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Financially Educated Citizenry Protects Democracy

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The ability of a person with modest means to build their assets and achieve economic mobility is at the core of our nation's values and economic success. The ability of citizens to build assets has taken on an even more fundamental importance in the wake of the Supreme Court's Citizens United ruling and other recent campaign finance related decisions. By ruling that corporate campaign contributions have the constitutional protection of free speech, and by allowing the creation of SuperPACs, the courts have inextricably linked the ability to build assets with the ability to participate fully in our democracy. More than ever we must view our politics as a marketplace and ourselves as financial citizens.

The Economic Mobility Project at the Pew Charitable Trusts summarizes in one report that, "Recent studies suggest that there is less economic mobility in the United States than has long been presumed. The last thirty years has seen a considerable drop-off in median household income growth compared to earlier generations. And, by some measurements, we are actually a less mobile society than many other nations." The gap between rich and poor in the US is widening and it is particularly dramatic between races and ethnicities. The median wealth of white households is 20 times that of Black households and 18 times that of Hispanic households, according to a Pew Research Center analysis of government data from 2009. Based on these measures, we are not living up to our potential as a country.

Economic mobility is predicated on building assets, which must start with a foundation of financial education. If your parents don't have a bank account, for example, your chances of being well equipped for today's economy are less than someone who grew up with their own savings account from birth. A Federal Deposit Insurance Corporation (FDIC) study in 2009 found that an estimated 7.7 percent of U.S., approximately 9 million, do not have a checking or a savings account and that the percentage of minorities that are unbanked is much higher, including Blacks (21.7 percent) and Hispanics (19.3 percent).

Free markets have predatory actors. Many check cashers, payday lenders and title lenders focus their business models on stripping assets from low-income people, immigrants and youth, including our servicemen and women. Too many policymakers on both the left and the right fail to effectively address this reality.

Many progressives place too great an emphasis on regulating to protect consumers over educating financial citizens. While clear and consistent rules are necessary for a healthy market, regulation is a blunt tool and determined sharks find their way around the rules. It is more important to arm people with information to protect themselves and their assets. It is my hope that the new Consumer Financial Protection Bureau can also be a consumer financial education bureau.

Many conservatives, on the other hand, are not as interested in competitive markets as they represent. A truly efficient market requires, among other things, that all market participants have the same basic knowledge about how the market works. This would require a serious and ongoing commitment to financial education, especially for youth, immigrants and for low-income people.

While financial education is the subject of plenty of discussion and the topic of numerous commissions and panels, budgets tell the real story. There is no significant federal investment in financial education. We must make financial education a higher priority for our nation by investing in this work.

Further, to be most effective, financial education must be integrated with access to financial services and savings opportunities. It is one thing to have the knowledge - it is another to have the opportunity to use that knowledge. The Mission Economic Development Agency (MEDA) in San Francisco implements a culturally and linguistically relevant financial coaching program that targets low-income people and recent immigrants, and then connects participants to small business training, homebuyer education, financial services and matched savings opportunities, according to their financial needs and interests. This program's effectiveness is measured by changes in participants' credit scores, savings levels and overall assets. It is a model for how we can integrate immigrants and low income people into our country's financial mainstream.

As our politics become more influenced by money, we must invest in educating financial citizens about building assets, toward achieving economic mobility. A popular voter registration slogan states: Su voto es su voz - Your vote is your voice. It is time to add a second refrain that recognizes that financial assets make some voices louder than others: su cuenta es su voz en alto - your voice is louder with a bank account.