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State Governors Weigh In On The Financial Literacy Crisis In America

By Jacob Wolinsky. Originally published at ValueWalk.

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Following is the unofficial transcript of a CNBC interview with Tate Reeves, Mississippi Governor, Former State Treasurer and Chartered Financial Analyst; Steve Sisolak, Nevada Governor; and Phil Murphy, New Jersey Governor and Vice Chairman of the National Governors Association moderated by CNBC Senior Personal Finance Correspondent Sharon Epperson live during the “Invest in You: The Governors Strategy Session on Financial Education” event today, Wednesday, April 6. The full video is available here:


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State Governors Weigh In On The Financial Literacy Crisis In America

All references must be sourced to CNBC’s “Invest in You: The Governors Strategy Session on Financial Education” event.

SHARON EPPERSON: Today we’ve brought together three of our nation’s governors to talk about the state of financial education in America, and why that knowledge is so very critical to advancing economic opportunity for all. New Jersey Governor Phil Murphy, Mississippi Governor Tate Reeves and Nevada Governor Steve Sisolak, It is an honor to have you with me here today to talk about such a very important issue. You know, here at CNBC, are our job is to talk to money managers and CEOs and economists and analysts about the markets, about investments, all facets of finance. But when we drill down to a personal finance level, why is it so hard to talk about money at home and in school? And is that silence actually contributing to Americans unhealthy financial habits? You know, Governor Murphy, I want to start with you because I’m really eager to learn how you learned about money and why financial education is so important to you?

GOVERNOR MURPHY: Sharon, thank you for having us. This is an incredibly timely and relevant gathering. I want to acknowledge my fellow governors Reeves and Sisolak, it’s an honor to be with them. And financial literacy is a topic that erases party lines and requires us to learn from each other’s states and work together on best practices. I grew up in a family that I call middle class on a good day. So we had scarce resources for my entire childhood. So that was probably the biggest early lesson for me and that is that you have to work within constraints that you might not otherwise have in your life. But I think it’s an incredibly – financial literacy is incredibly important for Americans, as you say, to secure their personal financial footing, to be better positioned, to provide for their families and set themselves up for future success. It could not be a more relevant topic. In fact, today, by coincidence, we’re launching in New Jersey a website here to enhance financial literacy for all residents called njfinlit.enrich.org to give you a sense of how important we think this is.

EPPERSON: Absolutely. And Governor Reeves, I know from your background, maybe you did actually talk about money at home. Many people don’t, but did you in your household growing up?

GOVERNOR REEVES: Well I had the opportunity – and Sharon thank you for having myself and my fellow governors on today because this is an incredibly important topic. I had the opportunity to grow up in a family and with a father, who was a small business owner and he came from a very modest background, to say the least. He was one of 11 who grew up in a two room home in Mississippi and as he became a small businessman, as he worked to build his business, he made sure that myself and my brother were aware of the sacrifices that he made but also to not only understand what it takes to be successful in life, but also what it means to be successful in the money side of things as well. I then went to college and had the opportunity to obviously major in economics and take classes that were there with not only on personal finance, but also on investing in other things and led me to a career in it, which is one of the reasons that I’m so passionate about trying to encourage my fellow Mississippians and really, my fellow Americans, to make sure that financial literacy is available to as many people as possible because I really do think it can help Americans have a better life.

EPPERSON: Absolutely. Absolutely. Governor Sisolak, did you ever take a class on personal finance or anything financial when you were in kindergarten through 12th grade or did you have to just learn by doing?

