Investor Education Critically Important
As published in the Fort Gordon Signal News (PDF 1.68 MB), January 19, 2007
Bonnie Heater, Signal staff writer-editor
This is part one of a three-part series on the financial forum offered at Fort Gordon on January 11, 2007.
Capt. Michael Maddox, a student in the Signal Captains Career Course, discusses financial planning with John Gannon at the NASD Investor Education Foundation forum at Alexander Hall on January 11, 2007. Gannon is the executive director of the foundation.
It was literally a full house at the free financial education forum held during the early afternoon on January 11, 2007 at Alexander Hall. Many stood to hear the advice of financial experts from the National Association of Securities Dealers Investor Education Foundation.
In partnership with Army Community Service, NASD hosted the free financial education forum to help military personnel and their families better understand saving and investing.
The event was open to active duty service members, reservists, National Guard members, military retirees, and Department of Defense and Department of Homeland Security civilian employees and their spouses.
Col. Bob Hoelscher, commandant of the Leader College of Information Technology, opened the forum with a brief explanation of what the NASD is about.
“NASD is the regulator of the securities industry in the United States,” said Hoelscher. “That means that anyone who sells stocks, bonds, or mutual funds in this country is regulated by NASD."
“In 2006, NASD launched the Military Financial Education Program to help members of the military community better understand investing and the marketplace so that they could manage their money with confidence,” he added.
“As leaders of our fighting forces, you know how important it is to our Soldiers and their families to feel secure at home while the service member is deployed,” said Hoelscher. “This is especially true in wartime and it is crucial for you to understand that financial readiness impacts combat readiness. Soldiers will not be able to focus on the mission knowing that they have financial problems and cannot provide for their loves ones."
“Listen to what these gentlemen have to say; what you learn may help you better understand and deal with some of the challenges your young Soldiers and their families face,” he said. The commandant then introduced the three presenters.
“John Gannon is the executive director of the (NASD Investor Education) Foundation and has been with NASD since 2001,” explained Hoelscher. “John Komorske is vice president and counsel for NASD and Frank Dong is one of our own. He completed his career as an Army officer, who commanded troops at home and abroad, most notably with the 1st Cavalry Division, and served with the Army Staff, the Joint Chiefs of Staff, and the Office of the Secretary of Defense. He has taught at the University of Maryland and the University of Virginia; he joined NASD in 2005 to head the Military Financial Education Program.”
Dong, who was the first presenter, spoke about smart credit management and avoiding the predatory loan trap. “Borrowers lose more than $25 billion each year because of predatory lending,” said Dong. “Military personnel are the most vulnerable,” he explained. “Active duty military members are three times more likely than civilians to take out a payday loan.
“Why?” he asked. “Because the lenders know you are going to get paid every two weeks."
“Here is how it works,” Dong said. “You need money (a cash advance). You show the loan company proof that you can cover the check you plan to write by showing your LES (leave and earning statement) or a pay stub."
“You then write a check for $300 and the (loan company) store agrees not to cash it until your next pay day,” explained Dong. “You get back $255 in cash; the store keeps the extra $45 as a handling fee. You just obtained a loan at 17.6 percent interest. Most of those loans must be paid back in two weeks.”
According to Dong, the average payday borrowers pay $800 to borrow $325. In this practice, the family becomes impacted by indebtedness; and the military member often faces disciplinary actions due to a lack of financial responsibility.
Dong went on to say 75 percent of payday customers are usually unable to repay their loan within the required two weeks and often must take out additional loans.
The retired Army officer offered these tips to avoid the predatory loan trap. “Consider borrowing from your family, friends, a bank or credit union,” he said. “Get overdraft protection for your checking account to avoid those costly fees due to insufficient funds in your checking account."
“Consider taking a cash advance on your credit card,” he advised. “However, don’t do this too often. Use it for emergencies. Also, look into credit payment plans and credit counseling. They are lower cost alternatives to payday loans.”
During his presentation he encouraged attendees to steer clear of car title loans, rent to own contracts, and predatory mortgage lenders. According to Dong, with a rent to own contract you could wind up paying $2,200 over a two year period for a $500 valued television that you rent.