tahira k. hira1 iowa state university financial literacy in america: implications for china july...
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Tahira K. Hira 1
Iowa State University Financial Literacy in America: Implications for China
July 2007
Importance of Financial Literacy in America: Implications for China-an
emerging global economy
Dr.Tahira K. Hira
Professor and Executive Assist. to the President
1750 Beardshear Hall
Iowa State University, Ames, Iowa 50010
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Iowa State University Financial Literacy in America: Implications for China
July 2007
OUTLINE
1. Implications of Financial Literacy2. Major Trends3. Role of Consumer Debt4. Shift in Responsibility from Government/
Employer to Individuals5. Major Components of Financial
Education6. Sources of Financial Literacy Information7. Promoting a Financial Literate Friendly
Environment
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Financial Literacy is“The ability to make informed judgments and to take effective actions regarding the current and future use and management of money. It is the effective use of information in the decision making process that separates the more literate from the less literate decisions.”
-The U.S. Financial Literacy and Education Commission, 2005
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Major Trends That Require Financial Literacy
Changing Demographics
Changing Economic Environments
Shifts from Financial Responsibilities to Individual Finances
Sources and Complexities of Financial Products and Services
Role of Technological Advancements in Financial Education
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Changing Demographics -U.S.Age:
Family Status:
Education:
Ethnicity:
Economic:
76 million baby boomers on the verge of retirement in the U.S.
Rise in single parent families are leading to a rise in child poverty rates.
Adults age 25 and over represent 43% of all post secondary school enrollments.
By 2050, the minorities in the US will represent 40% of the population.
By 2010 baby boomers will start to retire and rely heavily on social security
• Source-Merrill Lynch as of 2001
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Changing Demographics -China
Age:
Family Status:
Education:
Economy:
Chinese over the age of 65 will increase from 7% of the population in 2000 to 20% over the next three decades.
Because of the one-child policy launched in 1979,one child or no child houses are on the rise. As of 1980, 250 million births have been prevented.
2002-19% of the population attended a two-year college - only 6% attended in 1988. In 2002, 19% of the population attended a two-year colleges. Only 6%
attended in 1988 and 8% attended in 1995
In 2006, the Chinese economy had growth rate of 10.4%, andtransformed China into the world’s fourth largest economy. 400 million have been lifted out of poverty and family incomes
in urban areas are increasing.
China’s banking system is maturing and more credit is becoming available.
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Changing Economic Environments
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Iowa State University Financial Literacy in America: Implications for China
July 2007
United State’s Income
• Median Household income in 2006:
– $46,000 USD
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Iowa State University Financial Literacy in America: Implications for China
July 2007
United States Saving Rate
In 2006, The U.S had a negative 1% saving rate. The lowest it’s been since 1933.
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Borrowing: United State’s Overall Debt
Total debt is 48 Trillion $161,287 per person
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Iowa State University Financial Literacy in America: Implications for China
July 2007
$12.8 trillion outstanding
household debt in 2006
Mortgage Debt: $9.7 trillion
Credit Debt: $2.4 trillion Including auto loans Credit Card debt:
Avg. credit card debt per household with at least
one card was $9,205.
