Literacy: CPAs Can Make a Difference
Susan B. Anders and Timothy M. Crawford
2005 - Financial literacy, the ability to effectively evaluate
and manage one’s finances in order to make prudent decisions
toward reaching life goals—basically, knowing what is
necessary to achieve financial goals—is much in the
news. This is not surprising, considering the impact of financial
20% of families with annual incomes below $50,000 spend
close to half of their net income on debt payments (source:
Credit Union National Association).
The average household credit card debt is $8,562 (source:
The Motley Fool Credit Center).
40% of families each year spend more than they earn (source:
Federal Reserve Board).
20% of workers whose employers sponsor retirement plans
don’t participate, while only 60% of workers are
saving for retirement at all (source: Employee Benefit
Start Coalition for Personal Financial Literacy study revealed
that more than half of high school students failed its financial
literacy survey. Unfortunately, the problem is not confined
to young people. A study published by Rutgers Cooperative
Extension (RCE) in 2003 reported average “financial
fitness” quiz scores of 65 out of 100. The authors’
own pilot study using the RCE quiz in 2005 reflects an average
score of 63. The overall financial quiz score on Yahoo Finance
(“Website of the Month,” page 70) is around
U.S. Department of the Treasury established the Office of
Financial Education in May 2002. The Financial Literacy
and Education Commission, with members from 20 federal departments,
agencies, and commissions, was created in 2003 under the
Fair and Accurate Credit Transactions Act. As part of its
mission, the Commission launched a website (www.mymoney.gov)
and a toll-free hotline (888-mymoney).
U.S. General Accountability Office (GAO) held a forum in
July 2004 on the role of government in improving financial
literacy and issued a report in November 2004
Although participants concluded that the federal government
should make financial literacy a national priority, they
also encouraged public–private partnerships.
private sector has also become involved. The AICPA announced
its “360 Degrees of Financial Literacy” program
in May 2004. The program’s consumer website (www.360financialliteracy.org)
debuted in October 2004, and a program aimed at women’s
financial literacy (www.360financialliteracy.org/women)
launched in May 2005.
of June 2005, eight states require financial-literacy education
for high school graduation: Alabama, Georgia, Idaho, Illinois,
Kentucky, New York, Texas, and Utah. Many state CPA societies
have joined this effort and have either created their own
financial-literacy educational materials or linked to the
AICPA’s online resources.
commissions, federal and state laws, and CPA organization
initiatives are all well and good, but the average CPA has
firsthand knowledge of the extent of the country’s
financial literacy problem. Every CPA who has helped a widow
reconcile a bank statement, or tried to explain the taxation
of mutual fund withdrawals to a client, or prepared an estate
tax return while watching heirs fight over an inheritance,
knows exactly the depth of our country’s need for
financial education. No one is better qualified than CPAs
to provide financial-literacy training.
CPAs are probably unaware that they already know most of
the concepts behind basic financial-literacy education.
Many topics are common sense to CPAs, and this common sense
does not necessarily take years of experience to develop.
Accounting students can also help spread financial literacy,
and acquire outstanding experience in the process of sharing
that common sense within their communities.
place that CPAs can begin gathering information to evaluate
their potential contribution to financial-literacy
education is online at www.aicpa.org/financialliteracy,
where the volunteer resources include background notes on
the issues; a script and PowerPoint presentation for a general
speech; a downloadable logo; and a mobilization kit with
sample brochures, invitations, and evaluation forms. The
360 Degrees consumer website is another good source of information
on financial literacy topics. Financial literacy volunteers
can register with the AICPA, and after five presentations
can become certified financial-literacy volunteers, an excellent
resume-builder for accounting students.
the AICPA provides a good foundation from which to begin
a financial-literacy program, its materials appear to be
directed at middle- and upper-income individuals that understand
the value of saving and the prudent use of credit. Additionally,
much of the AICPA’s resources seem to assume that
a financial planner or other financial professional will
be making the speeches. The most urgent need for basic financial
education in many parts of the country lies with the low-to-moderate-income
groups. Even CPAs that are not financial specialists are
more than capable and qualified to discuss a variety of
topics in plain English with low-and middle-income audiences.
