Financial Literacy, Public Policy, and Consumers’ Self‐Protection—More Questions, Fewer Answers

Abstract

WHAT IS THE GOAL OF FINANCIAL EDUCATION? When this special issue of the Journal of Consumer Affairs was first conceptualized, the subprime mortgage crisis was not yet front-page news. Even without the events that precipitated the crisis, there was, and is, a clear need for research in the area of literacy and consumer self-protection. As the scholars in this special issue suggest, the problems and opportunities associated with education are many and varied. The articles in this special issue examine a host of topics and issues that are linked by a common question: how can we educate consumers in the most effective manner to help them realize their goals? A worthwhile education program starts with having the participants set a goal--whether it is to be a homeowner, save for retirement, reduce debt, increase human capital through education, or start a business. Likewise, before consumer goals can be addressed, there is a need to clearly define the goals of education. The Cooperative Extension System has answered this question by stating that the goal is security. A 2005 Government Accountability Office (GAO) report places this goal of security within a macroeconomic context: Finally, I believe that a clear understanding of the country's overall condition and future fiscal outlook is an indispensable part of true literacy. The futures of the American people are shaped not only by their own personal planning and individual investments but also by the fiscal choices made in Washington ... Due to current demographic trends, rising health care costs, and other factors, we face the possibility of decades of mounting deficits, which left unchecked will threaten our economic and national security, while also adversely affecting the quality of life and opportunities available to future generations. Americans must be aware of these developments in planning for their own futures, since, for example, we can no longer assume that current federal entitlement programs will continue indefinitely in their present form. (GAO 2005, p. 2) Given this goal, the question then becomes what needs to be in place for consumers to become financially secure? The research in this special issue examines organizing frameworks for effective education delivery and environmental factors that moderate the effectiveness of programmatic efforts as well as cases of best and worst practice. What the articles also point out is the varied nature of education delivery in the United States and elsewhere. After examining these and many other contributions to the literature, the guest editors believe that there is a demonstrated need for a financial facts box that models the nutrition facts panel mandated by the Nutrition Labeling and Education Act (NLEA). We arrived at this conclusion by looking at several key factors necessary for an effective literacy effort: information provision, education, third-party advice, the role of policy, and assessment of best practices. THE ROLE OF INFORMATION Within the realm of consumer nutrition, research demonstrates the conditions under which the nutrition facts panel aids consumers in their evaluation of food and nutrient information (Burton, Biswas, and Netemeyer 1994; Ford et al. 1996; Kozup, Creyer, and Burton 2003; Levy, Fein, and Schucker 1996). Disclosures, labels for products as it were, are also supposed to help consumers make decisions about products. But just as there is a problem with obesity in the United States, there also is a problem with its equivalent: namely, insecurity represented as excess debt, insufficient savings, poor retirement planning, and suboptimal investment behavior. Labels and disclosures on products and services provide information and provide regulatory compliance and liability protection for product and service providers. …