The stock market began its recent slide on July 22, just a day after the new Consumer Financial Protection Bureau went live. It’s an ironic twist. The bureau, authorized by the Dodd-Frank Reform Act last year, is supposed to limit personal financial mayhem, and yet we’ve had nothing but ever since the CFPB officially opened its doors.
Let me be clear: The new agency and the larger Dodd-Frank reforms have had nothing to do with the Dow’s recent 16% slide. Still, that gut-wrenching plunge hard on the heels of a vaunted new consumer watchdog getting its working papers underscores a painful truth: Most folks need to know more about how their money works.
Yes, there is a new sheriff in town and that will help stiffen oversight of financial products and curb predatory practices. But government moles won’t be there to backstop you when you sign a car lease or apply for a credit card. In the end, the only real financial protection is knowledge.
We need a greater emphasis on financial education – at work, in communities and most of all in schools. Some momentum has been established. For example, within Dodd-Frank is a provision for a new Office of Financial Education, which “shall be responsible for developing and implementing initiatives intended to educate and empower consumers to make better informed financial decisions.”
This office will publish information for consumers on a broad range of topics. Specifically, it is charged with helping consumers:
- Access financial counseling
- Evaluate credit products
- Understand credit histories and credit scores
- Access savings, borrowing, and other services
- Prepare for education expenses and filling out financial aid applications
- Reduce debt
- Develop long-term savings strategies
- Identify appropriate tax credits and federal benefits
Interestingly, though, this section of the law makes not a single reference to educating young people about money while they are in school. That’s where the long-term solution lies, and other countries ravaged by the financial crisis including Australia, New Zealand, Canada and the U.K. are moving that direction.
The U.S. is exploring financial education in schools through other bodies, like the President’s Advisory Council on Financial Capability and the Financial Literacy and Education Commission. Which is good because no amount of oversight can truly protect individuals from money mayhem.
They need to be able to protect themselves.