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well another side to financial literacy is the different communities which can benefit from this type of education it's
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not just an English language issue but what about those who speak other languages David Musto professor of
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Finance here at the Wharton School and director of the Stevens Center for innovation in finance joins us with more
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on that David great to talk to you again how have you been that's great to be
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back thank you and I understand that you are doing work right now on a Spanish language program around financial
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literacy well we're just uh getting started on that yes I this is actually an inbound inquiry that we got to the
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Steven Center uh from some uh Bankers really uh discussing how they do business with uh especially the
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Immigrant Community people coming recently from other countries where often they've had very bad experiences
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with the financial services industry in their own country and this has made them
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very wary of engaging with financial services in this country understandably and so the question is how can people be
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educated about how how a financial system works in this country what are the safeguards and what are the products
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how to engage with financial service providers uh safely in this country so that that's a project we're
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just embarking right and because when you're talking about somebody coming into this country for the first time
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there's probably a lot of uneasiness and hesitancy to begin with and so by being
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able to bring forward a program like this potentially you're hopefully alleviating some of those potential
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issues yeah yeah that's right I think there are a lot of financial products that
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um it would do just very helpful for a family and is to live without that to put your money in the mattress because
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of what happened in another country it's just uh you're just missing out on a lot
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especially now that we have uh this higher inflation uh the cost of not minding your money carefully has really
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gone up how much do you think what we've gone through here in the last uh several
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months actually let's even expand it because of the impact of the pandemic and now with inflation has impacted
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people's understanding or at least want to understand more about Finance about
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uh uh Financial operations so that they can be better prepared yeah you know we think uh you know I've
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I've been around the block yet and I've been through several uh cycles of
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um the economy and those of us who remember the financial crisis will saw a lot of banks closed uh over those over
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those months just you know every Friday more Banks being closed and we saw how it worked we saw the protections
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afforded to smaller depositors uh and and we just saw the whole uh we saw you know the famous line about when you have
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a crisis you you see the the financial services industry in its underwear right you know when you've seen that you you
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understand uh the bad State and you understand where what's safe and what isn't safe
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and for those people who were you know now it's getting to be a while ago that's that all happened 14 15 years ago
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and um we haven't been through that of course people have been through similar
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problems in their own home countries which affordable which have less protection so yeah
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um just uh younger people in general just haven't seen what what we've seen
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um and it's just there's a lot of work to do to uh to just bring people to that
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the Comfort level they need to engage safely uh without of course uh getting involved in things that are targeted at
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uh newcomers that may be scams what do you think that then we as a country have kind of missed uh in terms of financial
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literacy and what do you think we need to employ as we move forward to improve that as well
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well so I have also involved in overseeing a financial literacy course for high school students right now we
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have several hundred students taking this is actually it's a pen course they're
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taking it from Penn course credit at their high schools right now just just wrapping that course up and so I had to
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think hard about this what what what do you need to know to make your financial decisions that you have to make
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wisely and also to be an informed voter and one thing I learned just for example
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so this is aimed at 17 year olds one of the most generous programs the federal government has is the income driven
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repayment of student loans it's it's a generous program and it's it's likely to
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become more generous and yet the high school students I spoke with didn't even
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know about it very rarely do they haven't even heard about it and yet years this program
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meant to soften the blow of you know taking out a loan and ending up in hard times and therefore because it softens
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the blow it's it's an invitation to take a risk you might not otherwise take with
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your education and but if you don't know about it in advance then we're not
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getting the benefit of these students taking that risk and so that that's a way that um you know financial literacy
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will hopefully pay off um you know for everybody I I know you also uh in your research
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have focused on consumer credit and if I can't have you speak to the importance
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of that as a component of financial literacy for either young people growing up or for adults as well
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yeah um so and consumer credit is a big uh part of that course I have uh so try to introduce students to what they're
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going to see as far as uh you know not just the student loans or credit cards car loans other uh related products
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um and also to sort of understand the very dire consequences of running out of cash and then that having you know
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overdraft protections and payday loans and credit card debt extremely expensive ways to make it through a tough moment
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uh you know this is all uh you if you could just avoid falling into those traps which are so hard to get out of
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um you know your life is just so much brighter um so uh so yeah it's it's I I think and