GOVERNOR SISOLAK: Well Sharon, thanks for having me and my colleagues on here to talk about this very important subject. We learned in the home, my brother and sister and I did. My mom and dad did an incredible job teaching us and I personally always encourage parents to be involved in their kids education, all education, particularly financial literacy. We have a formal curriculum, and that’s great and I think it does a lot for us. But right now it’s important that their families get involved and kids understand that they want that new bicycle or they’re going to save for their first car, they have to start saving money and save it early. You put so much of the when grandma and grandpa give you $10 for your birthday, you put a couple bucks of that aside for your future. And my parents delved into that and really encouraged my siblings and I to do that and I think we had a good foundation. It’s unfortunate that a great percentage, I think 50 some odd percent of Americans can’t cover $1,000 emergency costs if it comes up without borrowing the money. So it tells us we need to invest more. We’ve invested $2.5 million from the state into these programs. And to make sure that it gets out we address access and equity so that everybody gets this education, it’s not just reserved for the upper class.

EPPERSON: Absolutely. Access, equity and financial responsibility is so very important. And you know, students who have taken a class in personal finance are more likely to engage in financially responsible behaviors. One study from the Council for Economic Education found that of the students who have taken a personal finance class, they’re 9% more likely to save their money, 15% more likely to invest the money, and they’re 21% less likely to take on credit debt. And when it comes to student loan debt, financial education in terms of high school graduation requirements has been shown to increase aid for applications for federal loans and decrease private student loans. So with all these positive results, it’s just a wonder why it is not mandatory in all schools. Why is there such a difference in each state’s approach to financial education? Governor Reeves, let me start with you. What is Mississippi’s approach?

GOVERNOR REEVES: Well, I think one of the challenges that we have across America is that we’re all working very hard to ensure that the we improve educational attainment levels of our citizens. And you know, in our state, we actually were the seventh state in America to mandate a class we call it the Mississippi College and Career Readiness class. It’s really about teaching life skills but 75% of the life skills that are taught in that class are with respect to financial education, because one of the things that you were talking about the importance earlier, I would just point out those individuals that have a fundamental understanding of their finances and financial literacy, they’re also much more likely to improve their educational attainment level, they’re much more likely to go back to maybe the local community college and learn a skill, so that they can increase their earning capacity, because they have a better understanding of what that means to them on a day to day basis. Obviously each state – and we believe very strongly here in our state about home rule – and each state has to make their own decision and make their own priorities as to what classes are most appropriate for their young people. But I am absolutely convinced that a fundamental understanding of finances is incredibly important to one’s ability to be successful in life.

EPPERSON: Absolutely. But Governor Sisolak, every state does have the authority to make its own rules in terms of how they have financial education in schools. And in Nevada, it’s a part of the social studies curriculum, not necessarily a standalone class. Why is that the approach in Nevada? Why isn’t it just a mandatory class for every student?

GOVERNOR SISOLAK: Well mandatory class might be the next step that we go to. I mean, social studies class indoctrinates students into the idea about this, it gives them the first touch and I think that’s a good way to get that to put that curriculum into the social studies classes as opposed to developing a whole new program to begin with. But we’ve had it at every level. I can tell you that I had it when I was on the Board of Regents of our universities I served in. We had credit card companies in the arenas give it all the college kids and signing them up for $1,000 credit cards. And I’d go into the classes and say look, you’re running up these credit cards, the max limits on beer and pizza. Then you graduated from college and you got to understand that you’ve got to pay that all back. Kids don’t understand that. It was an eye opening experience. We got to the point where we wouldn’t let them give out t-shirts and sweatshirts and swag to get them to sign up for the credit card because it was misleading so many students and they didn’t have the background in order to handle that kind of credit.

EPPERSON: You know, Governor Murphy I was in a class in West Orange, New Jersey a couple of years ago when the first students were taking their financial class – their personal finance class. They were in sixth, seventh, eighth grade. And this was the time that the state had decided that middle schoolers were going to have to take a personal finance class. These students loved learning about stocks, they knew every company that they wanted to invest in. Why is the approach of having financial education in middle school so important, and when will it become a high school requirement in New Jersey as well for students?