Borrowing:United States Household Debt
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Iowa State University Financial Literacy in America: Implications for China
July 2007
The annual disposable income of urban households has continuously increased in the last two decades. In constant 2002 values, the per capita annual disposable income in urban China increased 82%:
China’s Income
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Iowa State University Financial Literacy in America: Implications for China
July 2007
China’s Saving Rate
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Borrowing: China’s Debt
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Borrowing:China’s Household Debt
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Shift in Responsibility for Financial
Well-being
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Expectations of Retirements
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Major Components of Financial Literacy Education
Cash Flow Management Banking Managing Credit Card Use Managing Overall Debt Managing Financial Risks Savings and Investing Retirement Planning Estate Planning
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Sources of Financial Education
Family Educational Institutions Non Profit Organizations Government Agencies Business
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Role of Family in Proving Financial
Education
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Non-Profit and Governmental Organizations Providing Financial Education
National Endowment for Financial Education
Jump$tart USDA/Extension and CSRESS Treasury Dept. of the United States
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Businesses Providing Financial Education
VISA www.mymoneyskill.com
Prudential “Investing in your Future”-China’s Women’s Program
Paradigm Learning/Intellexis China “Zodiak®: The Game of Business Finance and Strategy”
Wall Street Journal The Wall Street Journal: Complete Personal Finance Book
(paperback) By: Jeff D. Opdyke
Merrill Lynch Special Needs Financial Services
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Role of Technology in Financial Education
Communication Tool More people are being reached via the internet concerning new financial educational
programs and services
Articulating communication styles to fit certain demographics
Specialized Marketing Fitting the product or service to the individual’s needs
Providing target markets with a variety of products
Individual Control New developments give consumers more options and greater flexibility on the products
and services they want to use
Individuals must take responsibility on becoming aware of products available and how to use properly them
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Technology: Access to Financial Information
Easy 24/7 access to information
Easy information sharing across institutions and borders
Nontraditional Learning approaches to teaching and learning
Games Simulations Storytelling Discovery learning techniques
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Importance of Literacy
Households: Higher standards of living leads to higher confidence in the home.
Sound planning decisions for retirement, funding children’s education and accumulating more assets.
Communities: Financial service firms will provide better products at better prices because of market pressures by informed consumers.
Stable communities with a stronger, safer banking system.
Nation: Baby Boomers are potentially independent on social security and other
parts of the government’s social safety net, which may pose a very expensive fiscal dilemma for the federal government.
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Challenges of Providing Financial Literacy Education
Efforts to increase financial literacy are resource-and-time-intensive
Programs requires well trained educators and advisors
Education must be available to consumers near the time at which they are making an important financial decision i.e., buying a home
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Strategies to Enhance Financial Literacy Among all Consumers
Promoting awareness of the importance of financial literacyIncreasing access to information about financial products and servicesCollaborating with educational and community organizationsSupporting research and identifying best practices Providing financial education at the work place to all employees
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Lessons Learned and Implications for the United States and
China
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Iowa State University Financial Literacy in America: Implications for China
July 2007
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(2001). Merrill Lynch. The 20th Century Tectonic Shifts of the Demographic Landscape. Retrieved June 6 2007 from Allen Academy of e-learning Inc. Web site:http://www.allenacademy.com/eleraning/about/pages10.htm
Pethokousis, J (2007). Changing Demographics in China Factor Medical Products Supplier. Retrieved June 6, 2007 from Investor's Business Daily Web site:
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Qao, Q, Zhai, (2006, August). Demographic Changes and Household Income in Urban China. Paper prepared for th29th General Conference of the International Association for Research in Income and Wealth, Retrieved June 6, 20 from http://www.iariw.org/papers/2006/gao.pdf
Riley, N.E. (2004). China’s Populations: New Trends and Challenges. Population Bulletin, 59 (2), 1-36 (2000, Sept. 25). China steps up 'one-child‘ policy. Retrieved June 11, 2007 from BBC News Web site: http://news.bbc.co.uk/2/hi/asia-pacific/94151/stm
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Iowa State University Financial Literacy in America: Implications for China
July 2007
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Saxton (R-NJ), J (2006, July). "Five Challenges That China Must Overcome To Sustain Economic Growth." Joint Economic Committee United States Congress, Retrieved June 5, 2007 from:<http://www.house.gov/jec/publications/109/07-27-06china_economy.pdf>.
Shiller, R (2006, August,26). Sublime to the ridiculous: savings rates in China and U.S. Taipei Times, Retrieved May, 28, 2007 from http://www.taipiatimes.com/News/editorials/archives/2006/08/26/2003324931
Saxton (R-NJ), J (2006, July). "Five Challenges That China Must Overcome To Sustain Economic Growth." Joint Economic Committee United States Congress, Retrieved June 5, 2007 from:<http://www.house.gov/jec/publications/109/07-27-06china_economy.pdf>.
