these numbers, I believe it is readily apparent that increased financial literacy is needed to offset unchecked consumer exuberance and aggressive marketing practices.
Beyond the statistics I just quoted, financial illiteracy is creating roadblocks to achieving part of the American dream - home ownership. Fannie Mae's 2003 National Housing Survey found that a significant roadblock to home ownership is lacking accurate information about the home-buying process. For the unhoused to become housed, a banking or financial relationship is part of the process. However, for the nation as a whole, approximately ten percent of individual households remain "unbanked." The unbanked are those who forego a relationship with a financial institution. By not participating in the financial mainstream, the unbanked miss out on the convenience, security, efficiency, and wealth-building opportunities that financial institutions offer. Mr. President, I think we can all agree that wealth-building and saving for the future are vital to the future economic success of the U.S. Extending financial literacy initiatives to all, from the unbanked, to students, to debt-burdened adults, is in all of our best interests.
Mr. President, we must be committed to providing people of all ages with the financial skills and insight to help them achieve financial independence and to make good choices when spending money and taking on additional debt. Prevention remains key, and education lies at the heart of prevention. Mr. President, I think that you would agree that as society moves more and more toward an "Ownership Society" with the advent of Health Savings Accounts and Private Accounts as currently proposed in the President's Social Security reform plan, the need for improving the financial literacy of this country is now, and the delivery and content of these literacy and economic programs needs to broaden and expand to all Americans, no matter the age.
Mr. President, I encourage my colleagues in the Senate to join me in commemorating efforts to forward financial and economic literacy in this country by recognizing April 2005 as Financial Literacy Month. But more than that, I hope that each of my colleagues becomes a champion of economic and financial literacy education so that all citizens in this country are prepared to contribute and participate in our evolving asset ownership society. I once again thank my colleagues from both sides of the aisle for cosponsoring this resolution, and I urge the support of our other colleagues as well. Thank you Mr. President.
