Dr. Billy Hensley: Financial Literacy – Empowering Americans Through Education
“Why don’t we require a financial literacy class in all high schools?” Many parents—and young adults—have asked that question. It turns out the answer is not as simple as one might think. Dr. Billy Hensley, CEO of the National Endowment for Financial Education, explains why in this episode. Even better, he presents a roadmap for creating a world in which all Americans can achieve financial capability and stability.
“To me, the American Dream shouldn’t be a one size fits all. It should be a find the size that fits you … and use money as a tool to help facilitate that.”
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Billy Hensley: I grew up in a blue-collar community and a lot of the children I grew up with were very poor. We didn’t know how poor everyone was because that’s sort of how everybody was, you know, that was your frame of reference. But what I did learn too is that some of the poorest people I knew growing up were the best with money. They were the best at managing the dollar, stretching the dollar. They didn’t have investment funds. They didn’t have 403(b)s, 401(k)s, but they were able to know and anticipate the needs that were coming in, those very practical skills of getting through to the next paycheck.
Manisha Thakor: Hello and welcome to the true WELLth podcast. I’m your host, Manisha Thakor and my guest today is Dr. Billy Hensley, the CEO of the National Endowment for Financial Education. NEFE, as the organization is affectionately referred to in the financial literacy world, is the leading private national nonprofit dedicated to inspiring empowered financial decision making for individuals and families through every stage of life.
Manisha Thakor: Dr. Hensley currently serves on the board of the Jumpstart Coalition for Personal Financial Literacy, where he chairs the education committee. He also serves on CNBC’s financial wellness advisory council, which is composed of a group of financial experts, thought leaders, and influencers in the arena of financial capability. He’s also on the editorial board of the Journal of Financial Counseling and Planning. Highly lauded within the financial education community, Dr Hensley’s research has been presented at state, national, and international conferences and published in numerous academic research journals. As you’ll soon hear, being the CEO of NEFE is not just a job for Dr. Hensley.
Manisha Thakor: Today’s episode is all about financial literacy. As such, we thought what better way to kick this conversation off than by asking a group of rising college seniors who are nearing the end of their time in our traditional educational system, what their exposure has been to all things financial.
Student #1: I would say as a kid growing up, my parents kept me out of most financial decisions and I really only got my first experience when I was in college after I took basic business classes.
Student #2: One of the big mistakes I think some of my peers have made are buying a car like right after getting a good job. They’ve just like, that was one of their major purchases that they’ve chosen to make. One of my friends just had like a really good restaurant job and he was making a lot of money and then he decided to buy some kind of Subaru. I don’t know what it is, but it’s pretty expensive looking.
Student #3: I think I would have, I would have honestly gone to community college for my first two years and then gone to the University of Washington because I felt the first two years of paying $10,000 for classes was it was a bit of a waste of money.
Manisha Thakor: As you listen to this conversation with Dr. Hensley, I’d like you to keep these voices in mind, and importantly, to know that all three of these students are accounting or finance majors who were selected in a rigorous competitive process to be interns at a top financial services firm. Imagine the responses might be from those rising seniors who are premed or studying physics or music. As indicated by NEFE’s goal of ensuring Americans of all ages and income levels have the opportunity to live their lives on solid financial footing, financial education is important to everyone. I highlight this because one of the most common laments I hear from parents across the country is why can’t they just teach personal finance to everyone and high schools and colleges coast-to-coast?
Billy Hensley: I wish it were that easy because even just that question or that statement that you said, just that little thing about “Let’s just put financial education into the classroom,” and just K-12, let’s just limit it to that – That is is incredibly messy because you have 50 states plus the District of Columbia plus the territories that all have their own separate unique departments of education who have their own ideals and ideas of how to do something.
Billy Hensley: Some people just, you know, they kind of staple on financial education and personal finance education to another class or as just something that’s unfunded and people are told to do it, but there’s no accountability, there’s no testing, there’s no kind of graduation requirements. Or they’re added as an elective that’s not required and the teacher who’s teaching it hasn’t been properly trained and vetted themselves.
