Promoting Financial Literacy

By: Tom Sadowski, CGFM, CPA

Tom Sadowski, CGFM, CPA, a member of AGA’s Mid-Missouri Chapter, is the Missouri state controller. He’s an AGA Past National President and a two-time Past National Treasurer.

Indulge me today while I talk about my kids. None of them are AGA members and none of them work in government financial management, so I don’t have to worry about them ever reading this—please don’t say anything to them.

Grant has a finance degree from the University of Missouri. He owns a small business in Fort Lauderdale, FL.

Cale has an architecture degree from the University of Kansas. He works for an architecture firm in Manhattan.

Kaitlyn is still in school and is following a familiar path of trying to figure out a career. I don’t know what it will be but it will not be finance-related. As much as she is like me she did not get that gene. My bet is she will work for a human services, not-for-profit organization as a policy or administrative person. The kid can think and write and she has passion.

Jatha and I have treated all three the same as best we could. They always got the same allowance (age-adjusted, of course). Grant, being the oldest, was the guinea pig for all matters financial. When he got old enough to need new athletic shoes on a regular basis we started having negotiations over how much he could spend. It didn’t take us too long to figure out that we needed a better way. The solution? Figure out how much we spent on clothes for him and add it to his allowance. “Grant, this is what you get each month and it covers clothes, shoes, gas, eating out, etc.” Guess what he wanted for Christmas? Clothes.

We did other things for them that helped make them financially literate (that was the outcome, not our purpose):

·      We got them a joint checking account in their name and ours. We had online banking so we could monitor their account. If they overdrew the account they paid the fees.

·      When they were old enough, we got them a credit card in their name with a $500 monthly limit.

·      When they had jobs we talked to them about the earnings statement and what the taxes were (that opened some eyes). I also did their tax returns for them.

·      Even when we were paying bills for them, like their student account, we would talk about what the charges were, etc.

·      We gave them room to make mistakes but with limited risk. They were learning by doing and by making occasional mistakes.

·      In general, we encouraged them to talk to us about money issues and we tried not to make too many judgments about their financial decisions.

If you stayed with me this long, you may be thinking “Hey, Tom, is there a point to all this? We got it that you are proud of your kids, but what does this have to do with me?” I am glad you asked. I’ll be getting to my questions to you in a minute.

First, while we pride ourselves on being an educated country, as a nation we are financially illiterate. I have thought that for some time, but starting with the run up in oil prices and continuing through the sub prime fiasco and the subsequent bailout/rescue plan, the evidence is clear and damning. What could have been a great teaching moment has degenerated into something as unintelligible and obtuse as our presidential debates and most of the political ads I saw. (I think there was one good one, but maybe that was a GEICO commercial. By the way, I voted for the Gecko and the Aflac duck. I know what you’re thinking. The Gecko is not a natural-born citizen. But at least he is articulate on financial matters.)

Second, I hope we only pay once for the financial crisis. Can we learn the true causes so we understand and not just point fingers of blame?

Can we understand that while there were some bad characters, you can trace a lot of this to human behavior? To paraphrase a GEICO commercial “Human beings behaving humanly. How existential.”

If we don’t understand this then we are sowing the seeds for the next crisis in the same fields where we are planting our fixes. I don’t know about you, but I want to get my money’s worth for my $800 billion. Just like General Patton never wanted to have to capture the same real estate twice, I never want to pay for the same real estate twice.

To the questions:

1. What have you done to promote financial literacy in your personal world and your work world? Specific examples would be great.
2. As controllers and auditors we ought to understand this stuff. What role do we have in helping resolve this crisis and ensuring we don’t head down this path again? In your answer, please indicate your sector and whether you have any direct responsibility in this area (banking, securities, insurance, etc.).