GOVERNOR MURPHY: I think we’re all in agreement that you need to get to folks while they’re young. And that’s the animating reason behind getting financial literacy into our curriculum and middle school, as you rightly point out in grades six, seven and eight. The combination I think of skills that folks don’t have a need to learn, but also as I think my colleagues have alluded to, there’s a temptation that comes with a lot of different things that you all of a sudden think you can afford. And you don’t realize the consequences on the backend. Whether it’s physical items, whether it’s meme stocks or whatever it might be, and so getting kids at the earliest ages possible we think is critical. Could I see this extending into high school? Absolutely. Right now it’s working. I have to say that the payoff for the investment we’ve made in grade six, seven and eight is evident. And if we think we need to do more, we will.

EPPERSON: Yeah, you know, there is a real difference though in terms of some communities and the resources that are available. Some students in the classes I’ve seen in New Jersey, they actually have their own accounts, they are trading stocks, their parents set it up for them. Others are learning about that work for the very first time. So if advancing economic opportunity is the ultimate goal, how do we make sure that everyone is provided for including under resourced communities, that we make sure that there’s equal access to that opportunity? And Governor Murphy, you were starting to mention this financial literacy program that just launched in New Jersey for adults, too. So what are you doing there?

GOVERNOR MURPHY: Yeah, so we’re launching it literally today, Sharon, as luck would have it – njfinlit.enrich.org. And it was developed with two outstanding firms in this space, Enrich and iGrad. Yeah, I think you make a very fair point. Getting folks while they’re young, but accepting as well that this is a lifelong reality that never goes away. You’ve got to be able to manage your circumstances and manage it intelligently. And the other point you’re making, Sharon, is a big one. Equity. You know, we’re proud to have the number one rated public education system in America but that banner has to apply not just to most of our kids, but to all of our kids. And again, remember that this is a lifelong reality. So we want to get at it early and stay at it as folks grow up and we’ll continue to do that.

EPPERSON: Yeah, you know, when you’re talking about under resourced communities, Governor Reeves, you know, there are some that are saying, just get the basics right. Make sure the kids know how to read and write, make sure they know how to solve math problems. Why do we have to add something else to the mix in terms of financial education? How do you impress upon communities, and particularly under resourced communities, that it’s important to have financial education? Because that improves learning all around.

GOVERNOR REEVES: To be honest with you, I think we’ve got to say that this is not an either or scenario. It’s a both and. There’s no doubt that we have to continue to focus on improving the basics. We have to continue to focus on improving the math literacy of the students in all of our schools. Because the reality is it’s very hard to teach financial literacy if there’s not a basic understanding of math. And then it’s very hard to teach financial literacy, because there’s not a basic understanding of reading as well. And so, I think that we can do both. And then quite frankly, I think we can do both in such a way that we utilize the same techniques. In our state, for instance, we hired dating years ago, we started hiring math coaches to go into various schools that were underperforming so that the math coaches were not only teaching students how to do the math problem, but also teaching the teachers how to be better math teachers. We did the same thing with reading coaches years ago, and the results have been fantastic. If you look at the nape testing, for instance, in our state in fourth grade reading, fourth grade math, eighth grade reading and eighth grade math, our results in terms of ten-year growth numbers are in the top five in the nation in each of those categories for each of the last three years. But it’s because of that model that we’ve used. And now we’ve taken that model to the financial education side of things where we’re actually having a master teacher of a personal finance program here in our state. We’ve got over 250 teachers that have gone through that and we’re making sure that the resources are available in all of our school districts, and we utilize our online network to make sure that all of those resources are available to every single school in Mississippi.

EPPERSON: Yes, well, in Mississippi the Council for Economic Education has been a really key supporter for the initiatives you’re doing there in that state. But when we talk about teachers, we also have to talk about parents as well, Governor Sisolak, and how they are supporting these initiatives. How is that happening in your state because there’s often you know, the need for parents to be involved as well as Governor Murphy has mentioned.