Billy Hensley: Think about it like this. Those of us who went to college, whether it be community college or looking for a credential or four-year, we all had a class by a professor who was “an expert” in that field, but they knew nothing about how people learn, how people relate to content, where people are developmentally based on their age and their life experience. So while that expert may have known a lot and been widely published in the area, they were a horrible educator.
Manisha Thakor: That makes a lot of sense. So what is working in the world of financial education?
Billy Hensley: Well, you know there’s some good standards out there. The Jumpstart Coalition has created standards for sort of Pre-K up through 12th grade and the Council for Economic Education has done the same thing. So at least there’s a guideline that’s available. Now, whether that’s used or not is up to each individual state. The problem that states face is shelf. You know, how much can fit on the shelf in that seven-hour day of instruction. How much can you fit in, how much money is available to not only train the teachers, but make sure that we have the necessary tools and resources so students can learn this.
Billy Hensley: Some states do a good job. I think Tennessee is doing a nice job, so is Utah. Virginia’s doing a decent job of this, Georgia and some of the other states have done a nice job of what it means and what they … what they’ve done, as I’ve said, teachers have to have a level of competency to be able to even cover this topic because it fits under social studies in a lot of states because it’s something like civics and so it fits under that broader umbrella of what social studies, but just because a person is under social studies doesn’t mean that they want to teach personal finance or even know anything about it. In some states, it may fit under math, but that general credential of social studies doesn’t mean that every person who teaches social studies knows all about history and knows all about government and knows all about personal finance and all these other topics.
Billy Hensley: So that’s the thing they’ve defined this to say we want to train the teachers, have quality educational programs and resources and access to those, but not these Band-Aid things that are a couple of lessons and we checked it off the box and we moved on to the next thing. Sadly, a lot of states in the K-12 space have done that as a Band-aid to do it, to do personal finance. Some states add it to an economics class that’s already required so that you know, students are already required to take it and there’s a unit of personal finance. We think that’s a good step in the right direction.
Billy Hensley: But ideally, it should be its own standalone course solely focused on that, or at least a half of a course, you know, half a credit focused on this because you don’t get distracted, you don’t get to skip it over if it’s not really your thing. You know, if you’re the economics professor and personal finance being sort of an applied version of economics is not your thing, you want to skip over that. If it’s a solid class, you know … but sadly, a lot of states struggle with funding and being able to add this to the calendar, and then you have the other elective courses like music for example or anthropology or something that’s kind of fun that you want to add onto your curriculum beyond the things that you’re required to do. You’re pushing other things off the radar for students and there’s sadly not enough time in the day, so it becomes a struggle in states and people lobbying for their things they teach that they want to stay in the curriculum.
Manisha Thakor: Dr. Hensley spoke about shelf space. This is not a new dilemma. We pause for a quick history lesson, the cocktail party version. The idea of a liberal arts education goes back roughly 2,400 years ago to Plato’s academy, where he believed there were four pillars of a well rounded education — geometry, astronomy, rhetoric, and music. As the world has become more complex, new topics have been added and other subtracted from this list, yet modern students have the same set of 24 hours in a day in which to learn, as did the students have Plato.
Manisha Thakor: What a society chooses to add or subtract from a curriculum says a lot about what the culture values. Knowing we would have to take something out of the curriculum to add in financial Literacy and education brings up two questions. One, is the trade off worth it? Two, will the addition of one class fix the unprecedented rates of Americans of all income levels struggling to make sound financial decisions?
Billy Hensley: Well, you know, the financial decision making landscape is much more complicated than it has ever been. The products are more complicated. There’s a lot more access to things like easy credit, so to speak. Financial education isn’t meant to be a silver bullet that solves your financial, 100% of your financial woes, or just because you took a six-week course in high school doesn’t mean that you’re going to be financially well forever.
