Reed Smith lawyer meets financial literacy 'void'

Next Tuesday, bankers will head into classrooms across the nation for “Teach Children To Save” day.

As they prepare to do so, I offer some comments from a lawyer who participated in the American Bankers Association’s other big financial literacy event, “Get Smart About Credit,” on Oct. 15.

Leonard A. Bernstein, a partner in Reed Smith L.L.P.’s Philadelphia and Princeton offices who focuses on financial regulation, talked to students at Moorestown High School about credit cards.

While he called the experience “extremely rewarding,” he also said it was “shockingly eye-opening” because it was clear the teenagers did not understand how credit cards work.

They didn’t realize how a high interest rate would increase what they would owe if they were to carry a balance on a card. Or how costly paying only the monthly minimum amount can be.

I got my first credit card in college. It had a $500 credit limit, and my parents had put the fear of Debt in me that it should be used only for emergencies.

How times change. The JumpStart Coalition for Personal Financial Literacy, which does a biennial survey of the financial acumen of high school seniors, said 35 percent of respondents reported using a credit card in 2008, up from 32 percent in 2002.

Bernstein read me some of the thank-you letters he got from the class. In most of them, the students confessed they’d never learned about credit cards in school.

Personal finance is not a required course for graduation in most school districts. Many offer it as an elective. But let’s just say, the course is not as popular as digital recording or fine arts.

All of which leads Bernstein, whose clients include many in the banking industry, to conclude that the only cure for “stupid lending and stupid borrowing,” as he called it, is to have a formal curriculum in schools.

Before we think that a new mandate is the solution, consider this line from that 2008 JumpStart survey: “We have long noted with dismay that students who take a high school course in personal finance tend to do no better on our exam than those who do not.”

Still, Bernstein said the country must do something to fill “the void in financial education that we’ve allowed to occur.”