PERSONAL FINANCE AND THE RUSH TO COMPETENCE: Financial Literacy Education in the U.S. Fannie Mae Foundation 4000 Wisconsin Avenue, NW North Tower, Suite One Washington, DC 20016-2804 (202) 274-8000 www.fanniemaefoundation.org FMF C 122 © 2001 Fannie Mae Foundation. All rights reserved PERSONAL FINANCE AND THE RUSH TO COMPETENCE: Financial Literacy Education in the U.S. Personal Finance and the Rush to Competence: Financial Literacy Education in the U.S. Lois A. Vitt, Project Director Carol Anderson, Jamie Kent, Deanna M. Lyter, Jurg K. Siegenthaler, Jeremy Ward A National Field Study Commissioned and Supported by The Fannie Mae Foundation ISFS Institute for Socio-Financial Studies 14 S. Madison Street PO Box 1824 Middleburg, Virginia · 20118 www.ISFS.org ACKNOWLEDGMENTS AND DEDICATION We are grateful to the Fannie Mae Foundation for conceptualizing and funding this study and to Karen Murrell and Lopa Kolluri for their leadership and direction. Jenny Ward at ISFS provided superb administrative and accounts management supervision and also helped with the production of the matrix and various reports to the Foundation throughout our project. We appreciate the participation of every program manager, instructional designer, educator and industry leader for helping us understand their financial literacy education initiatives and for sharing with us their vision for the future of financial education. Heartfelt thanks to program participants who told us their hopes and dreams and also of life enhancing changes that followed their experiences in financial literacy education. Special thanks to Joyce Adkins, Bill Arnone, Joe Bradley, Pat Brennan, Debbie Conover, Tom Garman, Kathryn Garnett, Frances Graham, Sally Hass, Steve Herrmann, Tony Jurney, Jim Laffargue, Steve McLamar, Gary Nederveld, Barbara O’Neill, Janet Paulovich, Jane Schuchardt and Ike Templeton. Behind every personal financial education program we studied, both large and small, we found a champion (sometimes more than one) who strives passionately to help people increase their financial knowledge and skills. These champions—because they have observed the newly self-reliant—know that such persons can become better parents, partners, employees, neighbors, community members and citizens. This study is dedicated to these program champions and to the millions of Americans whose lives can be uplifted when the language and management of their everyday personal financial affairs becomes routinely comprehensible to them. Institute for Socio-Financial Studies (ISFS) 2000 All Rights Reserved Contents Acknowledgments and Dedication .........................................................................i Executive Summary..............................................................................................xi Chapter One: Introduction..........................................................................................1 What Is Personal Financial Literacy?.....................................................................2 Financial Literacy Literature..................................................................................2 Financial Literacy Education .................................................................................3 Setting the Stage ....................................................................................................4 How Financial Literacy Education Programs Are Evolving ..................................5 Campaigns to Save, Invest, and Learn ..................................................................6 Objectives and Limitations of the Study ................................................................7 Organization of the Report.....................................................................................8 Chapter Two: Study Methods, Populations, and Program Characteristics 11 Study Purpose and Design ...................................................................................11 Critical Pathways Stages Model ..........................................................................12 Characteristics of the Sponsoring Organizations..................................................13 Survey Results – Program Characteristics ...........................................................14 Inception.........................................................................................................14 Needs Assessment ..........................................................................................14 Program Planning ...........................................................................................14 Rationale.........................................................................................................14 Scale, Participants, and Strategy .....................................................................14 Program Content, Pedagogy, and Delivery .....................................................15 Evaluation and Follow-up...............................................................................17 Multi-Sector and Special Purpose Programs........................................................18 Individual Development Accounts (IDAs)...........................................................21 Confidence, Gender, and Age .............................................................................23 Women’s Programs .............................................................................................24 Age ......................................................................................................................25 Homebuyer Programs and Financial Literacy......................................................25 Characteristics of Program Participants Interviewed ...........................................27 Chapter Three: Effective Personal Financial Literacy Education ...................29 When Is an Individual Financially Literate? ........................................................29 What Motivates People to Participate in Financial Literacy Education?..............29 Education, Self-Efficacy, and Attainable Goals...................................................31 Money Meanings, Culture, and Values in Financial Education ...........................32 Life Choices for Emerging Populations ...............................................................34 Attitude Changes and Action Steps......................................................................35 Effective Strategies and Notable Practices...........................................................35 Personal Finance and the Rush to Competence: Financial Literacy Education in the U.S. iii Program Challenges.............................................................................................36 Elements of an Effective Financial Literacy Education Program.........................36 1. Unambiguous Mission and Purpose ............................................................37 2. Targeted Outreach.......................................................................................38 3. Adequate Staffing and Administration.......................................................39 4. Successful Evaluation and Follow-up ........................................................39 5. Program Accessibility ................................................................................41 6. Relevant Curriculum..................................................................................42 7. Dynamic Partnering ...................................................................................43 Chapter Four: Workplace Financial Education ............................................... 45 Overview of Participating Workplace Programs..................................................45 Workplace Programs Study Findings.................................................... 47 Inception.........................................................................................................47 Needs Assessment ..........................................................................................47 Planning..........................................................................................................48 Purpose and Positioning..................................................................................48 Funding and Resources ...................................................................................48 Scale, Participants, and Strategy .....................................................................49 Program Content, Pedagogy, and Delivery .....................................................49 By-Products ....................................................................................................49 Evaluation.......................................................................................................49 General Observations......................................................................................50 Case Study: Weyerhaeuser Company..................................................... ...51 Case Study: United Parcel Service .......................................................... ...61 Chapter Five: Cooperative Extension Service (CES) Financial Education .. 69 CES Programs Study Findings............................................................ .. 