GOVERNOR SISOLAK: It’s important that we have the curriculum in the schools and the younger we stat, as Governor Murphy said, the better off we are. Unfortunately, a lot of these kids can’t get a lot of education from their parents at home because the parents didn’t get the education. We’ve still got a problem with parents going for short term payday loans in order to make their rent paid and so forth and so on. And they have to understand the absolute cost of borrowing that money. And we’ve done a lot. We are trying to educate the parents to have a well-rounded approach as we deal with that. But financial literacy is something you need for your entire life. Whether it’s buying your first car, saving up for a new pair of jeans, or buying a home at some point. And understanding what the interest rates are and what the long term effects are and what payments are and the depreciation and amortization and those sort of things. It’s a skill that is necessary for your entire life. We have to approach it more long term in that regard, and break the cycle of people that are just kind of left on their own in terms of not having the knowledge, how to handle their money and how to borrow money and when it’s necessary and how to save and how to invest.

EPPERSON: Yeah, when I talked to some of the students in New Jersey, Governor Murphy, they were the advocate saying that we need to have more financial education, that we need to try to impress upon some of our classmates that aren’t so into this in sixth grade that we need to have it. And in ninth grade when one of the students I talked to had advanced to high school, she said she was encouraging her colleagues, her classmates to take those classes. How important is the advocacy among students in your state but in other states as well do you think in terms of getting financial education legislation passed?

GOVERNOR MURPHY: Well I think it is incredibly important. And moms and dads as well, both the kids who are living it and they want more, I’m not sure earlier than sixth grade make sense, but does it make sense to put more resources into post eighth grade? If the market – in this case the market is our precious kids, if they and their moms and dads think that that would meaningfully improve their understanding of financial literacy, you got to be open minded to that. As I mentioned with the website that we’re launching today, we think it’s a lifelong experience. But absolutely is the answer. The answer is yes to your question, Sharon. Kids influence – enormous amounts and moms and dads have enormous influence on boards of education, on how we construct curriculum. And financial literacy is no exception to that.

EPPERSON: Yeah, you know, and they have a lot of input in terms of what they want to learn about their finances. Governor Sisolak, let’s talk about cryptocurrencies because you know, when we talk about crypto a lot of young people very interested in learning more about that a lot of Americans in general. There are no specific laws or regulations regarding cryptocurrency in your state. Casinos can use it, businesses can accept it for payment. With the rising popularity of cryptocurrency, what do you think is the responsibility that we have to teach young people about the risks and about how they need to be smart about new ways to spend and invest their money?

GOVERNOR SISOLAK: Well, I think you’re absolutely right. And cryptocurrencies, it’s in its infancy right now. What it looks like today versus what it’s going to look like three to five years or 20 years I can’t even begin to imagine. Most folks right now are not dealing in cryptocurrencies. We do have some casinos that you can use it at, we’ve got about businesses that accept it and so forth. But you know, I think there’s something we could maybe have a second or an advanced class in terms of financial literacy with cryptocurrency. But I’m talking about nickels and dimes and dollars, you know, when I’m talking about financial literacy. And kids have to understand that you know, that’s how they save and that’s how things are done. The investment I know a lot of the classes are doing these stock market games where they get grouped together, and they get a sum of money and they invest in it see who does the best over a year or two years in class or whatnot. Cryptocurrency is something that will be used in the future. I think it’s something that is not understood by enough people – I don’t have enough of an understanding on it to be very candid with you – to be able to advocate or to not advocate for it. But I think that we need to get to the basics of borrowing money, saving money, and you know, those sorts of things.

EPPERSON: Yeah, you know, Governor Reeves, a lot of teachers are concerned about the students wanting to learn about meme stocks, about crypto because they don’t necessarily have as great a grasp of that, either. How do you make sure that teachers are well equipped? These are the unsung heroes for our children. We need to make sure that they understand the material that they’re presenting to the children but in some cases, they’re at a loss. So how do you make sure that they’re up to date on the latest that young people want to know about their money that they should know about their money?

