Hello from Chicago!

What a month! Went to D.C. for a Council meeting last week, and now I'm in Chicago. This trip's also for the President's Advisory Council on Financial Capability, but this time around the Council's Youth Subcommittee will conduct a "listening session" on teaching financial capability in the Chicago Public Schools.

Our goal is to hear what's working in financial education in Chicago, and see if there are any initiatives we can scale nationwide to help all young Americans leave school financially prepared.

To that end, this morning I'll moderate a roundtable discussion with several inspiring panelists, including Chicago City Treasurer Stephanie Neely, and others from organizations that advance financial literacy and access.

So many questions to discuss: What are the greatest challenges of teaching financial lessons? What kinds of barriers keep young people unbanked? Why don't enough aspiring college students apply for financial aid? How does encouraging entrepreneurism inspire young adults to better manage their money?

Looking forward to a great conversation! I'll report back on what we discover.

Did you learn about personal finance in school? Did any lessons stick with you?

5 things every student should know about money

Last Friday, I was invited to speak at SUNY Westchester Community College (WCC) for the launch of their brand new (and beautiful!) Center for Financial and Economic Education. I was honored to be part of it.

Their new financial education center was created with a generous grant from the JP Morgan Chase Foundation—and what a wonderful initiative. The center will offer financial workshops for students, faculty, and the community at large, work with faculty to incorporate financial concepts into their curricula, and maintain a library of personal finance resources (Get a Financial Life is already on the shelf!).

So many students attended the launch event, and I was impressed, as always, by how earnest and interested they were in personal finance. They asked smart questions like "How do I know which websites to trust for financial information?" and "If I want to get my finances in order, where do I even start?" It is a TMI world out there, indeed!

To help guide them, I explained the five things every student should know about money:

1. Don't get into credit card debt, and protect your credit score. Know that a credit card is a loan. The typical American household has $7,000 in credit card debt right now. And if you only pay the minimum on that $7,000 balance, it will take you 17 years to pay it off, and you'll pay more than $5,000 in interest along the way. Plus, missing payments brings down your credit score, which means you'll pay more for things like car loans and mortgages.



2. Shop for a 4-year school like you would anything else: What can you afford and how will you pay for it? Students today are graduating with debt that burdens them for life. But you have options. The average annual tuition for private college is $27,293, compared to out-of state public school at $19,595 and in-state public school at $7,605. Choose wisely and be smart about how you pay. About 75% of students receive financial aid, and 55% is in the form of grants, scholarships, and tax credits that never have to be paid back. That can go a long way to keeping those loan amounts down. Also, only take out federal student loans, which are cheapest, and avoid private loans. Better yet, keep working, so you can pay as you go. Once you graduate, look for programs that help you pay back your loans like Income-Based Repayment and Public Service Loan Forgiveness.



3. Save 20 cents of every dollar you bring in. Saving in a tax-advantaged account like a 401(k) or IRA is the smartest and best way to save money. If you know that “compound interest” means this dollar becomes a dollar and six cents a year from now, and the following year you earn interest on that $1.06, and so on—then you understand its power. You don't have to know how to sit there and do the calculations; you just have to act on it.



4. Have health insurance. Making sure you and your family are covered could be what keeps you out of bankruptcy if you get sick. It protects your extended family and friends, too—the people who would pay for treatment if you ran out of money. Thanks to the new healthcare law, young people are now allowed to stay on their parents' insurance plan until they turn 26. If you do need to purchase a policy on your own (and not through an employer), compare prices at ehealthinsurance.com.



5. Comparison shop. All you need to do is be a savvy consumer. Shop around for everything from banks to school books to bubble gum, and make sure you're getting the best deal. When it comes to investing, that means going with index funds that carry low expense ratios. Two good ones are Vanguard's S&P 500 (0.17%) and Schwab's S&P 500 (0.09%). Be confident enough to approach every financial product—and certainly every piece of paper you're asked to sign—with skepticism.

Teachers, students—got any questions for me? I'm all ears!



Watch today's Council meeting!

The President's Advisory Council on Financial Capability is meeting today at 2:30PM EST—and you can watch! Simply tune in to the live webcast and you can follow along with us. I'm proud of the work we've been doing and excited to share it with you. And if you do watch, I'd love to get your feedback in the comments section below.  



Annamaria Lusardi: The first lady of financial literacy

I think of Annamaria Lusardi as the Annie Sullivan of personal finance. Just like Sullivan taught Helen Keller how to communicate, Lusardi is teaching our country how to communicate—about money.

She's been on my radar for years, but since being appointed to the President's Advisory Council on Financial Capability, I've had the opportunity to cross paths with her more than usual. In fact, in my research for the Council, every person I've spoken to has said, "You have to talk to Annamaria Lusardi."

And so, of course I did. Not only is she helpful and insightful, but she's truly gifted.

She runs the RAND Financial Literacy Center, a brilliant think-tank-like center that develops and tests innovative ways to truly improve folks' financial decisions. (Oh, to be a fly on the wall!)

On top of that, she's an economics professor at Dartmouth and has consulted on major financial literacy initiatives, including FINRA's 2009 Financial Capability Study, which surveyed more than 28,000 people to find out what Americans know—and don't know—about personal finance. The results are meant to help the public, policymakers, and researchers understand what's needed to improve. If you're anything like me, clicking that link is pure entertainment, especially in seeing how your state rates.

Photo courtesy of Dartmouth And I'm enthralled by her most recent project: She's chair of the committee that's designing the first-ever financial literacy portion of the next PISA exam, to be administered to about 500,000 15-year-olds around the world. The next exam isn't until 2012, and details are up in the air, but this test could become a crucial measure of global financial literacy. (I discussed it recently on The Takeaway.)

One question I wished I'd asked her on the phone: When does she sleep???

If you'd like to follow the wonderful work she's doing, you can check out her blog.

Who's your personal finance hero?



Reflections from the first Council meeting

On Tuesday, I had the honor of attending the first meeting of the President's Advisory Council on Financial Capability in Washington, DC. (That's me in front of the Treasury Building.)

As you may know, the Council was established earlier this year by President Obama, and one of its goals is to help the American people improve their financial literacy.

Sitting in the Cash Room of the Treasury, I felt extremely proud to be among my fellow Council members. It's a fantastic group, representing a great diversity of backgrounds and constituencies.

I was so inspired by the meeting and the opportunity we have to improve our country's financial education. It got me thinking about something my father, an 81-year-old retired high school principal, told me on Monday when he was wishing me a good trip to DC: "When you educate kids in financial literacy, it translates to their parents." That's my dad—always a champion of education. (And he practices what he preaches: In his spare time, he passes out homemade fliers about how to lead a good financial life, with tips from my book.) I love the idea that education expands across families and generations.

Now, it's our Council's job to help achieve these goals—with your help. I want to thank those of you who have sent me your thoughts on what issues the Council can address. I'm reading every email and comment and sincerely appreciate your insights. And it's never too late to send me your ideas if you think of new ones—there'll be plenty more meetings to come, and plenty of work to be done.