On this blog, we talk sometimes about whether disclosure to consumers as opposed to outright prohibtions or restrictions on business conduct (or doing nothing at all) is the appropriate way, under the circumstances, to protect consumers in the marketplace. In any case, and particularly when disclosure or nothing at all is the choice, consumer protection will only work when consumers have at least some knowledge of how the marketplace works. This concept is often referred to as "financial literacy."
So, you may want to read a speech given today by Consumer Financial Protection Bureau director Richard Cordray (pictured above), in which he stresses that the U.S. educational system must do a better job teaching kids financial literacy. Here are some excerpts:
The economist John Maynard Keynes was once asked what interest is. He replied simply and directly: “If I let you have a halfpenny and you kept it for a very long time, you would have to give me back that halfpenny and another too. That’s interest.” Of course, that is not Keynes’s most insightful comment on economics, but it may be his earliest: He was four-and-a-half years old at the time. … Today’s results from the Programme for International Student Assessment show that much works need to be done and can be done when it comes to financial literacy for young people. Young Americans struggle to solve financial problems, have trouble with financial decisions, and lack understanding of larger financial concepts. The United States ranked in the middle among the 18 education systems that participated in the tests. Youth in Shanghai, Australia, and New Zealand did better than we did in demonstrating strong financial education skills. What this means is that we have an opportunity to learn from others. The goal here should be a collaborative one, not a competitive one. What are they doing differently? How can we replicate their successes? … Last year, we published a report that assembled and synthesized all the best thinking we could find on ways to promote youth financial capability. We concluded that every state must include financial instruction in our schools – where the benefits of compound interest are understood in math class; where economic costs and risks are taught in social studies class; and where essays in English class include topics involving money. Young people should learn about money − what it is, how it has evolved, how we use it, how we keep it safe.