- The Freedman’s Bank, which was “certified to teach freed prisoners about money,” was one of the first initiatives that President Abraham Lincoln signed into law right after the Civil War.
- In America’s background, several threads are as important, and as ignored, as that of financial literacy.
- According to investor and Operation Hope leader John Hope Bryant, financial literacy is the civil rights issue facing this century.
In the developing tapestry of America’s history, several threads are as important, and as ignored, as that of monetary literacy. Financial education is undoubtedly the least expensive and most efficient tool for modern group economic development. It is the best tool for personal economic development that every person on the planet has available to them if they want to achieve greater self-determination, aside from a job and a standard means of earning income.
Economic development provides jobs, increases pay, and leads to a higher standard of living for its members. However, having more firms or more products is not the only factor in economic development. People are more active in the market, in this case. The more people are involved in financial activities, like as earning, spending, saving, and investing, the more powerful the market becomes.
It is the first thing the United States does, as I have repeatedly stated in speeches and media around and around the world. S. Following the Civil War in 1865, President Abraham Lincoln made a pivotal decision by enacting the Freedman’s Bank, which was intended to “chartered to tell freed prisoners about money.”
Operation Hope and I are dedicated to restoring the Freedman’s Bank’s vision and mission to living and size. We need the working class and the laddered-up middle school in America, and around the globe, to develop. Without fiscal education, we cannot fully participate in our free enterprise system, and we cannot create informed financial decisions. We are left at the mercy of an unenviable monetary system, and worse, some of us may not even know one that was built to help us.
Seven in ten people in the U.S., according to a new CNBC review. S. (70%) are “very or somewhat stressed” about their personal finances. Having a steady paycheck isn’t enough. According to PwC’s 2023 Employee Financial Wellness Survey, 60% of full-time employees are stressed out about their finances.
According to studies, economic security increases as a result of economic training. Consumers who received high scores on the financial literacy questions were significantly less likely than those with low scores to have trouble making ends meet in a typical month, to lack emergency savings, or to be unable to come up with $2,000 to cover an unexpected expense, according to the TIAA Institute-GFLEC Personal Finance Index, which has been conducted annually since 2017.
Picture this scenario: You’ve worked your entire life, providing for yourself and your family, playing by the rules, and saving what you can. You’re about to retire, and you’re hoping that the money you’ve saved will pay off will provide a safe basis for your prospect. But here’s the reality: the nest egg you’ve been nurturing isn’t enough to cover your expenses, let alone an unforeseen emergency. And worst of all, it’s to late to take any action. One too many Americans are faced with this nightmare situation, and it’s because they lack financial education.
Think about this for a minute. We live in the largest, strongest, most robust economy on the planet, yet most of our children don’t even get one class in financial literacy. No one is explaining how this business operates to them (and to us).
What I have seen first, coming up from nothing in Compton, California, and now as an entrepreneur and successful entrepreneur who eats, breaths, and sleep financial education, is that it’s not a lack of desire or ambition that holds so many of us up from long-term financial independence. It’s poor role models and a lack of the necessary building blocks for economic success, such as the tools and resources to improve our situations, the right enabling atmosphere to succeed.
Building credit ratings and societies
I suggest that we begin by improving every credit report community in America.
Credit ratings don’t just indicate an individual’s reliability, they are an exceedingly accurate barometer for the power and endurance of whole communities. Raise a town’s average credit rating by merely 100 points, and you’ll see a profound change. For instance, we found that in 580 credit report populations, people live to around 61 years of age. Important to take into account is that you don’t start receiving Social Security until you’re 65. Then, just a mere 15 days apart, in a 700-credit-score area, people are living to 81 years or older. Consider about that: A 120-point change can lead to 15+ more years of life.
In the 580-credit report area, most people have a high class level, while in the 700-credit report area, they are college-educated. In the 580 community, you find a development of single-parent families (irrespective of civilization, by the way), while in the 700 area, it’s increasingly two-parent homes. In the 580 community, you have a very low homeownership rate — between 25% to 45%, while in the 700-credit score community, it’s more than 75%. And I don’t care what anyone tells you, the easiest way to build wealth in America is still homeownership. In fact, in the 580 community, the violent crime rate is 75 per 1,000 residents, while in the 700 community, it’s about 2 per 1,000 residents.
