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well another side to financial literacy
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is the different communities which can
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benefit from this type of education it's
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not just an English language issue but
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what about those who speak other
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languages David Musto professor of
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Finance here at the Wharton School and
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director of the Stevens Center for
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innovation in finance joins us with more
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on that David great to talk to you again
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how have you been that's great to be
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back thank you and I understand that you
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are doing work right now on a Spanish
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language program around financial
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literacy well we're just uh getting
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started on that yes I this is actually
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an inbound inquiry that we got to the
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Steven Center uh from some uh Bankers
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really uh discussing how they do
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business with uh especially the
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Immigrant Community people coming
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recently from other countries where
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often they've had very bad experiences
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with the financial services industry in
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their own country and this has made them
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very wary of engaging with financial
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services in this country understandably
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and so the question is how can people be
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educated about how how a financial
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system works in this country what are
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the safeguards and what are the products
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how to engage with financial
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service providers uh safely in this
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country so that that's a project we're
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just embarking right and because when
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you're talking about somebody coming
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into this country for the first time
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there's probably a lot of uneasiness and
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hesitancy to begin with and so by being
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able to bring forward a program like
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this potentially you're hopefully
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alleviating some of those potential
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issues
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yeah yeah that's right I think there are
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a lot of financial products that
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um
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it would do just very helpful for a
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family and is to live without that to
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put your money in the mattress because
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of what happened in another country it's
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just uh you're just missing out on a lot
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especially now that we have uh this
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higher inflation uh the cost of not
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minding your money carefully has really
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gone up how much do you think what we've
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gone through here in the last uh several
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months actually let's even expand it
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because of the impact of the pandemic
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and now with inflation has impacted
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people's understanding or at least want
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to understand more about Finance about
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uh uh Financial operations so that they
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can be better prepared
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yeah you know we think uh you know I've
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I've been around the block yet and I've
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been through several uh cycles of
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um the economy and those of us who
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remember the financial crisis will saw a
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lot of banks closed uh over those over
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those months just you know every Friday
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more Banks being closed and we saw how
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it worked we saw the protections
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afforded to smaller depositors uh and
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and we just saw the whole uh we saw you
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know the famous line about when you have
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a crisis you you see the the financial
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services industry in its underwear right
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you know when you've seen that you you
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understand
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uh the bad State and you understand
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where what's safe and what isn't safe
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and for those people who were you know
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now it's getting to be a while ago
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that's that all happened 14 15 years ago
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and
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um we haven't been through that of
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course people have been through similar
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problems in their own home countries
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which affordable which have less
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protection so yeah
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um just uh younger people in general
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just haven't seen what what we've seen
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um and it's just there's a lot of work
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to do to uh to just bring people to that
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the Comfort level they need to engage
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safely uh without of course uh getting
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involved in things that are targeted at
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uh newcomers that may be scams what do
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you think that then we as a country have
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kind of missed uh in terms of financial
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literacy and what do you think we need
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to employ as we move forward to improve
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that as well
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well so I have also involved in
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overseeing a financial literacy course
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for high school students right now we
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have
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several hundred students taking this is
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actually it's a pen course they're
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taking it from Penn course credit at
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their high schools right now just just
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wrapping that course up and so I had to
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think hard about this what what what do
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you need to know to make your financial
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decisions that you have to make
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wisely and also to be an informed voter
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and one thing I learned just for example
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so this is aimed at 17 year olds one of
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the most generous programs the federal
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government has is the income driven
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repayment of student loans it's it's a
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generous program and it's it's likely to
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become more generous and yet the high
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school students I spoke with didn't even
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know about it
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very rarely do they haven't even heard
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about it and yet years this program
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meant to soften the blow of you know
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taking out a loan and ending up in hard
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times and therefore because it softens
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the blow it's it's an invitation to take
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a risk you might not otherwise take with
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your education and but if you don't know
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about it in advance then we're not
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getting the benefit of these students
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taking that risk and so that that's a
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way that um you know financial literacy
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will hopefully pay off
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um you know for everybody
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I I know you also uh in your research
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have focused on consumer credit and if I
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can't have you speak to the importance
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of that as a component of financial
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literacy for either young people growing
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up or for adults as well
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yeah um so and consumer credit is a big
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uh part of that course I have uh so try
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to introduce students to what they're
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going to see as far as uh you know not
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just the student loans or credit cards
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car loans other uh related products
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um and also to sort of understand the
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very dire consequences of running out of
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cash and then that having you know
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overdraft protections and payday loans
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and credit card debt extremely expensive
