RALEIGH -
As national leaders and pundits have sought to assign blame for our
country's current economic crisis, some have oversimplified the role of
decisions made by individuals and institutions. In many cases, people
are simply not equipped to make the crucial financial decisions that
will affect their families.

It's time to take a closer look at how people learn about personal finances and the economy.

Many
young North Carolinians are completely unprepared for the financial
decisions that await them as adults. The average seventh-grader thinks
it is cheaper to purchase an item on credit than to save for it. Our
high school students consistently perform below the national average on
financial literacy assessments, and their performance has actually
declined over time.

North Carolina provides five days of
financial education to students in a high school civics and economics
course, but research indicates that this is too little, too late. A
growing body of evidence suggests that children who learn about
personal finance early and often are more likely to retain financial
concepts and exhibit positive financial behaviors such as saving.

Children
also benefit from hands-on experience -- a finding that makes sense to
those who grew up with Bank at School programs or who remember visits
to their local financial institution to open an account.

Few
North Carolina children, however, benefit from learning about financial
education in the classroom, and fewer still are exposed to a
relationship with a mainstream financial service. It is estimated that
nearly 3 million households in the state are "unbanked" or underbanked,
meaning they do not have any accounts with a mainstream bank or credit
union. Without this experience with a financial institution, it's not
surprising that financial decision-making is compromised.

To
understand how to change this, look to the burgeoning field of
behavioral economics -- the study of how people make personal financial
decisions.

According to the latest research, people do not follow
traditional economic models that proscribe rational decision-making in
all matters. Instead, they act in a way that is "predictably
irrational."

It turns out that not only the way information is
presented, but the prior experience of a person and the influence of
peers can significantly influence financial decisions. This means there
is substantial opportunity for policymakers and institutions to help
people make better financial decisions.

Features that facilitate
good outcomes include automatically signing people up for retirement
plans at work and presenting information that can be translated for
actual use in the comparison of product terms. Incentives can promote
greater saving and orient people to better choices.

The bottom
line is that managing personal finances is difficult, as more products
and information become available. Tools that can simplify financial
information and orient people to sustainable, positive financial
behaviors are needed now, and needed by everyone.

Schools, banks
and other agencies that now provide financial education services in
North Carolina are to be commended, but these services are not
coordinated or universally available. To improve upon current efforts,
elected officials should establish a Financial Literacy Council to
coordinate and implement programs that combine financial and economic
information and experience to increase consumers' understanding of
their relationship to the broader economy. With greater investment and
government support, people will be more prepared for financial success,
and we will establish a more stable economy.