Take the Time Now to Plan for the Future

Take the Time Now to Plan for the Future

October 11, 2006 -

We all know that we live in a hectic world. With 24-hour news cycles, full-time or part-time jobs, children's school and extra-curricular activities, and trying to figure out how to squeeze more minutes out of the day, there is little time to sit down and just relax, let alone plan for the future.

But planning for the future, especially when it comes to your financial future, is an important step we can all take to ensure a better quality of life for retirement and the years beyond.

I am one of 11 children, and from an early age, my father taught me the importance of saving and understanding where money comes from. What is interesting then, and remains true today, is that I never took a financial education or planning class. The only formal training I, and likely, many of you received was in an economic or business class in high school and college.

There are thousands of thousands of people who do not have a basic understanding of their own finances or the skills they need to successfully plan for the future. This is something that must change; financial education for people of all ages must be a priority.

According to surveys published by the Consumer Federation of America and the Financial Planning Association, 77 percent of financial planners think it's very important for Americans to understand what personal wealth is, but only 49 percent of Americans know its meaning. Being proactive and developing a financial plan is one of the smartest thing you can do to secure your future. This might include saving for your child's higher education, starting a 401(k) plan or private Individual Retirement Account (IRA), paying down credit card debt, or saving for a down payment on a home.

In 2005, one bankruptcy petition was filed for every 60 households in the U.S. - a 23% increase from 2004. According to the Federal Reserve, revolving debt for American consumers totaled $805 billion in March 2006. Worse yet, the United States' personal savings rate based on the percentage of personal disposable income devoted to savings, was at negative 1.5% percent at one time last year.

What this means is consumers' credit rates are getting worse, people are using credit at an alarming rate, and they are not saving at a level to ensure retirement. One way to curb this is to provide financial and consumer education to people of all ages.

Texas has taken a progressive approach to financial literacy. The state legislature adopted legislation to require high schools to complete a course in economics and incorporate financial literacy as part of their core curriculum. This is a fantastic first step, but what remains clear is that financial literacy must be an independent course that teaches the basics. A foundation must be laid for future generations to take the reins and take control of their own personal finances.

Recently, Texas State Bank and I held a "Teach Children to Save" day at Margo Elementary School in Weslaco. Part of that day's lesson was to see if the fifth graders could tell the difference between a "want" and a "need." Most could confidently say that shoes are a "need," but a new pair of Nike's are a "want." Unfortunately, this type of education is either non-existent in many of our schools, isn't sufficient, or doesn't continue into someone's adult life.

In the Rio Grande Valley, unemployment is at record low, and the economy continues to thrive. With this new found wealth, it is important that families become educated about all aspects of their finances. So many in this region are still vulnerable to predatory lenders, don't have a checking account, let alone a savings account, aren't saving for their future, and may not even know how to obtain a loan or take the steps to purchase a house.

In Congress we included financial literacy education programs for seniors in the reauthorization of the Older Americans Act. And, next year, we will be looking to reauthorize the No Child Left Behind Act, and it is my hope that financial literacy will be a component in the bill. In each bill, the Rio Grande Valley can directly benefit from any financial education programs included in the legislation, and make financial literacy part of the elementary ABC's.

Just like paying bills every month and tax planning, financial education and literacy must become part of everyday life. By understanding your personal finances you can help create a more secure future for you and your family. It really is never too late to start.

Congressman Hinojosa is co-founder and current co-chair of the House Financial and Economic Literacy Caucus, and has long supported financial education. The goal of the Caucus is to improve financial literacy rates for all individuals across the United States during all stages of life.

http://hinojosa.house.gov/news/opinion.cfm?id=967