Fed Gov. Duke Stresses Financial Literacy
Because consumers today must choose from an increasingly complex array of financial products, they need to be equipped with the financial knowledge to make sound decisions, said Federal Reserve Governor Elizabeth Duke in a May 24 speech.
Speaking at a conference hosted by the Boston Fed, Duke said that financial decisions such as buying a car or home or saving for retirement have significant consequences for a person's economic well-being. At the same time, these decisions collectively affect the broader economy, she explained.
Complex products, decisions require more financial knowledge
As workers of all ages plan for their retirement, they are making decisions that require a higher level of financial knowledge. The increasing complexity of financial products makes the task of managing retirement saving all the more challenging, said Duke. As a result, "consumers need information and education to understand their saving and investment options, to make the best choices for themselves and their families, and to help them implement and monitor these choices over time."
Further, changes in the financial services industry have caused young consumers and other vulnerable groups to turn to alternative financial products, such as prepaid cards, instead of checking accounts or other mainstream financial services, Duke said. As more new products come onto the market, consumers will need access to accurate and unbiased information in order to weigh the benefits and potential costs of different financial products, she said.
Financial education a lifelong effort
Improving consumer financial literacy is a daunting challenge. Despite the many efforts and resources the effort has received, we still do not know enough about the effectiveness of financial literacy efforts, Duke explained. Future research will be needed to help understand "the best who, what, when, where, and why of financial education that will help American consumers make better decisions and achieve better financial futures."
May 31, 2011