Dara Duguay on Personal Financial Education

Dara Duguay has been involved in the field of financial education for over a dozen years, most recently serving as Director of Citi’s Office of Financial Education. Before that she was the Executive Director of the Jump$tart Coalition for Personal Financial Literacy. She is also the author of three books and a nationally recognized expert on personal finance. We had the pleasure of working with Dara on a number of Citi financial education initiatives and in honor of financial literacy month, we’ve asked her some questions on all things financial (answers have been edited for length).

TE: Why do you think that personal financial education has not been emphasized historically or as widespread as advocates would like?
Common arguments that I've heard over the years are (1) it should be taught in the home (2) I figured it out on my own so why can’t the kids nowadays and (3) this is a “life skill” which has no place in the schools because school is for serious subjects. These arguments are all flawed. For example, many parents don’t understand money management so how can they be expected to teach their children? And then, consider that this new generation of students has to navigate financial instruments that are more complex than ever. Finally, personal finance education can be incorporated into other current required subjects like economics or math in order to make these subjects “come alive.” And in fact, teachers have discovered that learning about money is a subject that their students are interested in and take quite seriously. For a list of states having a personal finance requirement, go to www.jumpstart.org and click on state requirements.

TE: An argument/question that I get from time to time is ... “Why would a credit card company want customers to be financially literate — won’t that make the companies less profitable?” Why do you think it’s important for credit card companies to encourage and educate customers to be more financially literate?
It is in the company’s best interest to have customers who are financially literate. No one wins if someone defaults or has to file for bankruptcy. Companies incur large costs when they have to initiate collections on an account. They may have to hire more employees if account defaults increase or even contract with an outside collection agency to pursue payments. And if the company is not successful in getting the customer to become current on their account, they may have to write-off the customer’s balance. This is a negative to their balance sheets and a hit to their profits.

TE: Do you think our current economic crises have illustrated the need for more (and better) financial education?
I truly believe that our current crisis has exposed the deficiencies in our money management practices. When the average American spends $1.22 for every dollar they make and they have personal savings rates at almost zero, emergencies like this current recession expose these vulnerabilities. The bright side to this recession is that Americans are now starting to save more than ever before. They are also starting to follow a budget and are reigning back spending that exceeds the income they have available. Financial education should and “must” be emphasized now... more than ever.