Nothing changes your life more, other than God or love, than moving your credit score to 120 points. At Operation HOPE, we are moving credit scores up 54 points in six months, moving debt down $3,800, and helping people increase their savings by $1,100 on average. Because there is no such thing as a dedicated banking sector and broad-based access to capital, we are helping banks get out of the “no” business (declining loans) and back into the “yes” business (investing in individuals and businesses) at scale by raising the credit scores of communities. This is our laser focus, and this is also our plan for the nation.
About half of Black Americans have credit scores below 620. Not poor Blacks — everyone. The truth is that this may be worse than the police abuse or the daily racism we experience at a store retail counter, because 50% of Black Americans wake up completely locked out of the free enterprise system every day.
With a credit score under 620, we are unable to obtain auto loans with favorable terms and rates. With a credit score under 680, we are unable to obtain a prime mortgage for the home of our dreams. And with a credit score under 700, we aren’t getting the loan we need to launch that small business. But this I do know. If we can educate people on how to raise their credit scores from say 580 on average, to somewhere around 680 or better, we can stabilize America.
Financial wellness and educational goals
This empowering work is a testament to the legacy of the Civil Rights Movement, which fought in public squares in the 20th century. I want to highlight four education areas that I believe we can give attention to as we strive for a just and just society, break the chains of financial inequality, and create a future where financial literacy is not a privilege but a fundamental right because of the tangible effects we have seen through our work at Operation Hope and the efforts of so many other incredible organizations.
Starting as children, we must change our relationships with money.
Financial literacy is a crucial component in this situation. It provides the knowledge and tools necessary to alter a person’s relationship with money. Through it, individuals can understand the power of investments, the magic of compound interest, and the importance of savings. They can navigate the complex world of credits and debits with confidence, ensuring they’re not just earners, but wealth creators.
According to a study conducted by the National Endowment for Financial Education, young adults who had taken a financial literacy course in school were more likely than not to budget, save, and invest wisely. There is abundant evidence that education can change the mindset from “living for the day” to “planning for tomorrow.”
We need more funding for Black and brown business owners.
From restricted access to capital and biases in lending to a lack of financial education, business mentorship, and resources, Black and brown entrepreneurs often find themselves navigating a maze of challenges. We can close this lull by providing training and skill development classes, developing mentorship programs to light the way, and bringing in accessible funding for budding entrepreneurs.
Without funding, even the most brilliant concepts remain just that — concepts. And for far too long, communities of color, particularly the Black community, have been deprived of this vital fuel. More than just providing capital, creating accessible funding is about more. It’s about trust, belief, and validation. It’s about telling every would-be entrepreneur, “Your ideas matter. Your dreams are valid. And we think you have the ability to succeed. ”
This lack of access is more than just a oversight; it is also; It’s a systemic flaw that has stifled aspirations and dreams for generations.
More financial security benefits are a requirement for employment.
Not everyone has the desire to be an entrepreneur. And that’s okay. People who want to succeed in the modern workforce should also be a part of a financial education and empowerment program.
Imagine entering your new job’s human resources office and finding your employment package on the table. You see the usual suspects — health insurance, dental, vacation time— but nestled among these typical offerings is something you didn’t expect. Financial well-being benefits. Your employer is not just concerned with your physical health; it cares about you. they’re committed to your financial health.
Imagine having a financial advisor as a part of your employment benefits, a personal advisor who can advise you on everything from tax planning to making wise investment decisions. But let’s not stop there. What if your employer also held regular sessions where everyone, from executives to interns, could learn about the intricacies of personal finance?
Employees who aren’t caught up in the demands of living paycheck to paycheck are more likely to be more focused, productive, and committed to their work. Companies that show genuine care for their employee’s well-being, can build a reputation as an employer of choice, attracting top talent in a competitive market. Several forward-thinking businesses are already leading the charge for employee financial wellness, including my friends Doug McMillon at Walmart and Ed Bastian at Delta Air Lines.
More discussions about community-based private sector work are required.
Through my work with Operation HOPE, I have firsthand experience the powerful effects that partnerships with the private sector can have on communities. By merging resources, we’ve provided essential financial literacy programs and services to those who need them the most and we’ve seen the profound, life-changing effects that these programs have on individuals, families, and communities.
At Operation HOPE, our partnerships with private-sector companies have enabled us to open nearly 300 offices serving over 1,000 locations across America. How can we encourage more of this kind of collaboration and innovation? That’s a conversation we need to have in our boardrooms, our government offices, and our communities.
The CNBC Financial Wellness Advisory Board and CNBC CEO Council are led by John Hope Bryant.
John Hope Bryant and Brian Sullivan will discuss financial education as the most efficient tool for community economic development tonight on CNBC’s Last Call at 7pm ET.