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Follow us: CPAs take lead in financial literacy.

WHAT IF YOU GAVE a party and everybody came? CalCPA did. We called on CPAs, educators, students, consumer groups, nonprofits, legislators, regulatory agencies and others to imagine a California in which everyone--children, adults, young and old, and families--have a secure financial future. And more than 500 individuals representing all of those groups, as well as the public, answered CalCPA's call April 26 and convened at the Sacramento Convention Center for the inaugural California Summit on Financial Literacy.


"What a day!" said CalCPA CEO Loretta Doon, CPA, who hosted the event. "The summit has placed CalCPA and the profession at the forefront of the fight against financial illiteracy in California--and the nation. The summit has created a tremendous buzz; it literally is being talked about across the nation."

Since the summit, CalCPA has had requests from organizations across the country and throughout California to collaborate on financial literacy programs, provide CPA experts as speakers, distribute materials and share tips on how to launch similar efforts. Additionally, legislators are reaching out to CalCPA to host Dollars & Sense workshops in their districts, and the media has taken an increased interest in interviewing CPAs to discuss personal finance topics.

The summit was a culmination of a year's effort by co-hosts CalCPA, CalCPA Institute, the California Jump$tart Coalition and the California CPA Education Foundation.

"When the planning started for this event, we felt 200 attendees would be a huge success," said Stanley Breitbard, CalCPA life member and chairman emeritus of the California Jump$tart Coalition. "It was tremendously rewarding to walk into a standing room only situation today--more than 500 people attended the summit."

"No one knows better than CPAs about what a huge problem financial illiteracy is--it is rampant throughout our state and our country," said Mitchell Freedman, CPA/PFS, a founder and chair of the California Jump$tart Coalition and a member of CalCPA's Financial Literacy Committee. "That's why it made sense for the California Jump$tart Coalition to partner with CalCPA on this event."

The summit was designed to review the state of financial literacy in California, create a vision of a financially literate California and develop a blueprint for success.

According to Robert Duvall, president and CEO of the National Council on Economic Education, a nonprofit organization that trains elementary, middle and high school teachers in economics and personal finance, the summit's timing was perfect. "Financial literacy has become a front page issue. People are increasingly aware of the problem, so we must seize this opportunity and make a difference," he said.


Like CalCPA's financial literacy initiative, the summit was about improving the financial literacy of all Californians, with significant focus on helping students and young adults.

"Our nation's young people stand to inherit an increasingly complex and rapidly changing economy, yet too many are unprepared for the challenges ahead," Duvall said. "Getting to kids effectively, while they're still at school, is the best practice to improve financial literacy."

Lewis Mandell, a professor at the State University of New York at the Buffalo School of Management, presented the audience with recent findings from the Jump$tart Coalition for Personal Financial Literacy's biennial survey, which in 2006 tested 5,775 high school students on basic financial literacy concepts, such as managing credit cards, insurance, retirement funds and savings accounts.

"In 1997, the average test score was 57 percent, not even close to a passing grade," said Mandell, who has conducted the survey since its inception. But in this year's test, the average score was 52.4 percent, "a decline that suggests the problem is getting worse. As near as we can tell, financial literacy is lower than it was in the late '90s," he said.

To Mandell, and a host of others, financial literacy is so important partly because the luxuries that prior generations have enjoyed--like Social Security and defined benefit plans--may not be available to our nation's young people. "The safety nets that used to exist have all been cut. The 21st century tells kids: you're on your own; nobody is going to do it for you. And that could possibly be one of the most important things we can be teaching," Mandell said.

Financial illiteracy is made more frustrating by the fact that young people have all the latest financial tools at their disposal, but often lack a basic understanding of how credit works.

"College kids have between three and seven credit cards, and they carry an average of $3,000 in credit debt, and that doesn't even include student loans," said John Parfrey, director of the National Endowment for Financial Education, an independent, nonprofit foundation that provides free financial education materials. "Maybe that's why the highest growing area of bankruptcy is the under-30 crowd."

In fall 2005, CalCPA members began using NEFE's materials in California classrooms--with astounding results. During the 2004-05 school year, CalCPA members made financial literacy presentations to 1,500 high school and college students. During the 2005-06 school year, CalCPA members will reach almost 7,500.

"We expect a continued increase of CalCPA members in California's high school classrooms," said John McWilliams, a professor at San Francisco State University and chair of CalCPA's Financial Literacy Committee. "Our goal for the 2006-07 school year is to reach 10,000 students, and frankly we may be under-estimating our volunteers' capabilities. At last count, CalCPA had more than 750 financial literacy volunteers.

