Part 3 in a series

By Neil Berman

(The opinions and views expressed in the commentaries of The Somerville News belong solely to the authors of those commentaries and do not reflect the views or opinions of The Somerville News, its staff or publishers.)

It is the sense of Congress that States should develop curricula relating to the subject of personal finance, designed for use in elementary and secondary schools.

– The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Congress was right about the need to develop curricula for teaching personal financial literacy. While it is certainly needed in schools, it is also needed for adults. A recent Harris poll found that about a third of all Americans feel they are not financially literate. This is not just an issue in the United States. The European Union is promoting what they call “financial capability.” Among other measures, they are establishing a website to explain how to use knowledge and resources to make informed financial choices.

There have always been organizations available to help people understand and resolve their personal finances issues. For many years there were nonprofits, many with volunteers (often retirees) whose primary responsibility was to counsel people on how to handle their finances.  There were also organizations, almost all of them for-profit, that provided counseling, but also attempted to negotiate settlements and payment plans with creditors.

Among the 2005 bankruptcy code’s many provisions is one requiring debtors to take a credit counseling briefing prior to filing for bankruptcy and a personal financial management briefing after filing. Most of the organizations that were already helping people with their personal financial issues began providing these services. They have also expanded their offerings to include other types of financial management programs.

States are developing standards for school-based personal finance courses. At least 20 have already mandated teaching the subject in their schools. Private organizations, both for-profit and nonprofit, are offering individual counseling, phone consultations, webinars, and workshops in classroom settings. Written materials are available on the web and as hard copy, sold in bookstores and available from social service agencies.  A quick web search turns up college and nonprofit courses, with materials targeted to different populations distinguished by age, income level and sophistication.

It is important to know where the impetus and money for a particular course came from. Creditors and their business associations set up some web sites to direct debtors to the solutions that they favor, while not covering options harmful to their interests. Some settlement negotiators and bankruptcy lawyers set up sites for the same purpose.

My research and review across the range of available curricula was, overall, positive and a pleasant surprise. However one shortcoming seems to be that these curricula are directed to people with adequate incomes who just need to learn how to better mange their money.  Often the focus is on how to plan for retirement, given the end of defined pensions and the lack of reliable alternatives. Social security was meant to supplement pensions, but its minimal payments are now often retirees’ only income.

What of people who do not have adequate income? There can be a positive difference in their financial situation when they learn to be financially literate and make smarter choices.  But no amount of improved financial management can solve the problem of inadequate income. People who are honestly doing everything that they can to make ends meet need a system to connect them with resources. Government and non-profits will have to fulfill this need, as people in financial trouble can rarely afford to pay for help.  This population’s issues must be addressed to complete the curricula called for by Congress.

City Life/Vita Urbana is a grassroots community organization in Jamaica Plain that is trying to fulfill this need. It has been putting together a financial literacy program over the last year to help people in trouble.  I was at a meeting in which a few organizers questioned a group of about 100 people who were losing homes, either to foreclosure or eviction.  The vast majority had never received training about personal finances. They had learned by trial and error as they established their households.

City Life/Vita Urbana intends to create a workshop to teach them how to analyze financial issues so that they can understand their circumstances and what financial options are available to them.  I believe that this type of training is badly needed and insufficiently provided.

Neil Berman is a Somerville-based bankruptcy attorney.