AICPA materials are organized by life stages that include
childhood, college, career, marriage, parenthood, homeownership,
and retirement and estate planning. This approach may work
well in large cities, where presenters might draw homogeneous
middle- and upper-income audiences, but in small towns and
rural areas, the potential audiences are more likely to
be diverse in age, education, employment, and income. Much
of the demand will come from lower-income individuals struggling
to make ends meet, and from community groups that serve
Bonaventure University is located in rural Cattaraugus County
in western New York, an economically depressed and declining
area and one of the poorest counties in the state. Two ingredients
for a successful financial-literacy program exist there:
a large potential audience for which the training could
really make a difference, and accounting students interested
in service. [See The CPA Journal, February 2005,
for an article on St. Bonaventure’s Volunteer Income
Tax Assistance (VITA) program and its efforts to assist
the working poor.] Missing was a comprehensive financial-literacy
program basic enough to be understood by low-to-moderate-income
audiences, one that could be taught by students without
lengthy experience in the practice of accounting.
the AICPA resources provide a start for thinking about what
a financial literacy program should entail, many other resources
offer materials at a more basic level and from different
perspectives. The resources used in developing the St. Bonaventure
program materials are detailed in the Exhibit.
For the St. Bonaventure University 360 Degrees of Financial
Literacy Program, an instructor’s manual, a participant’s
manual, a PowerPoint presentation, and a variety of handouts
and worksheets were developed from diverse sources.
discussions with community members, the material was organized
by topic rather than by life stage. The seminar is designed
to be delivered in two sessions, with the participants completing
homework between the sessions. Given the topical organization,
the program can be adapted to cover certain segments and
not others, based upon the group’s needs. The topics
discussed here are for the complete program.
first topic, “Getting Started,” discusses eight
steps toward financial literacy. The first four are discussed
in detail at the beginning: preparing a net worth statement,
opening a bank account, paying bills on time, and obtaining
a credit report and credit scores. The last four topics—getting
a credit card, establishing an emergency fund, creating
a budget, and getting good financial advice—are briefly
mentioned at the beginning, and discussed in more detail
as the seminar progresses. The homework for Getting Started
is the preparation of a simple balance sheet, with a paper-and-pencil
the Getting Started segment, the seminar progresses through
topics that are of vital importance to low-to-moderate-income
groups in particular: establishing credit, balancing a checkbook,
getting out of debt, building up an emergency fund, how
to start saving, and budgeting. Homework assignments include
balancing a checkbook and preparing a one-month budget,
again with simple forms provided. It became apparent from
the first presentation of the seminar that checkbook reconciliation
was an important area to address.
the “life skills” topics, the program covers
insurance, tax basics, investment basics, saving for retirement,
estate planning, and wills. Handouts include an insurance
summary worksheet, information on IRS publications, an investment
risk–return diagram, a retirement planning worksheet,
and a living will. Additional information addresses financial
record-keeping, teaching children about money management,
finding a professional advisor, and Internet resources.
topics that could be covered in a financial literacy program,
but are not addressed in this seminar, are preparing for
college and buying a home. Separate manuals are available
on these topics for interested participants. Buying a home
is not included in the main seminar because, after consulting
local real state agents and other sources, it was emphasized
that potential homebuyers need to be on a budget and to
have a clean credit record—goals which were already
a focus of the general program. Preparing for college is
not included due to local demographics, but may be used
separately as an outreach to area schools.
important, community members requested specific resources
and referrals on areas such as debt-counseling services.
The general program participant manual, as well as the preparing-for-college
and buying-a-home manuals, offer specific resources and
contact information, including local contacts where applicable.
Participants’ seminar packets contain sheets for them
to note questions that arise as topics are presented, as
well as an evaluation form. Certificates of completion are
awarded at the end of the seminar, and participants are
contacted several weeks later to check on their progress.
are asked to prepare for the program by completing the Rutgers
Financial Fitness Quiz, and to bring it to the first session.
The St. Bonaventure program has made only one presentation
so far, and as noted that pilot group’s average score
was 63 out of 100, compared to the Rutgers study’s
65. While many women were equal to men in financial knowledge,
40% of the women had very low scores, resulting in an average
score for women of 59 and for men of 73. This is comparable
to the Rutgers averages (62 and 70, respectively). As many
practicing CPAs know from their own experiences, there is
great concern about the financial literacy of women as a
group. The AICPA’s financial literacy campaign for
women could not have come soon enough.
St. Bonaventure’s program has made only one presentation,
and the program has not been publicized, community groups
have made inquiries about future seminars. The program will
also be presented to the general population of seniors at
St. Bonaventure, and VITA clients are another obvious target
group. The potential audiences that can be reached—and
served—by the average CPA and accounting student are
B. Anders, PhD, CPA, a member of the CPA Journal
Editorial Board, is an associate professor of accounting at
St. Bonaventure University and its financial-literacy program
advisor. Timothy M. Crawford is a senior/graduate
student enrolled in the dual BBA/MBA accounting program at
St. Bonaventure University and the student coordinator of
its financial-literacy program. They are both registered AICPA
Financial Literacy Volunteers.