GOVERNOR REEVES: It’s true in all levels of education that you’ve got to – the best way for the kid to get a quality education is for there to be a quality teacher in the classroom teaching it. There’s no doubt about that. And that’s the reason we started our master teacher personal finance program, wherein we actually offer some 75 hours of training for those teachers. We also have coaches that are going in and help teaching them. And the reality is cryptocurrency is relatively new here and so you’ve got to continuously have continuing education for the personal finance teachers, just like you’ve got to do so whether it’s in English or math or social studies or the other subjects. But as was mentioned earlier, and I think this is important. You know, one of the primary foundations of teaching financial literacy is the recognition and understanding of risks. That’s true when it comes to crypto. That’s also true when it comes to these stock market games. What we’re really trying to teach these individuals is not to pick an individual stock and do phenomenally well and get wealthy, but to teach them that what the real risk reward is of making decisions and particularly making financial decisions.

EPPERSON: So very important, and they’re learning though this risk reward – some are learning it at home, but it was very interesting as CNBC recently did a survey that looked at the fact that parents overwhelmingly say that they should be responsible for teaching their children about money. But only about 40% or so said that they talked about money at home more than once a month. And so we’re having about a third of the parents admitting that they don’t even discuss household finances at home. So how important when you have many studies also have shown that young people believe that cryptocurrencies may be a path to retirement savings, that it may be a good investment long term. Governor Murphy, how do you make sure that although parents think it should be their responsibility, the schools are playing a very important role from an early age in some of these new ways to invest and grow your money and some of the traditional ways that everyone should know?

GOVERNOR MURPHY: Yeah, I think Governor Reeves said earlier and said it the right way this is and both. It’s something that needs to be talked about at the kitchen table, but that’s not in lieu of our need and responsibility to teach it in schools. And I think it’s got to be both of those. And I think so that’s the general financial literacy. How do you assess risk? How do you price risk? Everything that is associated with that. As it relates to the newer realities, Web 3.0, blockchain, crypto, we’re all kind of learning that together. And I think we’ve got to be committed to that. And I think in particular, folks and our kids, especially need to understand the risk reward equation, generally, but specifically within crypto. There’s a phrase that Warren Buffett uses that anything that seems too good to be true, usually is. And that’s not to say you can’t make money, you can’t make smart investments in the crypto space and because the answer is you can. But boy, you’ve got to understand the basics of that reality and you’ve got to understand the risks associated with it. I think that’s incumbent upon all of us to be shoulder to shoulder in that regard.

EPPERSON: You know, there’s a focus on the short term, perhaps profit of crypto and there’s the reality that families across this country are going through in terms of inflation, and what we need to understand about how it works, the impact it’s having, and their understanding that because they know what they’re paying at the grocery store, at the gas pump and how it’s impacting their daily budgets. But I’m wondering Governor Reeves, how we can impress upon schools and how states can come together to have some type of standardization of these are the key lessons that everyone needs to learn, including about inflation so that we can move forward in these difficult situations.

GOVERNOR REEVES; Well, given the significant inflation that we’re seeing in the U.S. economy today, I think it would be fair to say that we ought to have a requirement for a financial literacy class for all of our members of Congress. And I don’t think that’s unique to one political party either by the way. But the fact of the matter is that we find ourselves in a position in which if more people understood the reason that prices were rising, that I think we would probably see better policies to combat those. You mentioned earlier about parents and there’s no question that parents play a significant role in every child’s education, and it’s a critical component. But you also mentioned earlier that 50-something percent of parents – only 50% of parents felt that they were adequate in their own knowledge and financial education. And the reality is some of them probably aren’t telling the whole truth. And so it’s a both and thing where we can provide foundational information to individual students in our classes, but also hopefully, involve our parents in the long term conversation to get more people more comfortable talking about these issues.

EPPERSON: You know, another word that comes to mind is recession because Governor Sisolak, in our recent CNBC and Acorns survey, 81% of Americans said they expect a recession sometime this year. So what does that word mean to you for your state, for your students, and what should they learn about recession?