"Our efforts will also be given a big boost if AB 2787, which was introduced by CalCPA member and California Assemblymember Roger Niello, continues its progress. The bill would encourage the inclusion of personal finance as part of the 12th grade economics instruction."




Niello's bill, which has bipartisan support as well as support from the California Teachers Association, is a small first step toward systemic change to improve Californian's financial literacy. According to Niello, systematically combating financial literacy through the classroom is overdue.

"We haven't emphasized financial literacy as part of basic education," said Niello. "With the significantly increased opportunities for obtaining credit and the evolution of the financial services industry, there are just so many more ways in which an unsophisticated person can get themselves into credit trouble today than they could have 30 years ago."

Niello is also one of several legislators who have engaged in grass-roots activities to fight financial illiteracy. He hosted a tax advice session in his district in March, and last fall he hosted two CalCPA Dollars & Sense workshops.

Dollars & Sense, one arm of CalCPA's multi-faceted financial literacy initiative, teams CalCPA members with legislators, community groups, businesses and others, for town hall-style workshops that feature a panel of CPA experts who overview money management basics from setting financial goals to creating a budget and managing credit.

"The Dollars & Sense program has been a huge hit," said Doon. "Both the participants and hosts always tell us the program was excellent and that they would recommend it to others."


While many grass-roots programs exist to educate children about finances, it is more difficult to find programs for adults, despite the excruciating need.


Nearly 90 percent of kids look to their parents for financial guidance, but more than 50 percent of parents say they don't feel qualified to give their kids financial guidance, said Parfrey.

"With the influx of first-generation immigrants from all over the world, we're finding that many elementary-age schoolchildren are in fact the business agents for their households," said Margo White, executive vice president of Junior Achievement Southern California. "We have to continue to address the literacy issues of our adult population."

Among the adult targets for personal finance education are teachers. "I used to be a teacher, and as a teacher, we're not typically trained in areas like financial literacy," said Parfrey.

If you teach a person to fish, the old saying goes, you feed them for a lifetime. The same holds true for financial literacy.

"If you teach a teacher how to get across basic concepts of economics and personal finance--not only in standalone classes, but in math, geography, U.S. history, social studies--those same teachers teach new students every year," said Duvall. "So we have and can create and can act on what economists call the multiplier effect."


Financial literacy is also critical due to the uncertain nature of the California economy, especially the real estate market.

"There are several economic indicators within the state that suggest an onslaught of personal finance conundrums," said Christopher Thornberg, senior economist at UCLA Anderson Forecast, who captivated the audience at the summit with his presentation, "The Startling Reality: A Look at California's Personal Financial Future."

While the state's economy is strong, with unemployment down and corporate incomes up, take-home pay has been flat "for about the last year or so," he said. And the cost of benefits as a percentage of take-home pay is rising "at a very fast pace."

However, while take-home pay has been flat, "you wouldn't know it from spending," Thornberg said, pointing to several indicators, such as the state's recent rise in taxable sales and residential alteration permits. "Consumer spending is really booming at a very rapid pace."

What's more, the national private savings rate, a percent of what people save as a portion of their disposable income, has reached record lows. "Back in the early 1980s, it was between 10 and 12 percent," Thornberg said, "In 2005, for the first time since the Great Depression, savings rates went negative. Absolutely astonishing."

Thornberg also noted that debt servicing levels--the percentage of one's income used to pay financial obligations--are close to a record high, averaging about 15 percent.

So while people are making more, they are spending more than they make and saving less. And these trends interact with California's booming housing market. "There's been a buildup in wealth inside our economy, wealth wrapped around real estate," Thornberg said.

"People don't feel like they have to save because their house is doing it for them."

But due to overvaluation and overbuilding, the housing market will go flat soon, Thornberg predicts. "Last year in the U.S. economy, we built 2.5 new homes for each new household. Absolutely unsustainable," he said. And when the market does flatten, good old-fashioned financial literacy will come to the rescue.

"All that wonderful wealth creation is going to come to a halt and prices are basically going to be flat for six maybe seven years. And that means, all that wealth ... is not going to be there anymore, and you're going to have to do it the old-fashioned way--you're going to have to save," Thornberg said.


John Bryant has made spreading financial literacy his life's work. In the wake of the 1992 Los Angeles riots, Bryant founded Operation Hope, the nation's first nonprofit social investment banking organization.

Operation Hope issues small-business and personal loans to low-wealth individuals and underserved communities, lending more than $240 million for homeownership and small-business creation since its inception. What's more, since 1992, nearly 140,000 inner-city children have been educated by the organization's financial literacy program.