Billy Hensley: That’s the argument that people make is that, well yeah, don’t waste your time taking that class because you’re going to end up struggling in 20 years from now. Well, when you think about the full landscape that I’ve talked about, the broader ecosystem of not, it’s not just about education, but it’s also about financial information, having access to good financial information and tools, things to help influence your behaviors.
Billy Hensley: There is so much noise out there. If you go to a search engine on the internet and you type in “how to get my debt under control,” you will get 25 million responses and the people who pay to be at the top of that list are going to be the ones that you’re going to go to and those are going to be the ones who may give you information but try to sell you something as well. You know, we get it, that’s part of it, but financial education is meant to be a component of a broader support system to help the consumer. Some of that needs to be consumer protection, appropriate consumer protection. Some of that needs to be better choice architecture and better understanding, better defaults even. We’ve seen research on that. If someone actually isn’t asked, “Hey, would you like to participate in our retirement plan?” You just sign them up and they have to say, “No, no, I don’t want that.” We’ve seen people start saving more.
Billy Hensley: Now there’s arguments about what’s the right level, what’s the right amount? Is 5% too much for certain families that they just can’t swing that? Is 10% too little for other families? So that default system doesn’t work exactly well for everyone else. The problem is that people defend their component of this, whether it’s financial education, whether it be financial information or the so-called just in time courses or interventions. It’s better decision making, or it’s let’s fix the social systems that are in place. If women are making less than men for the same jobs, that’s already an obstacle. You know, financial education can’t overcome that necessarily but we can help people navigate this system as it exists.
Billy Hensley: That’s the thing that I’ve been trying to communicate, that financial education, when it’s done right, when it’s done well, when you incorporate appropriate learning experiences appropriately tied to being able to make a decision, you can learn everything in the world. If you don’t have the opportunity to apply that information and then that knowledge in your life, then what good is it?
Billy Hensley: The parallel I like to make is the health and wellness space. For years, there were people that were talking about you need to move more to be healthy. Then there was another group of people that said, oh no, you need to reduce calories. Then there was another group of people who said, no, you need to stop eating fat. Then there was a group that said you need to eat less carbs. Then you’ve got the people that focus on the mental health and wellbeing. Then, you know, so they were all sort of separate and they were all trumpeting their own cause, and then America got fat.
Billy Hensley: I personally get annoyed when I go to buy jeans that everything is slim cut. I’m like, what is wrong with this world that everything is slim cut? But anyway, another story for another time. But when you look at what the health and wellness movement has done is that they’ve looked at it from a holistic point of view, that it is about reducing calories and movement and healthy choices and hey, you know what? Healthy food is expensive, what are we going to do about that? There are people that are working on that in the policy space. Then the there the labels now that have the calories that you’re ingesting. I just am astounded at some of my favorite things at restaurants, how much fat and calories are in some of those things and that’s probably why I love them so.
Billy Hensley: When you put all of that together and think about this, being healthy isn’t just about reducing the number of French fries in your life. When you transpose that over onto the personal finance ecosystem, that it’s not just about financial education, it’s about financial education having access to high quality information, having protections that keep the bad players at bay. It’s about helping people understand the system that’s in place, the inequalities that are in place and being able to navigate that. When you right size the expectation of financial education, that it’s meant to impart knowledge that ultimately helps you make better decisions and make behaviors that are seen as sort of high quality behaviors for your own values and your own life, then yes, it is going to work every single time.
Billy Hensley: But that takes a lot of resources, it takes a lot of thought, and it takes a paradigm shift in our field. We’re trying to lead that dialogue and help people understand that each little thing that they do, each cog in the machine, that that cog alone is not going to keep the car running but that cog is essential to work with the other cogs to make the machine run. That’s the stance we’re taking on this and this is why personal finance education does work because if you hit the right level of expectation on what that’s meant to do, then it does work, but it’s not going to solve the problem alone.
