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Peter Crabb: Bone up on lessons about saving, borrowing

When asked what they learned in school about money and finances, many adults say “nothing.” Despite a financial crisis that shook us all up five years ago, we need to do more to advance the financial literacy of adults as well as schoolchildren.

The U.S. Department of Treasury describes financial literacy as the ability of an individual to make smart financial choices related to earning and spending, saving and investing, the use of credit, and the avoidance of fraud. A 2012 study by the Financial Industry Regulatory Authority looked at just how well Americans from all 50 states make such choices. Idahoans do well on a basic quiz of financial concepts, but our spending and savings patterns are weak.

The study looks at four areas of our “financial capability” — whether or not we spend less than our income, how much we save for a rainy day, how much we borrow from nonbank lenders and how much we know about finance in general.

As a group, Idahoans are spending too much. Only 34 percent of our state’s population report saving more then they spend. The national number is 41 percent.

As a nation, our savings rate is low. The personal saving rate as a percentage of disposable personal income was 4 percent in August. This is down from 4.9 percent in the same month in 2012 and down from more than 5 percent a decade ago.

According to the FINRA study, only 36 percent of Idaho households have a “rainy day fund.” We don’t appear to be planning well for emergencies. The national average in this category is 40 percent.

Another area of financial literacy we need to work on is how we buy financial services and products. The study found that 28 percent of Idahoans have used some form of high-cost, nonbank borrowing over the past five years. This includes taking out payday loans or getting an advance on a tax refund. Both of these financial services are very expensive.

More and more Idahoans are falling into the economic categories known as unbanked or underbanked.

A 2011 study from the Federal Deposit Insurance Corporation found that 5.7 percent of all Idaho households (approximately 33,000 families) are “unbanked,” and 19 percent of households are “underbanked.” An unbanked household is one where no one has any kind of deposit account at an insured depository institution. An underbanked household holds a bank account but also uses the expensive payday loans or cash advance services.

The final category in the study is financial literacy. In this aspect, Idaho scores better than average, but there is still room for improvement. Participants in the study were asked five questions about finance, including compound interest, inflation, investment risk and mortgage payments.

The Financial Industry Regulatory Authority reports that 44 percent of Idahoans score at least 80 percent on the five-question quiz. The national average is only 39 percent. You can take the quiz at

Everyone needs to keep their financial books in order. Our political leaders can lead the way to better financial literacy by spending less, reducing their dependency on borrowing and promoting the lower costs and safety of traditional banking services.