Financial education and economic development, JM Hogarth

Tags: Retirement planning, positive outcomes, financial education, retirement savings goals, Economic impacts, American Dream Demonstration, financial education programs, community participation, Learning style, Community courses, behavior change, education Need, Importance of education, economic security, financial education works, Opportunities Credit Union
Content: Financial Education & economic development Jeanne M. Hogarth Division of Consumer & Community Affairs Federal Reserve Board, U.S.A. With assistance from Marianne Hilgert, Jane Kolodinsky, Michael Wilson. The analysis and conclusions set forth in this presentation represent the work of the authors and do not indicate concurrence of the Federal Reserve Board, the Federal Reserve Banks, or their staff. Mention or display of a trademark, proprietary product, or firm in the presentation by the author does not constitute an endorsement or criticism by the Federal Reserve System and does not imply approval to the exclusion of other suitable products or firms.
Why is education important? Increased sophistication of financial products and services Shifting responsibility away from institutions and towards individual Demographic changes affecting the marketplace Long-term economic situation
Why is the Fed interested in financial education? consumer protection
Why is the Fed interested in financial education? Community development
Why is the Fed interested in financial education? Financial access
Education is only one piece of the puzzle Education Disclosures & information Substantive protections Redress Professional advice
How financial education works Educated consumer
How financial education works
Better use of resources
Educated consumer
How financial education works
Increased economic security, better jobs, more home owners
Better use of resources
Educated consumer
How financial education works
Increased economic security, better jobs, more home owners
Better use of resources
Educated consumer
More involved in schools, community participation
How financial education works
Increased economic security, better jobs, more home owners
Better use of resources
Educated consumer
More involved in schools, community participation Vital, thriving communities, well-educated labor force
Components of education Topics Audience Learning style Stage in behavior change
What topics?
Savings Investment Saving & inv e stme nt
None
Basic (all 4 topics)
General (all 4 topics) Cash flow, savings & inv e st.
Cash flow &/or credit; savings, or inv e stme nt
Savings & investment
Credit, savings & investment
Who are target audiences? Youth Military Low-income families First-time home buyers Employees Pre-retirees Retirees Women Minority groups
learning styles Visual Auditory Kinetic
How do people learn?
Learned "a lot"
Most important
Experience Friends & family Media Employer H.S. course Other course
68% 42 36 21 19 17
48% 21 11 5 5 5
How do people want to learn?
Media (TV/radio, magazines,
newspapers)
71%
Brochures/print materials 66
Video
64
Internet
56
School
53
Community courses
53
Stages of behavior change Maintenance Action Preparation Contemplation Precontemplation
Components of education Topics Audience Learning style Stage in behavior change
What is "success"? Information is not education Need to change behaviors Are behaviors the right outcome measures? Satisfaction with life & lifestyle Attitudes -- feel confident Feel prepared for events
Financial education & community economic development Opportunities Credit Union case study Panel surveyed in 2001 and 2004 Small sample
What works and how do we know? First level benefits Manage money, on track, paying off debts Second level benefits Expand goals, save more, more assets, income increased, job opportunities improved, housing opportunities improved Third level benefits Self confident, quality of life improved, hopeful, more involved in neighborhood & community
Importance of education & savings account balances
$250 $200 $150 $100 $50 $0
$223 $115 Education im portant
$82 $68 Education not im portant
2001 2004
Savings balances
$500 $400
E d u c a tio n im p o rta n t E d u c a tio n n o t im p o rta n t
$300
Dollars
$200
$100
$0
1
3
5
7
9
11 13 15 17
Q u a rters
Importance of education & loan balances
$900 $800 $700 $600 $500 $400 $300 $200 $100 $0
$647 $82 Education important
$882 $369 Education not important
2001 2004
So what? Those who feel education is important report positive outcomes at all 3 levels Pattern of saving is "craggy" (save up and then spend down) When do you measure outcomes of program? How do you measure outcomes of program?
So what? Education seems to make biggest difference at first level (manage money, pay off debts) As members (clients) stay with program, need to develop "higher" levels of financial education Need for financial education curriculum, not just a course
So what? People come to recognize & appreciate benefits over time Longitudinal evaluation plan for financial Education Programs Need to ask attitudinal as well as behavioral questions to get at program impacts
What works, and how do we know? NEFE high school financial planning Program Increased knowledge, skills, and confidence Improved behaviors Measured before, after, & 3 months later Financial/consumer education in high school Financial education in high school associated with higher savings and net worth as an adult
What works, and how do we know? Credit counseling Improved credit scores, better credit management, lower delinquency Homeownership counseling Lowered 90-day delinquency rates
What works, and how do we know? Retirement planning Save More Tomorrow Increased participation in 401k, increased rates of contribution, high retention after 3 years Members of TIAA-CREF Revised retirement savings goals, plan to modify saving & investment
What works, and how do we know? Money 2000 Increased savings, decreased debts American Dream Demonstration (IDAs) Financial education increases savings (maxes out at 8-10 hours) Money Smart Increased financial understanding Not associated with opening bank account
What works, and how do we know? Employee Financial Education Increased 401k participation & improved other financial behaviors Financial Security in Later Life Improved financial management practices (selfanchoring) Economic impacts averaged $870 (savings increased, debts reduced, etc.)
What is the Fed doing? Promoting awareness of the importance of financial education Increasing access to information about financial products & services Collaborating with educational and community organizations Promoting research and identifying best practices Educating our employees
www.federalreserve.gov
www.federalreserveeducation.org

JM Hogarth

File: financial-education-and-economic-development.pdf
Title: Microsoft PowerPoint - Financial Literacy & Economic Development-Hogarth-OECD-G8
Author: JM Hogarth
Author: m1jmh03
Published: Tue Nov 21 08:36:41 2006
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