Manisha Thakor: Let’s move to Dr. Hensley, I had this thought. Many of us, myself included, have reluctantly changed our eating habits now that those annoying calorie counts are even shown for our favorite treats. For me, it’s forever ruined Starbucks’ unbelievably yummy glazed cake doughnuts. What if, when you want to pay for something with a credit card, you were greeted with the financial version of the calorie count label? What if you were forced to see the total amount that purchase will actually cost you once interest is factored in? This is the kind of multifaceted, highly practical paradigm shift we need and which Dr. Hensley is talking about.
Manisha Thakor: So Billy, let’s switch gears here. What’s your background and what brought you to this work?
Billy Hensley: Yeah. Well, I think my background and where I grew up, as you can probably hint it too from the accent that I have, is it largely shapes my view in education and what education can do. You know, I grew up, I was a fifth generation eastern Kentuckian. You know, coal mining all the way back as far as I can remember. There was not a lot of economic opportunity by the time my generation came along because that industry has slowly hired fewer and fewer and fewer people because of things like automation and so forth.
Billy Hensley: I saw what education could do because it affected me. It provided an opportunity for me to go beyond my small rural community, to be able to kind of go on to graduate school and then get a Ph.D.
Manisha Thakor: That probably had a big effect on your relationship with money?
Billy Hensley: Well, I learned several things growing up with money. Money, to some extent … I understand it now as an adult that money was really a tool, but it was something you either had or you didn’t have. You know, I think about that now as a kid and look at that, and I remember my grandparents on both sides, they never carried debt. They had very little debt in their lives. They were fearful of credit cards and things … maybe fearful is the wrong word, but maybe skeptical is a better word … of credit, carrying credit. I remember distinctly my grandfather, my dad’s dad, when the satellite dishes became popular in the early 80s, you remember the huge satellite dish that people had before those small, tiny dishes like DirecTV, and he wanted to go buy one. He had borrowed so little money in life that they said, “Oh, you know Mr. Hensley, you can’t borrow money for this. You have no, essentially no credit.”
Billy Hensley: He said a four-letter word and said, “You know what, I’ll just pay for it now.” He had the cash already, but he thought, you know, “I’ll just do this this way.” And just sort of furthered that along, like, “I don’t need approval from some random person I’ve never met when I can just go ahead and pay for it.”
Billy Hensley: That story always stuck in my mind. But you know, my parents’ generation, they had a much different relationship with money. They use a lot of debt and struggled and it was hard for them. I saw what that meant. I saw, I understood people floating bills. You pay this one, the next month you have to double up on the other one. I saw a lot of that as a kid growing up, not just with my own family, but the kids I grew up with.
Billy Hensley: But no one talked about their money. They talked about that we’re getting by. You know, that was a phrase, getting by. You’ve got to kind of get to the next paycheck, so to speak. I understood what that meant as a child and I saw the struggles that people had in my family. When I went to college, I started looking at budgeting and I was always the kind of person who would write down all my expenses. You know, I had the notebook and I like to be organized and write down what it was going to be. I was an RA in the dorm, which meant I got a little bit of extra money in college and I would write down, you know, I was like, oh this month I’m going to get $312 and I know I’ve got gas and I want to go to the movies because I love going to the movies. I would write that out every time.
Billy Hensley: I didn’t always balance, but I knew, I already already had that concept in mind. I think being a Gen Xer or also viewed that because we are a little bit, you know, we just do our own thing. You know, we were the latchkey kids, we kind of figured our own path out and I think that contributes to it as well.
Manisha Thakor: Billy, you talked about your parents. What about your grandparents?
Billy Hensley: You know, this is complete speculation, but I think because of my grandparents’ generation, money went farther. My grandparents, especially my dad’s parents, they didn’t go to college. My grandmother graduated from high school, my grandfather didn’t on that side and neither my grandparents did on my mom’s side, but they all had three-bedroom homes. One set of grandparents had a nice brick home with a boat and the others had a nice, beautiful frame home that they were able to build.
