the chances that a household will use an electronic banking product. in particular, in 1998, the typical user of an electronic source of information for savings or borrowing decisions had a college degree - a level of education currently achieved by only about one - third of u. s. households. similarly, education can play a critical role in equipping consumers with the fundamental knowledge required to choose among the myriad of products and providers in the financial services industry. this is especially true for populations that have traditionally been underserved by our financial system. in particular, financial literacy education may help to prevent vulnerable consumers from becoming entangled in some types of financially devastating credit arrangements. one long - standing source of concern is abusive lending practices that target specific neighborhoods or vulnerable segments of the population and can result in unaffordable payments, equity stripping, and foreclosure. with this issue in particular consumer and community advocates, bankers, and policymakers have all sought to raise consumer awareness about the dangers of such aberrant lending practices, and financial education is an important component of their efforts. in addition, education can help to provide individuals with the financial knowledge necessary to create household budgets, initiate savings plans, and make strategic investment decisions for their retirement or children ’ s education. such financial planning can help families to meet their near - term obligations and to maximize their longer - term financial well - being. while data available to measure the efficacy of financial education are not plentiful, the limited research available on the benefits of financial education programs is encouraging. for example, a recent study by freddie mac, one of the nation ’ s largest purchasers of home mortgages, finds that homebuyers who obtain structured homeownership education have reduced rates of loan delinquency. similarly, an evaluation conducted by the national endowment for financial education on its highschool - based programs found that participation in financial - planning programs improved students ’ knowledge, behavior, and confidence with respect to personal finance, with nearly half of participants beginning to save more as a result of the program. and a recent study of the relationship between financial behavior and financial outcomes revealed that comprehension of the general principles of sound financial behavior, such as budgeting and saving, is actually more beneficial in producing successful financial results over time than specific and detailed information on financial transactions. these findings underscore, in particular, the importance of beginning the learning process as early as possible. indeed, in many respects, improving basic financial education at the

alan greenspan : the importance of education in today ’ s economy remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the community affairs research conference of the federal reserve system, washington, dc, 6 april 2001. * * * i am pleased that this conference has drawn together such a knowledgeable group of economists, academics, lenders, practitioners, and other experts to address issues of great significance to consumers and banking communities. there are, no doubt, many different views on the effects that credit scoring, wealth creation strategies, and the community reinvestment act are having on the availability and accessibility of financial services to lower - income populations and small businesses. but i think we would all agree that sound analysis and open discussion in meetings like this are essential to furthering our understanding of financial markets and how they serve the diverse financial needs of our populace. in my remarks today, i would like to offer some observations on how the rapid adoption of new information technologies has expanded the scope and utility of our financial products and on how we can address some of the challenges these changes pose to our efforts to ensure that our financial system meets the evolving needs of businesses and consumers. given the importance of accurate and timely information in the financial services industry, it is not surprising that this sector has been affected enormously by the adoption of new technologies. the resultant advances in the flow of information have greatly facilitated the development of a wide range of new financial products. similarly in the case of household and business credit, computer and telecommunications technologies have lowered the cost and broadened the scope of financial services. as a consequence, we have seen a proliferation of specialized lenders and new financial products that are tailored to meet very specific market needs. at the same time, the development of credit - scoring tools and the securitization of pools of loans hold the potential for opening doors to national credit markets for both consumers and businesses. overall, our evolving economic and financial systems have been highly successful in promoting growth and higher standards of living for the majority of our citizens. but we need to reach further to engage those who have not been able to participate fully. the results of the federal reserve ’ s most recent survey of consumer finances, for example, indicate that families with low - to - moderate incomes and some minority groups did not appear to fully benefit from the highly favorable economic developments of the mid - 1990s. between 1995 and 1998, the median real net worth for all families increased 17 -