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Readin’, Writin’ and Financial Literacy
When I was growing up, on Sunday evenings my frugal, blue-collared father would dole out a modest amount of cash to each of his three children. The money was to last until the following Sunday night. We could spend it any way we wished, but it needed to cover school lunches, entertainment, special articles of clothing we wanted but didn’t need, contributions to church — everything except the three hots and a cot that we got at home. Each child received the amount of money Papa thought was appropriate for our age, with me getting slightly more because I was the eldest and my brother the least because he was eight years my junior. By Wednesday, my sister, the middle child, was out of money and was borrowing from her “banker” sister.
“Interest” sometimes consisted of her making my bed or drying the dishes, but mostly I was an enabler for her extravagancies — which usually meant that she needed more reeds for her clarinet than she had anticipated. My father wouldn’t have known what to call it, but he was encouraging financial literacy in his children.
Financial literacy has become a much discussed topic among educators, bankers, and frustrated business persons who can’t quite believe that we have spawned yet another generation of young people who cannot deal with credit, don’t understand the concept of saving, and cannot conceive of ever needing money to retire.
The President’s Advisory Council on Financial Literacy defines personal financial literacy as “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.” The council acknowledges that personal financial literacy is more than being able to compare prices, balance a checkbook or get a job. True financial literacy includes the ability to envision and plan for the future and the discipline to use these skills to achieve the results you want to experience.
The Tennessee Financial Literacy Commission, established by the Tennessee Financial Literacy Act of 2010 (June 23, 2010), is headed by an 11-member board comprised of State Treasurer David Lillard, Department of Financial Institutions Commissioner Greg Gonzales and Department of Education Commissioner Kevin Huffman. The goals of the TNFLC are to increase the per capita savings for college and retirement and the per capita savings rate for low-income persons.
The Tennessee Supreme Court’s Access to Justice Commission’s Education and Public Awareness Committee recognized the value of teaching the clients of our various pro bono and other outreach programs the fundamentals of financial literacy as one means to escape poverty and avoid costly mistakes. Commissioners Gonzales and Huffman and Treasurer Lillard have made financial literacy in the state a priority, and many banks and credit unions conduct in-school and community outreach programs. Teaching a child to manage money is a step toward financial independence for that child as he enters adulthood.
Besides insisting that her children and grandchildren learn how to plan for their financial futures, a lawyer’s clients may also need assistance with both the basics and more complex aspects of personal financial awareness. A pro bono client may need counseling on dealing with a modified loan agreement in lieu of foreclosure. A young entrepreneur may require advice on the proper use of credit and drafting a business plan that will convince a lender that his small business loan has a better than average change of repayment. An established business may seek advice on whether key-person insurance is a good use of resources. Helping clients with financial decisions is part of what a lawyer does regardless of her area of practice, and we should all remember that there are degrees of financial illiteracy among those who call on us for advice.
As the United States works its way through the effects of the Great Recession, we should take a page from those, like my parents, who survived and thrived after the Great Depression. I cannot help wondering whether we might all have been better served by having an Alvin Reed in our lives who expected his children to be frugal planners and good stewards of our resources.
KATHRYN REED EDGE is a member of Miller & Martin PLLC, a regional law firm with offices in Nashville, Chattanooga and Atlanta. She heads the firm’s Commercial Department and concentrates her practice in representing financial institutions. She is a past president of the Tennessee Bar Association and is a member of the editorial board for the Tennessee Bar Journal.