Billy Hensley: But money went further, they were able to start small businesses after working in other industries for awhile. Both sets of grandparents were able to do that and so they were able to facilitate a certain level of lifestyle for the following generation, at least in my family. On my dad’s side, my grandmother also worked. In that era, a lot of the women didn’t work, so my both parents worked. It was important to my grandmother who grew up very poor that her children had nice clothes. They weren’t, you know, nobody would ever make fun of them at school. That was a big deal to her.
Billy Hensley: I think by the time my dad’s generation came of age, they had a certain level of lifestyle, money’s sort of worthless at that point and then you use debt to be able to fill the gaps, to be able to maintain that, keeping up with the Joneses, so to speak.
Billy Hensley: The problem that I see is that as people move up the income ladder, they changed their lifestyle to accommodate that so they never have any more extra money than they had when they were 30 as they do when they’re 50. Because hey, you know, you were making, $33,000 then and now you’re making $115,000 but you’re spending at $115,000. You don’t keep the same house like our grandparents’ generation did and some of our parents. You continue to upside, you continue to go up, continue to go up, so you actually have less money or less liquidity at higher incomes than you did at lower.
Billy Hensley: One of our research studies even shows that financial fragility for people at the hundred thousand dollars range is still at 20%, and financial fragility, meaning you couldn’t come up with $2,000 in 30 days by any way necessary — through a credit card through family … You know, 20% of people at a hundred thousand dollars cannot come up with two grand to cover like deductible or something. So more money doesn’t always mean more liquidity and happiness, and so I would be cautious about that.
Manisha Thakor: Talk to me about the relationship between the American dream and finances.
Billy Hensley: You know, we engaged a sociologist many years ago at NEFE to look at life values and how that informs your financial life. It’s not just about needs and wants, necessarily. I think it’s just about personality and it’s about style. We looked at how do you take life values and how does that help you create a financial life, so to speak? What’s fascinating about this is we actually were able to create an assessment, a quiz, and we asked these questions and it helps you understand this. Are you a decorator, pillow person or a ski pass person?
Billy Hensley: You know, you go into some people’s homes and they have these perfect pillows on their sofas and on their beds and you know, they were exact color, they look wonderful. They look like they should be in a magazine and those pillows were like $112 each. That gives me major heartburn, but I would spend $112 on dinner any day of the week, you know? It’s about that what do you value? Do you value the experience. Do you evaluate your home environment where you are most of the time, where you feel comfortable and you want it to be comfortable, you want it to be aesthetically pleasing? Or would you rather go on an adventure? Would you rather fill up a backpack, take $1,200 and just see where it’s going to get you?
Billy Hensley: Understanding your life values and how money is a tool to help you facilitate that change and that dream is an important discussion. It’s very important for couples, I think, to have that discussion early on and understand that so that you’re not having those arguments and disagreements about money necessarily. That you understand that, “Hey, I’m a decorator pillow person and you’re ski pass person so let’s figure out how do we come to this level of compromise and so that we’re both happy and fulfilled in that, but do it in a way that’s appropriate and fits within our budget.”
Billy Hensley: I think the more people who understand that and understand who they are and they’re not trying to fit within that box of, you know, three-bedroom brick house, two cars and a boat, they’re actually … and my grandparents achieved that and that was what they valued and what their generation valued, I think, but they didn’t travel a lot. And I went to college with people who still are like this, that literally would do the whole throw things in a backpack and just go off on an adventure.
Billy Hensley: Being able to understand that that’s what gives you happiness, that’s what gives you joy, and if having a one-bedroom condo in a downtown urban environment gives you happiness because you want to walk to everything, then understanding that, and then that builds back to the American dream question, is that understanding what you value, what gives you happiness, what fulfills you in a way that’s appropriate to your budget constraints and making that happen.