"In the information age, education is king. And the ultimate poverty eradication tool is education," Bryant said.

Bryant believes that the most pressing struggle for low-wealth individuals and underserved communities is the movement from civil rights to what he calls "silver rights."

"What good is it to get equal access to a hotel if you can't afford to pay the bill?" Bryant asked the enraptured audience. "Civil rights was about issues of race and color, and the first civil right was the right to vote. But silver rights in the economic era that we live in will be about issues of class and poverty, and the first silver right will be financial literacy. If you don't know better, you cannot do better."

Bryant reeled off a list of alarming statistics to underscore the need for financial literacy in underserved communities. He noted that 70 million Americans have no bank account, and that the average net worth for middle-class Hispanics and African-Americans is $7,700 and $8,800 respectively, compared with $88,000 for the average middle-class Caucasian.

Key to the discussion, Bryant said, is the need to recognize that financial literacy isn't about teaching people how to become millionaires; it's about changing behavior. Financial literacy is "not about low-income people, we need to stop saying that," Bryant said. "It's not about making more money, necessarily, it's about making better decisions with the money you make."


Throughout the summit, from the podium, in the halls and from their seats, participants exchanged success stories. While the stories varied in reach and scope, all were inspirational and contagious.

Carrie Schwab Pomerantz, president of the Charles Schwab Foundation, illustrated the financial literacy multiplier effect that sets off a chain reaction of good financial habits.

She noted that two years ago, the foundation, in collaboration with the Boys and Girls Clubs on America, created "Money Matters," a financial literacy program that has so far taught money management skills to 37,000 teens.

At the summit, Pomerantz shared the story of Laetitia, a 14-year-old girl who, before taking Money Matters, cashed her bi-monthly check at a check-cashing business.

"After going through the program, she was so excited that she opened up a savings account for free and cashed the check for free," Pomerantz said. "She then encouraged 10 of her friends to open up their own accounts. So, we feel that we're changing lives."

Later in the afternoon, the applause was deafening as Margo White, executive vice president of Junior Achievement of Southern California, introduced Maynard Brown, Junior Achievement Teacher of the Year.

Brown, a successful entrepreneur and Junior Achievement volunteer, left his business to dedicate his life to teaching economics at Crenshaw High School, which didn't offer business courses at the time.

Under Brown's tutelage, students at Crenshaw began their own graphics and printing business, called Cougar Copy Center, mainly because they lacked a place to make copies at school. "Within a few months, they were dealing with the Los Angeles Unified School District and a printing company to print some of the textbooks for one of the elementary classes," said White.

Tovah Seals, one of Brown's proteges, went on to Stanford University to major in finance, but not before she took a semester off as a sabbatical to stay at Crenshaw and help the program.


Former SEC Chair Arthur Levitt once said, "the American economy is the eighth wonder of the world. The ninth is the economic ignorance of the American people."

In the end, financial literacy is about empowerment. It's about taking advantage of the resources available.

"With financial education, we can empower people to change their life for the better--to have a comfortable retirement, to avoid fraud and to use credit so that it's a tool that's useful, instead of a trap that's dangerous," said Dan Iannicola Jr., U.S. Deputy Treasurer in the U.S. Treasury's Office of Financial Education.

"And we have the power to help them."

Jerry Ascierto is a CalCPA's managing editor. You can reach him at

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WITH MORE THAN 35 million Californians, CalCPA has a lot of work to do to improve the financial literacy of our citizens.

CalCPA volunteers work with thousands of Californians every year, including, but not limited to, high school students, parents, disaster victims, senior citizens, military families, college students and young adults. Workshops take place in businesses, senior centers, community centers, classrooms, libraries and on military bases.

While our greatest need is placing volunteers in hundreds of classrooms each year, CalCPA also has opportunities for:

* Public speaking

* Media interviews

* Pro bono services

* Dollars & Sense panelists

* Tax call-ins

A typical volunteer commitment is about three to four hours a year, although many CalCPA members give far more time.

"I volunteer because I enjoy it," says Rob Seltzer, a Beverly Hills-based CPA/PFS. "It is rewarding to know you are making a difference. I know that people don't absorb every fact or topic, but if it makes them think responsibly regarding their finances, that's more than half the battle."

Learn more about CalCPA's financial literacy initiative or volunteer,
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Title Annotation:certified public accountants
Author:Ascierto, Jerry
Publication:California CPA
Geographic Code:1USA
Date:Jun 1, 2006
Previous Article:Members in the news.
Next Article:Assessing risk: AICPA's new risk assessment standards present a sea change for auditors.

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