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ways to make it through a tough moment
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uh you know this is all uh you if you
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could just avoid falling into those
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traps which are so hard to get out of
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um you know your life is just so much
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brighter
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um so uh so yeah it's it's I I think and
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again people who went through the
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financial crisis you can see how there
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was a lot of weariness about getting
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into debt after that which you know I
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think you and I can agree is probably on
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the balance of Health thing
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but you don't want to entirely avoid
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using Consumer Credit products in you
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know just you know it's a way you know
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you know buy a house and pay for it over
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the years you enjoy it or buy a car and
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pay for it over the years you enjoy that
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or take out a student loan become
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educated and pay the loan off of the off
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of the human capital you built these are
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all great things you can do with uh with
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Consumer Credit if you're smart about it
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well and I was going to add in uh the
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credit score itself and the impact of
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paying those uh bills off on time versus
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not paying them off and the
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understanding about how that can play
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into some of those life decisions as
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people uh go on with the different
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components of their life absolutely yes
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and actually I remember last time I
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think I we we spoke
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um we're also talking about the
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importance of taking a look at your
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credit file
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um which which you can do for free don't
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let anyone charge you to look for it and
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it's free and you often find mistakes if
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you find mistakes that your credit
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bureau is obliged to take you seriously
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and and remove the mistake so take a
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look because that can also in addition
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to the fact that you know just
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difficulties you've had in the past are
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going to feed through to a lower credit
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score on top of that there's so much
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identity theft and fraud and all these
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things going on these days there could
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be something that you know you have no
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idea it's it's dragging you down until
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you take a look
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are you more optimistic or pessimistic
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right now in terms of how people are
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thinking about financial literacy and
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the want to uh to learn more about a lot
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of these issues
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yeah I it is a big push at the um state
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level in many states to require
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financial literacy there certainly was
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no requirement for for me in a class of
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1983 in high school already the thought
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of teaching financial literacy I don't
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think I came up at all right and I
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certainly took out student loans as much
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as I could in uh you know to go to
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college and I just did it I figured well
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got to do it but I I really didn't uh
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think through what I was getting myself
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into uh probably would have done it
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anyhow but it certainly would have
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helped uh and that was that was my first
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interaction with Consumer Credit which
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is as you can see it's it's a it's one
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of the biggest decisions you make to
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take out loans that big and we're doing
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it at 17 years old that is uh you know
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that that's that sort of big mismatch
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there and how ready we are and how big a
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decision we're making well and the
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program that you do uh is fantastic and
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I think it is you know kind of the
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natural question of where we stand right
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now in this kind country around
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financial literacy the resources or lack
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thereof at times to be able to have
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those types of courses in our schools so
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that uh especially teenagers have you
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know kind of that that basic
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understanding for when they go off to
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college or when they get that first job
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so that they can you know be prepared
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for some of these things that get thrown
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at them well absolutely I mean it's
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starting your first job we've gotten
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your first job you're probably going to
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have a defined contribution 401k plan
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it's probably going to be the way your
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retirement is funded and uh you know
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this is you're making a very decision
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about a very far off thing but you're
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making it right now you walk in there
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and these days one thing I've learned is
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that most people when they walk in that
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job when they they click a box and that
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on that first day during your
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orientation they click the box for the
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Target date fund then with the date
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that's approximately when they would
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retire you know 40 45 years later
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everyone not everyone most people choose
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that and what is it why what does it do
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that's something that we decided we
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would tackle in this course even though
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it's a tremendously far off
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um uh you know uh payout but you're
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making the decision now so you you
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should know what you're doing and and
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not only but just you know clicking that
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button and not doing anything with it
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over the next 30 35 40 years but really
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having kind of an active view of what's
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in there and and and the benefits that
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you're getting and how you can continue
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to improve it over the course of time
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yeah yeah well it's just a fact of life
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that you know compared to uh you know my
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parents generation uh we just have all
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these Finance decisions to make for
00:11:28
ourselves uh we don't have the pension
00:11:31
plan that people had 50 years ago this
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is it yeah well the Social Security
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and then there's this and that's it and
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uh and so this really is you know and
00:11:42
that money that what's going on with the
00:11:44
money in your account well you just
00:11:45
simply have to take that seriously uh
00:11:48
basically another point which is to talk
00:11:49
about social security uh another thing
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that we were thinking about with
00:11:53
designing this course is to help
00:11:55
students become informed uh voters and
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citizens
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um and to tackle the issues that that
00:12:03
maybe there's not not so much they can
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do about it except that they are voters
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that have a decision to make and you
00:12:10
know with Social Security there's always
00:12:11
talk about how the Social Security trust
00:12:13
fund is going to be depleted and in 10
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years and what does that mean and so we
00:12:18
took a moment in our course to spell out
00:12:20
well this is how Social Security works
00:12:22
this is the trust fund this is what they
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mean when they say it's going to be
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depleted here's the question you know
00:12:28
and and you're going to be as a voter
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going to be a decision maker about what
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happens next
00:12:33
David great to have you with us thanks
00:12:34
for all the insight and good luck with
00:12:36
the class thanks a lot thank you David
00:12:39
Musta who's a professor of Finance here
00:12:41
at Wharton also director of the Stevens
00:12:43
Center for innovation in finance
