Children today will have a better lifestyle than their parents. But they will also have to take on greater personal responsibility for their futures and require a higher level of financial acumen, Fed Chairman Ben Bernanke said Tuesday.
“My best guess is that our kids will be better off than we are,” Bernanke said during a town hall meeting with educators, called to discuss financial education in schools. He cited technology gains that make workers more productive, great universities, an entrepreneurial culture, an efficient market-based economy, and a diverse workforce as leading factors for his optimism.
But the Fed chief was quick to note that kids will face many challenges, and one of them is the need to become more financially astute. “If you think about what adults are required to do each day,” economics and financial literacy are critical, he said. Among the things that Bernanke says kids must learn:
- How to evaluate student loans
- How to seek credible information before making a purchase
- That financial education is a “lifelong undertaking”
Bernanke said he is “all in favor” of adding economics and personal finance courses to school curriculums. One way to do that, he said, is through Advanced Placement classes that drill down on things like bank runs, subprime mortgages, the financial crisis, recessions, and the role of the Fed and how monetary and fiscal policy work. He called these “complex issues” but says that teachers could find a way to bite off pieces and help explain current events.
He also said that incorporating money lessons in classes on civics, history and math makes sense, adding, “I don’t think there are any students who should not be exposed to a basic financial literacy course.” From his prepared remarks:
“Financial education supports not only individual well-being, but also the economic health of our nation. As the recent financial crisis illustrates, consumers who can make informed decisions about financial products and services not only serve their own best interests, but, collectively, they also help promote broader economic stability. Smart financial planning–such as budgeting, saving for emergencies, and preparing for retirement–can help households enjoy better lives while weathering financial shocks. Financial education can play a key role in getting to these outcomes.”
One interesting and timely approach, he said, would be to study why countries compete to host the Olympics, which are so often massive money losers.
The town hall meeting frequently veered away from financial education as teachers in the field, wasting an opportunity to push their agenda with a key official, asked macro questions like how the Fed balances political and economic needs and how the Euro crisis will play out in the U.S. But a few teachers were focused. Perhaps the best question had to do with teaching kids the importance of saving even though savings rates are abysmally low. The basic question was, what’s the point?
Bernanke said rates are low for a reason. That is what will get the economy moving again, which is good for everyone. Meanwhile, you still have goals like paying for college, buying a home and retiring. This requires saving no matter how low rates may go—in fact it requires saving even more as rates decline. He didn’t say it in so many words, but his message was: Focus on the goal, not the rate of return, and you’ll be ahead of the game.