70 Inception.........................................................................................................70 Needs Assessment ..........................................................................................70 Planning..........................................................................................................71 Purpose and Positioning..................................................................................71 Funding and Resources ...................................................................................71 Scale, Participants, and Strategy .....................................................................72 Program Content, Pedagogy, and Delivery .....................................................72 By-Products ....................................................................................................73 Evaluation.......................................................................................................73 General Observations......................................................................................73 Case Study: Rutgers Cooperative Extension ...............................................74 Case Study: Mississippi Housing Initiative ..................................................82 Chapter Six: Community-Based Financial Education .................................... 89 Community-Based Programs Study Findings .........................................90 iv Personal Finance and the Rush to Competence: Financial Literacy Education in the U.S. Inception.........................................................................................................90 Needs Assessment ..........................................................................................91 Planning..........................................................................................................91 Purpose and Positioning..................................................................................91 Funding and Resources ...................................................................................92 Scale, Participants, and Strategy .....................................................................92 Program Content, Pedagogy, and Delivery .....................................................93 By-Products ....................................................................................................93 Evaluation.......................................................................................................93 General Observations......................................................................................94 Case Study: International Institute of Boston ......................................... ...95 Chapter Seven: Faith-Based Financial Education .........................................105 Faith-Based Programs Study Findings Inception.......................................................................................................106 Needs Assessment ........................................................................................107 Planning........................................................................................................107 Purpose and Positioning................................................................................107 Funding and Resources .................................................................................108 Scale, Participants, and Strategy ...................................................................108 Program Content, Pedagogy, and Delivery ...................................................108 By-Products ..................................................................................................108 Evaluation.....................................................................................................108 General Observations....................................................................................109 Case Study: MidAmerica Leadership Foundation....................................110 Chapter Eight: U.S. Military Financial Education..............................................117 U.S. Military Programs Study Findings ...................................................118 Inception.......................................................................................................118 Needs Assessment ........................................................................................118 Planning........................................................................................................119 Purpose and Positioning................................................................................119 Funding and Resources .................................................................................119 Scale, Participants, and Strategy ...................................................................119 Program Content, Pedagogy, and Delivery ...................................................120 By-Products ..................................................................................................120 Evaluation.....................................................................................................120 General Observations....................................................................................120 Personal Finance and the Rush to Competence: Financial Literacy Education in the U.S. v Chapter Nine: Community College Financial Education.................................121 Community College Program Study Findings .......................................122 Inception.......................................................................................................122 Needs Assessment ........................................................................................122 Planning........................................................................................................122 Purpose and Positioning................................................................................122 Funding and Resources .................................................................................123 Scale, Participants and Strategy ....................................................................123 Program Content, Pedagogy, and Delivery ...................................................123 Evaluation.....................................................................................................123 General Observations....................................................................................124 Chapter Ten: The Internet.......................................................................................125 Overview ...........................................................................................................125 Internet Sites......................................................................................................129 Chapter Eleven: American Dream Sequencing: Issues and Ideas for Program Managers, Educators, and Policymakers ...133 Financial Education in the Workplace ...............................................................134 Financial Education in the Community..............................................................135 Financial Education Topics and Teaching Materials..........................................136 Socioculturally Sensitive Teaching Methods .....................................................137 Life Planning Education Approaches for Pre-Retirement ..................................138 Financial Education for Later Life.....................................................................138 High-Tech Teaching Methods ...........................................................................139 Financial Literacy is a Two-Dimensional Concept ............................................140 Financial Literacy and Renewed Opportunity....................................................141 Appendix A: Financial Education Programs Matrices....................................145 A-1. Workplace Financial Education Matrix ....................................................145 A-2. CES Financial Education Program Matrix................................................154 A-3. Community-Based Financial Education Programs Matrix ........................167 A-4. Faith-Based Financial Education Programs Matrix...................................182 A-5. U.S. Military Financial Education Programs Matrix.................................186 A-6. Community College Financial Education Programs Matrix......................188 Appendix B: Survey Instrument............................................................................193 Appendix C: Matrix of Program Content, Delivery and Evaluations............201 Appendix D: About the Institute for Socio-Financial Studies (ISFS)............207 Appendix E: About the Authors .......................................................................209 vi Personal Finance and the Rush to Competence: Financial Literacy Education in the U.S. List of Figures and Tables Figures Figure 2-1. Financial Literacy Education Program Sectors ......................................... 11 Figure 2-2. Topics Covered in Programs..................................................................... 14 Figure 2-3. Course Delivery ........................................................................................ 15 Figure 2-4. Course Evaluation..................................................................................... 16 Tables Table 2-1. Overview of Multi-Sector Elements in Programs...................................... 17 Personal Finance and the Rush to Competence: Financial Literacy Education in the U.S. vii