By Jennifer Eder
Annamaria Lusardi has spent much of her career examining the ability of people to make sound financial choices.
Her findings have raised some alarming conclusions about the financial status of American households.
Dr. Lusardi, a professor of accountancy and economics at the School of Business, has emerged as a prominent advocate for “financial literacy”— the ability to make informed decisions about personal finances. Her research has shown that many Americans and many people across the globe fail to grasp basic financial concepts. As a result, they make poor and sometimes destructive choices.
“The average worker has very little knowledge about economics and finance,” said Dr. Lusardi, who recently launched the Financial Literacy Center at the GW School of Business. “We must empower consumers to make sound financial decisions.”
In an effort to promote a better understanding of personal finance, the Financial Literacy Center was recently awarded a $150,000 grant from the NYSE Euronext Foundation, a private philanthropic foundation established by the New York Stock Exchange. The grant will fund the Workplace Financial Fitness Toolkit, a set of tools and recommendations that companies could use to help employees navigate complex financial decisions.
Dr. Lusardi designed the program with Punam Keller, a professor of management at Dartmouth College’s Tuck School of Business. The two women rang the opening bell at the NYSE in April to celebrate the launch of the program.
“This important new web-based toolkit provides employers with practical, ready-to-use tools to build or improve their workplace financial fitness programs, including a wide range of tools to help educate, motivate and empower employees,” said Michelle Greene, vice president and head of corporate responsibility at NYSE Euronext, as well as executive director of the NYSE Euronext Foundation.
The financial literacy program features toolkits for both employers and employees. The employer toolkit offers a checklist to assess current policies and materials to help employers implement financial fitness recommendations. The employee toolkit also features a checklist, along with information and recommendations that can be customized according to a person’s needs.
“This program is not a one-size-fits-all. We want to make it personalized for an employee. We want to match this for the needs of all the employees,” Dr. Lusardi said.
Dr. Lusardi said the workplace is an ideal venue to provide tools to facilitate financial decision-making. And since financial education tools are most effective during “teachable moments,” such as tax time or the birth of a child, it’s important that employees be able to access that information.
“We want to make it as easy as possible for the employer to adopt a financial education program,” said Dr. Lusardi. “This toolkit offers the employer a menu of initiatives they can implement for the employee.”
Dr. Lusardi’s research has helped highlight the problems of financial illiteracy. According to one recent study she co-authored, nearly half of Americans say they definitely or probably could not come up with $2,000 in 30 days. Another of Dr. Lusardi’s studies found that the majority of Americans have not done any retirement planning, and many of those who are saving for retirement know little about what’s in their accounts. Half of the survey respondents said they had trouble keeping up with monthly expenses.
Dr. Lusardi said the recent financial crisis underscored the destructive consequences of poor financial decisions. Governments across the globe are paying greater attention to the need to promote financial literacy.
“There is growing sense of urgency around the issue today,” said Dr. Lusardi. “The financial crisis has made both governments and individuals acutely aware of the costs of financial illiteracy. This is not specific to the United States but has been happening in many countries around the world, and I have been traveling to Europe, Asia and Latin America to talk about the causes and consequences of financial illiteracy.”
Dr. Lusardi joined the GW School of Business faculty in the fall after nearly two decades on the faculty at Dartmouth College. She has consulted for top government officials in the United States and abroad, and has held appointments at the University of Chicago, Harvard Business School and Princeton University.
Her visibility has made her a popular subject for interviews on the topic of financial literacy. Dr. Lusardi has been quoted in numerous publications, including Newsweek, The New York Times and The Wall Street Journal.
“I have become what you might call the go-to person in financial literacy,” she said. “I want GW to be the go-to place.”