The Importance of Economic Education

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Charles I. Plosser, President and CEO
* Anthony M. Santomero, President (2000-2006)
* Edward G. Boehne, President (1981-2000)
* William H. Stone, Jr., First Vice President (1987-2010) * Michael E. Collins, Executive Vice President (retired 2011) * Loretta J. Mester, Executive Vice President and Director of Research * Speeches Main Page

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Knowledge Is Power: The Importance of Economic Education
Presented by Anthony M. Santomero, President
Federal Reserve Bank of Philadelphia
Pennsylvania Economic Association Annual Conference
Hosted by West Chester University
May 30, 2003
Introduction
Economic education is vital to the future health of our nation's economy. It gives our students the building blocks for a successful financial future. It empowers consumers with knowledge and tools to improve their economic well being. It is the best investment we can make to strengthen our nation's economy. As economists, we recognize that the development of basic economic and financial knowledge is an important goal for a democratic society that relies heavily on informed citizens and personal economic decision-making. When households are capable of building wealth, they are also capable of building more economically stable neighborhoods and communities. Today, I would like to share with you my perspective on the importance of economic and financial education and give you some examples of what we're doing at the Philadelphia Fed to further this important cause. Knowledge Is Power

In today's ever-changing and increasingly competitive financial marketplace, knowledge is power. We are living in an age in which the communications revolution has inundated consumers with more information than ever before, even as the financial marketplace has become more complex. But simply having more information does not necessarily mean people have more knowledge. As we all know, the business of managing our money in this environment has become increasingly complicated. Technological advances continue to expand the range of financial services available to consumers. While choice and flexibility are certainly beneficial to the consumer, they come with increased risks --- especially among consumers who lack the knowledge and resources to discern their choices. American consumers must not only have access to information, they must be able to both understand and use it. This is our challenge. It is difficult enough for the average American to understand and choose wisely among the complex financial products and services now available. Think what an exceptionally daunting challenge it is for those with limited financial experience or education to make such decisions. Therefore, educating consumers on the basics of economics is an issue of critical importance. Economic Education and the Fed

The Federal Reserve has been involved in economic education initiatives for some time. We consider them integral to our mission. As you know, the Fed serves a three-fold function in our economy: it conducts monetary policy, supervises and regulates banks and financial institutions, and maintains an effective payments system. Our economic education efforts are important to, and intertwined with, all three functions. First, educating the nation's populace about economic issues is an integral part of our role in monetary policy. Economic education fosters a better understanding of how our democracy works and how policymakers have an impact on the economy. This basic knowledge of economics helps consumers better understand Federal Reserve policy actions and how changes in policy ultimately impact their own lives. Second, as regulators and supervisors of banks and other depository financial institutions, the Federal Reserve is responsible for promoting safety and soundness in the industry. In addition,...
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