Edward Paxson wrote a thoughtful, well-researched letter to the editor that partially explains many of America’s problems, to wit home foreclosures, bankruptcy, unmanageable credit card debt, etc.
His comparison of the savings rate of US citizens with other cultures is eye-opening and illuminating. Coupled with the fact that the student loan interest rate just doubled, financial literacy should be stressed in all curriculums. Mr. Paxson is a little misinformed in his view that financial literacy is seldom taught. It is taught as a stand alone course in many states of our Union. Home mortgage calculations should be clearly understood by any home buyer. The relationship between your credit score and interest rates should also be known by folks who purchase on credit.
He is also ideologically off by insisting that government should pass laws to encourage savings. People should have to deal with the consequences of their poor decisions. It is the only way to really learn. Government has its hands in way too much as it stands!
May 19, 2013
To the editor:
From the 1960s into the 1990s, the personal savings rate was around 7.5 percent of income, sometimes peaking above 10 percent. It started falling 20 years ago and bottomed out at about minus 3 percent(this means that American were spending 3% more than they were earning with credit cards, pay day loans etc.) when the recession started to appear. It has since barely peaked above zero, and the average American only has a few thousand dollars in the bank in case of an emergency or lay off. In China, the average Chinese earns about $9,000 annually, while the average American earns about $50,000. The Chinese savings rate runs between 20 percent and 50 percent of their salary.
The average 55- to 64-year-old American has a measly $69,000 saved for retirement. Our laws should do far much more to encourage saving, but that’s no excuse for this pity.
Most think that just because they can technically pay for something, it is alright to buy it. Maybe this is why one-fifth of people who make more than $100,000 per year live paycheck to paycheck.
Students all across the country are encouraged to take on massive student loan debt regardless of their future plans or whether their major will lead to any kind of career in that field.
Studies have shown that children who are able to delay gratification for a greater return in the very near future grow up to do significantly better in school, have more stable families, make a lot more money and were less likely to be involved in crime and drugs than those who cannot delay gratification. How could an education system supposedly for the benefit of students ignore teaching these very important financial skills and presenting these facts?
After literacy, personal finance is probably the most valuable academic skill you will ever learn. Despite this, it is seldom ever taught in schools.(Financial Literacy is actually taught a lot more these days in American schools, but still needs to be emphasized more and a forced inclusion in any accredited curriculum)
Any advocate of education should definitely fight for the teaching of this subject. After all, isn’t the underlying point of education to give kids the tools they need to succeed?
Edward S. Paxson , Fairbanks, Alaska