Billy Hensley: Maybe this is the “Gen Xification” of the American dream is that we don’t like that, we don’t like that box. Millennials definitely don’t like it. So being able to define what that means for you … You know, for years people were moving out into the suburbs, we’re starting to hear through news stories, people are moving back into the city core because of certain things they want to experience. To me, the American dream shouldn’t be a one size fits all. It should be a find the size that fits you, and make that work and use money as a tool to help facilitate that.
Manisha Thakor: When I reflect on this conversation with Dr Hensley, three big takeaways jumped out at me. Number one, surprisingly, financial fragility exists at a wide range of income levels. As Dr. Hensley pointed out, 20% of people earning $100,000 or more would have difficulty coming up with $2,000 in a month if they had to by any means necessary. Why? Human nature. When you’re financially flush, you may feel like you have an endless tailwind supporting you and you can go head to head with the Joneses next door, but often too much of something can make you take that less seriously.
Manisha Thakor: For as Dr. Hensley pointed out, on the flip side, some of the people who had best financial habits he knew were those who had the least amount of money, for they had to be mindful out of necessity. My point, the need for financial education crosses all sorts of demographics.
Manisha Thakor: Second. The question of why don’t we have mandatory financial education classes in all high schools in America has a much more complex answer than you might think. It’s not so far off as trying to solve a Rubik’s cube. You move one piece and it affects another. You add it to a civics class and now you need to make sure that civics teacher has the tools and training to teach it. And now something has to be taken out of that civics class curriculum. Then who decides exactly what should be taught in the financial education portion of the class given we live in a country where the vast majority of educational requirements are set at a state, not a national level? Not to mention the fact that information alone doesn’t always lead to behavior change, and you can start to see why simply waving a wand isn’t going to do it.
Manisha Thakor: Lastly, while we tend to speak of the American dream as if it is one unified viewpoint that stays constant through generations, that’s actually a culturally simplistic and financially dangerous way to frame it. The truth is, the American dream has always been in flux, from no taxation without representation, to manifest destiny, to the unbridled and unregulated capitalism in the early 1920s, to the near absence of the dream in the Great Depression.
Manisha Thakor: But the dream most of us are intimately acquainted with is the one of our parents, i. e., the American dream is all about home ownership. Now that definition made a lot of sense in our parents’ time when homes were smaller and thus cheaper, when people tended to live in the same home for decades so home ownership became a wonderful form of forced savings and it was rare to have to sell your home at a moment’s notice to take that next step up the career ladder, albeit to a new state or in a new country.
Manisha Thakor: My point, this conversation sparked thoughts I didn’t expect to have, i. e., that in addition to impactful integrative financial education as a society, we perhaps could also benefit from a collective conversation such as the one suggested by Vicky Robin in our episode with her about civilizational survival and your money or your life, about what the American dream really means at this particular time in American society and culture.
Manisha Thakor: To learn more about Dr. Hensley and the National Endowment of Financial Education, please visit our show notes at truewellthpodcast.com. Remember, that’s WELLth, W-E-L-L-T-H.
Manisha Thakor: On our show notes, we’ll also have links to a number of consumer facing resources NEFE offers for free to help Americans of all life stages learn more about various financial topics. So please take a few minutes and swing by the episode page. I really think you’ll enjoy some of these additional NEFE tools.
Manisha Thakor: Oh, and a quick cocktail tidbit. Going back to Plato in his academy, did you know Plato lived closer to the moon landing than the construction of the Great Pyramids?
Manisha Thakor: As always, if you found this show interesting, we’d be grateful if you’d share it with your friends and loved ones. I’m Manisha Thakor and that’s it for this episode of true WELLth.
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Announcer: Today’s episode was edited and produced by Stan Hall, with special help this week from our interns who you heard earlier in the episode, Jewels Oliquiano, Ajay Bhat, and Finlay Bruce. Alongside our true WELLth team, as always, Chris Sylvester, Michael Stubel, Marc Asmus, Lindsey Hurt, and John Dougherty. To get in touch with the team, visit truewellthpodcast.com.