GOVERNOR SISOLAK: Yeah, we’re just coming through the pandemic and you’re absolutely right a recession is not something that anticipating or hoping is on the horizon for us. We got through one a few years back and just devastated our economy and hopefully not going that way again. I think it’s important that our students understand what a recession is, what a depression is, what a slowdown in the economy means, what a heating up in the economy means. These are real world situations that they’ll need, not only when they’re in middle school or high school, but in their adult life that they’re going to be dealing with regularly about unemployment, and jobs, and inflation as Governor Reeves said. These are real issues that people – that these kids are going to have to deal with multiple times. It’s the cyclical nature – the economy is – and they’re going to be dealing with these multiple times over their lives. So it’s important that we give them that foundation and I think you got at what we’re talking about, you know, the initials, the basics of savings and interest and whatnot and cryptocurrency. We’ve got to get kids in the shallow end of the pool before we drop them in on the deep end and overwhelm them with some of these things. Cryptocurrency most folks deal with it as a get rich kind of thing. They can invest in it and it goes from $1,000 to $50,000, Bitcoin and they are suddenly going to be rich. It doesn’t work like that in the real world. Sure, some people can be beneficiaries of that, but that’s not the everyday opportunity that Americans have. So I am focused on as my wife is, this is one of her main priorities in the First Lady’s initiatives in teaching basic financial literacy to our kids in terms of saving, borrowing and oftentimes the kids are teaching to their parents as well. So I think that’s a good thing.

EPPERSON: So your main money lesson if you’re teaching a class would be what? What’s the first lesson you would give, Governor Sisolak?

GOVERNOR SISOLAK: Well the first lesson I’d give them is you should pay yourself first when you’re making a living, when you’re saving, you need to pay your necessary bills before you go buy, whether it’s an ice cream cone or that $6 cup of coffee, put a few dollars away for your future. It’s hard to think about retirement when you’re you know, 17, 18, or 20 years old. But those years go by quickly. And I would encourage people to save a little bit – not save your whole paycheck. You got to enjoy your life, but save a little bit and understand the cost of borrowing money. When you borrow money, you’ve got to pay it back and you got to pay the interest on that money. And sometimes that’s a lesson that’s lost a lot of folks. They look at hey you just whip out that piece of plastic and you can get whatever you want and they’ll realize that that bill comes every month and you’ve got to keep making payments on it.

EPPERSON: Absolutely. Governor Murphy, what would be the money lesson that you would most want to teach to a sixth grade class?

GOVERNOR MURPHY: I think it’s similar to Governor Sisolak. It’s what does it mean to live within your means? And not just in the here and now but over time. Very basic building blocks. I’m also in huge agreement that you start with the basics. But living within your means, I think would be the first chapter of lesson number one for me.

EPPERSON: Absolutely. And Governor Reeves, in terms of college career readiness, what is that first class that you’re going to teach when you go to visit one of those Mississippi classrooms?

GOVERNOR REEVES: Well, I always tell young folks when I visit with them one of the most important things that I’ve learned is, and it was taught by my dad first but also in learning things about finance is it turns out the harder you work, the luckier you seem, and the luckier you get. And so hard work makes a difference and what I always try to tell young folks is their education across the board, if they’re in the fifth or sixth grade, what they do in the 7th, 8th, 9th, 10th, 11th and 12th it really matters. It matters in terms of their ability to be successful in life and be successful in getting a job and be able to provide for themselves and their families. And I really like to remind them how rewarding it can be to be self-sufficient to be able to take for yourself and not to depend upon others to do so. And that starts every single day by doing the little things in school. And then ultimately, in terms of investing, it’s all about risk and reward and teaching the basic principles about risk and reward I think are incredibly important.

EPPERSON: Incredibly important, you know, financial education leads to financial freedom. And I thank all of you for being here today to talk about this. Governor Reeves, Governor Murphy, Governor Sisolak, thank you all for being here with us today. Very critical topic that we’ve been discussing financial education in America. And if you all would like to watch this event again and access more personal finance resources, go to cnbc.com/invest-in-you. Also our Money 101 newsletter is available in English and Spanish. You can sign up, go to cnbc.com/money101 or cnbc.com/dinero101. I’m Sharon Epperson for CNBC.

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