by Michael Eisenberg
Knowledge is power.
As CPAs, we have a thorough understanding of the ways individuals can increase their wealth. We know the advantages of 401(k)s, how to maximize tax deductions and the importance of a budget. But think back to high school. Did you learn anything about 401(k)s, tax deductions and budgeting then?
Probably not.
And if your career had taken you down another path, you still might be woefully ill-equipped to handle money matters.
Most Americans are not well educated about finances. Public and private schools primarily instruct students in the basics of math, English, social studies and science, and pay little attention to business and personal finances.
Parents often are too preoccupied with making a living and paying bills to teach their offspring how to save and invest. As a result, children grow into adulthood without achieving financial literacy. No wonder many Americans are swimming in an ocean of debt or are scraping by on Social Security rather than their own investments during retirement.
Frightening statistics
The consequences of a nation of financial illiterates are frightening. The following statistics help illustrate the problem:
- 60 percent of Americans don’t pay off their credit card bills each month, according to the Treasury Department.
- The average household pays more than $500 a year on credit card interest charges.
- Only 50 percent of high school students responding to a nationwide survey conducted by the Jump$tart Coalition correctly answered basic financial questions.
- 40 percent of Americans say that they are living beyond their means.
- Social Security is the only source of retirement income for 26 percent of unmarried elderly women.
- The average 50-year-old has less than $40,000 in personal wealth.
Last year, Steve Wimmers, a San Diego-based CPA and chair of the 27,000-member California Society of CPAs, reviewed these and similar statistics and was, well, alarmed.Creating the framework
Following the launch of its financial literacy initiative, CalCPA formed a financial literacy committee, to which Wimmers appointed me chair. The committee consists of 32 members, who represent a wide cross-section of practice areas, drawn from CalCPA’s 14 chapters.
The committee has organized itself into working groups that are involved with activities such as:
- Reviewing existing financial literacy programs to determine a fit with CalCPA’s goals and objectives;
- Exploring alliances with various organizations to further the financial education of Californians;
- Creating a comprehensive, objective online resource for Californians to turn to for financial information;
- Building legislative awareness regarding financial literacy and investigating ways to work with public officials to improve the financial literacy of Californians; and,
- Developing presentations on financial literacy that CalCPA members can deliver to community groups and organizations that would value financial education for their members.
Dollars and Sense
One of our first efforts toward improving the financial literacy of Californians has been creating our Dollars and Sense program. The program teams CalCPA members with state legislators and other government officials to host town hall-style workshops. The workshops feature a CPA panel overviewing the basics on topics such as setting financial goals, creating budgets, credit/debt management, saving strategies, making college a reality and tax tips.We added a special segment on disaster preparedness after working with victims of last fall’s Southern California wildfires. Californians need a recovery plan for vital financial information in the event of a catastrophe.
Our inaugural Dollars and Sense program was held in late January at a senior citizens center in Irvine, Calif. Assemblyman John Campbell, himself a CalCPA member, hosted the event, which attracted seniors as well as college students, parents and small-business owners. Almost 100 people gathered to hear a panel of four CPAs share money management tips and respond to questions about taxes, investments and budgeting.
Alliances formed
In addition to Dollars and Sense, we are looking for other opportunities to provide financial knowledge to the public, including forming alliances with organizations that are committed to the same goal. The California Jump$tart Coalition, the state arm of the national nonprofit that focuses on financial learning for young people, is such a group. Almost 150 corporations, associations and government agencies partner with Jump$tart to fund and disseminate financial educational tools to teachers and students.
CalCPA member Stanley Breitbard, CPA/PFS, is chair of the California Jump$tart Coalition. He sees CPAs as the ideal conduits of financial information to young people. “CPAs deal with the results of bad business and investment decisions daily,” says Breitbard. “There are many opportunities for CPAs to participate in financial education organizations. One such opportunity is classroom teaching, which allows CPAs to ensure that tomorrow’s adults will be fiscally responsible and able to invest and save wisely.”
Through Jump$tart, CalCPA teamed with Junior Achievement, itself a coalition member, and recently participated in a CalCPA/JA Day at four elementary schools in the Los Angeles area. About 40 volunteers led almost 800 second and third graders through various activities designed to show them the value of money and how businesses provide the economic foundation for communities.
High school outreach
Separately, CalCPA has an ongoing high school outreach program to place CPAs in classrooms to excite students about careers in accounting. We believe that it is essential to encourage more young people to enter the accounting profession. Unless we ensure that there will be future CPAs, the next generation of adults won’t be able to tap their financial expertise.
CalCPA provides hundreds of free copies of lesson plans covering financial topics to high school teachers throughout the state. Through these lesson plans, part of the Takin’ Care of Business package created by the American Institute of CPAs, students learn how to write a business plan, analyze a financial statement and develop a budget.
CalCPA members also participate in spring and fall tax hotlines to help improve Californians’ financial knowledge. At radio and television stations, as well as through newspapers in San Diego, San Francisco, Fresno, San Luis Obispo and Orange County, our members provide free tax guidance for viewers and readers. We also are organizing a statewide call-in.
Our “Ask a CPA” Web site features a wealth of information on money management, personal finance, tax and small-business issues. Here, members respond to financial questions from the public.
And many members are reaching out to community-based groups, teaching workshops on topics such as the earned income tax credit, budgeting and money management.
Mitchell Freedman, CPA/ PFS, is a longtime crusader for improving the financial literacy of Californians. “Politicians and educators talk a lot about the lack of basic reading, writing and math skills in today’s young people,” he says. “While they are right to point that out, they also should stress the importance of financial literacy. If citizens don’t know how to properly handle their own funds, how can we expect them to know who can best run our government and the economy?”
Californians won’t become financially literate overnight. In fact, there always will be more to learn. However, Californians can rest a little easier knowing that CalCPA members will be there, providing objective financial guidance to help them build their financial security.
Michael M. Eisenberg, CPA/PFS, has a Los Angeles-based planning and tax practice. He serves on the California Society of CPAs’ Board of Directors and Council, and is chair of its Financial Literacy Committee and its AICPA PFS Credentials Committee. Reach him at