Puru, S (2006). Time to Go Shopping. Retrieved June 7, 2007, from Financial Sense Guest Editorial Web site: http://www.financialsense.com/editorials/saxena/2006/1120.html
(2007). 2007 Fidelity Research Institute Retirement Index: Americans on Track to Replace 58 Percent of Income In Retirement. Retrieved June 14, 2007, from Fidelity Research Institute Web site: http://www.fidelityresearchinstitue.com
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(2005, Dec. 16). Paradigm Learning and Intellexis China, "Partnership Brings Paradigm Learning's "Zodiak(r) to China: Intelleixis China Will Distribute Paradigm's Flagship Financial Literacy Program". press release, Tampa Florida and Shanghai, China Retrieved May 11, 2007 fromhttp://www.prudential.co.uk/prudential-plc/cr/crnews/cr2004/2004-12-26 and http://www.prweb.com/releases/2005/12/preweb323264.htm
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Iowa State University Financial Literacy in America: Implications for China
July 2007
2007). NEFE news and articles, NEFE educational programs. Retrieved May 11, 2007 from National Endowment for Financial Education Web site: http://www.nefe.org/pages/educational.html
(2007). Jump$tart Coalition for Personal Finance Literacy. Retrieved June 8, 2007 from Jump$tart- Financial Smarts for Students Web site: http://www.jumpstart.org/
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(2006, Nov. 14). What the Federal Government is Doing to Improve Financial Education. United States Department of the Treasury, Retrieved June 18, 2007 from http://www.treas.gov/press/releases/docs/fined.pdf
(2005, Dec. 15). Treasury Officials Support Financial Literacy Efforts in Washington, DC Neighborhood. United States Department of the Treasury, Retrieved June 18, 2007, from http://www.treas.gov/press/releases/docs/fined.pdf
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(2004, Dec., 26). Paradigm Learning and Intellexis China, "Partnership Brings Paradigm Learning's "Zodiak(r) to China: Intelleixis China Will Distribute Paradigm's Flagship Financial Literacy Program". press release, Beijing, China, Retrieved May 11, 2007, from Web site: http://www.prudential.co.uk/prudential-plc/cr/crnews/cr2004/2004-12-26 and http://www.prweb.com/releases/2005/12/preweb323264.htm
(2005, Dec. 16). Paradigm Learning and Intellexis China, "Partnership Brings Paradigm Learning's "Zodiak(r) to China: Intelleixis China Will Distribute Paradigm's Flagship Financial Literacy Program". press release, Tampa, Florida and Shanghai, China. Retrieved May 11, 2007 from http://www.prudential.co.uk/prudential-plc/cr/crnews/cr2004/2004-12-26 and http://www.prweb.com/releases/2005/12/preweb323264.htm
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Iowa State University Financial Literacy in America: Implications for China
July 2007
Braunstein, S, & Welch, C (2002). Financial Literacy: An Overview of Practice, Research, and Policy. Federal Reserve Bulletin, Retrieved June 18, 2007, from http://federalreserve.gov/pubs/bulletin/2002/1102lead.pdf.
2005, Dec. 16). Paradigm Learning and Intellexis China, "Partnership Brings Paradigm Learning's "Zodiak(r) to China: Intelleixis China Will Distribute Paradigm's Flagship Financial Literacy Program". press release, Beijing, China, Retrieved May 11, 2007, from Web site: http://www.prudential.co.uk/prudential-plc/cr/crnews/cr2004/2004-12-26 and http://www.prweb.com/releases/2005/12/preweb323264.htm
Qao, Q, Zhai, F (2006, August). Demographic Changes and Household Income in Urban China. Paper prepared for the 29th General Conference of the International Association for Research in Income and Wealth, Retrieved June 6, 2007 from http://www.iariw.org/papers/2006/gao.pdf