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again people who went through the financial crisis you can see how there was a lot of weariness about getting
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into debt after that which you know I think you and I can agree is probably on the balance of Health thing
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but you don't want to entirely avoid using Consumer Credit products in you know just you know it's a way you know
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you know buy a house and pay for it over the years you enjoy it or buy a car and
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pay for it over the years you enjoy that or take out a student loan become educated and pay the loan off of the off
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of the human capital you built these are all great things you can do with uh with
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Consumer Credit if you're smart about it well and I was going to add in uh the
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credit score itself and the impact of paying those uh bills off on time versus not paying them off and the
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understanding about how that can play into some of those life decisions as people uh go on with the different
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components of their life absolutely yes and actually I remember last time I think I we we spoke
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um we're also talking about the importance of taking a look at your credit file
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um which which you can do for free don't let anyone charge you to look for it and
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it's free and you often find mistakes if you find mistakes that your credit bureau is obliged to take you seriously
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and and remove the mistake so take a look because that can also in addition to the fact that you know just
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difficulties you've had in the past are going to feed through to a lower credit
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score on top of that there's so much identity theft and fraud and all these things going on these days there could
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be something that you know you have no idea it's it's dragging you down until
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you take a look are you more optimistic or pessimistic right now in terms of how people are
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thinking about financial literacy and the want to uh to learn more about a lot of these issues
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yeah I it is a big push at the um state level in many states to require financial literacy there certainly was
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no requirement for for me in a class of 1983 in high school already the thought of teaching financial literacy I don't
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think I came up at all right and I certainly took out student loans as much as I could in uh you know to go to
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college and I just did it I figured well got to do it but I I really didn't uh
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think through what I was getting myself into uh probably would have done it anyhow but it certainly would have
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helped uh and that was that was my first interaction with Consumer Credit which is as you can see it's it's a it's one
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of the biggest decisions you make to take out loans that big and we're doing
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it at 17 years old that is uh you know that that's that sort of big mismatch
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there and how ready we are and how big a decision we're making well and the program that you do uh is fantastic and
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I think it is you know kind of the natural question of where we stand right now in this kind country around
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financial literacy the resources or lack thereof at times to be able to have those types of courses in our schools so
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that uh especially teenagers have you know kind of that that basic understanding for when they go off to
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college or when they get that first job so that they can you know be prepared for some of these things that get thrown
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at them well absolutely I mean it's starting your first job we've gotten
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your first job you're probably going to have a defined contribution 401k plan
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it's probably going to be the way your retirement is funded and uh you know this is you're making a very decision
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about a very far off thing but you're making it right now you walk in there and these days one thing I've learned is
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that most people when they walk in that job when they they click a box and that on that first day during your
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orientation they click the box for the Target date fund then with the date that's approximately when they would
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retire you know 40 45 years later everyone not everyone most people choose that and what is it why what does it do
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that's something that we decided we would tackle in this course even though it's a tremendously far off
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um uh you know uh payout but you're making the decision now so you you should know what you're doing and and
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not only but just you know clicking that button and not doing anything with it over the next 30 35 40 years but really
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having kind of an active view of what's in there and and and the benefits that
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you're getting and how you can continue to improve it over the course of time
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yeah yeah well it's just a fact of life that you know compared to uh you know my
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parents generation uh we just have all these Finance decisions to make for ourselves uh we don't have the pension
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plan that people had 50 years ago this is it yeah well the Social Security and then there's this and that's it and
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uh and so this really is you know and that money that what's going on with the
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money in your account well you just simply have to take that seriously uh basically another point which is to talk
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about social security uh another thing that we were thinking about with designing this course is to help
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students become informed uh voters and citizens um and to tackle the issues that that
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maybe there's not not so much they can do about it except that they are voters
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that have a decision to make and you know with Social Security there's always
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talk about how the Social Security trust fund is going to be depleted and in 10 years and what does that mean and so we
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took a moment in our course to spell out well this is how Social Security works this is the trust fund this is what they
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mean when they say it's going to be depleted here's the question you know
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and and you're going to be as a voter going to be a decision maker about what
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happens next David great to have you with us thanks for all the insight and good luck with
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the class thanks a lot thank you David Musta who's a professor of Finance here
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at Wharton also director of the Stevens Center for innovation in finance