Why did the financial crisis happen in the first place? More importantly, can we learn enough from history to stop it repeating?
Anyone with a heartbeat could get a mortgage, and lending standards remained non-existent. Boom, then bust. And America is still clawing itself out of the leftover damage.
Doug Duncan, chief economist for Fannie Mae, previously said, “It took 10 years to get to the housing bust, so it will take 10 years to get back.”
But for now, the Consumer Financial Protection Bureau is doing what it can to ensure that the same situation never happens again.
“We have an opportunity to see that America does better by its children. Now more than ever, as we emerge from the deepest financial and economic crisis of our lifetimes, people need the know-how to manage the ways and means of their lives,” Richard Cordray, director of the CFPB, said at the President’s Advisory Council for Financial capability for Young Americans Meeting.
“The choices they face in the financial marketplace – with instruments like mortgages, credit cards, auto loans, student loans, credit reporting, and more – are increasingly complex,” he continued.
Cordray outlined five ways young childhood education is the key to helping shape housing’s future.
1. Financial education should begin at a young age
Education needs to be a priority as students approach gradation from high school and should continue to evolve into adulthood. Cordray explained that this can be attained through integrated curricula in our schools, so the benefits of compound interest are understood in math class, economic costs and risks are taught in social studies class, and essay topics in English class may cover how we use money, how we protect our money, or how we can take control of our financial lives to achieve our goals.
2. Students should practice financial management through experimental learning
Whether it is through stimulating a banking experience or playing a computer game that hones financial skills, it will help students learn more effectively.
3. Teachers who are interest in teaching personal financial management need to be supported and engaged with
Teachers need access to training and incentives to take part, such as continuing education credits or need-based travel stipends.
4. Financial education concepts need to be integrated into standardized tests
In doing so, it would increase the incentive for educators to teach these topics.
5. Parents need to get involved
“Parents help set expectations, and research has shown that if parents engage their children by establishing a savings account for them, these children are seven times more likely to attend college than those without a savings account,” Cordray explained.