Partners, Volume 13, Number 2, 2003
Partners, Volume 13, Number 2, 2003
|Adult Financial Education Programs Can Yield Big Rewards|
Concern about growth in consumer debt and nonbusiness bankruptcy filings is prompting many nonprofit organizations and community development professionals to think about adult financial education training. The rationale is that a more informed consumer can avoid unscrupulous lenders and make better financial decisions. Given the many resources and curricula, how does a group create an effective program?
Critical components of an adult financial education program
Although one group, Jump$tart Coalition, has made significant strides in establishing nationally recognized standards for the financial education of children, such guidelines have yet to be determined for adults.
In a 2000 study, "Personal Finance and the Rush to Competence," Dr. Lois Vitt weighs in on the topic with a definition of adult financial literacy:
"A financially literate individual understands his or her relationship to money and can read about, discuss and communicate regarding personal financial issues. She possesses knowledge of banking and credit, practices money management, understands the need for protection against unforeseen emergencies, plans for major life events, and saves and invests for the future."
Based on this definition, Vitt has outlined the key elements of an effective financial education program. The following discussion of Vitt's approach may help organizations develop or enhance their own financial education programs.
Defining goals and targeting audience
A mission statement can help define a financial education program's goals and establish realistic expectations. The mission statement becomes the basis for the curriculum. Determining the target population is important in developing an appropriate curriculum as well. Focus on a particular audience can also help in recruiting class participants.
Although word of mouth seems to be the most successful method of recruiting once classes are established, partnering with other organizations for referrals and co-delivery of classes is another effective recruitment method.
For example, Individual Development Account (IDA) Collaborative of Louisiana receives referrals for financial education from a coalition of over 50 organizations. Consumer Credit Counseling Services and Neighborhood Housing Services of New Orleans increase the program's flexibility by offering classes on different schedules to ensure reaching the target market.
Optimizing staffing and administration
Finding adequate staffing and resources is a common and difficult challenge for many organizations teaching financial education. Even well-established groups struggle with this issue. One option is to employ existing staff to teach classes using free instructional materials. Another is to seek help from volunteers or local financial professionals.
Use of the FDIC's MoneySmart training materials, for example, supports the financial education programs established by the Neighborhood Reinvestment Corporation, the Mississippi Housing Initiative, and the U.S. Department of Housing and Neighborhood Development.
Recently grants have been available to help groups cover the cost of teaching financial education. Bank of America and the National Endowment for Financial Education are among the organizations that help with funding.
Developing a relevant curriculum
The next challenge is deciding what topics should be covered first. In Vitt's study, the top three topics among 12 areas surveyed were budgeting and money management; saving and investing; and credit and debt management.
Over half the programs surveyed included topics such as retirement planning, financially managing major life events, housing and mortgage financing, consumer education and protection, insurance and life planning. Ultimately, the program should be tailored to include topics that best fit the needs of the target audience.
Immigrant populations, for example, present special challenges. The success of the program will depend on how well cultural values are incorporated in the curriculum. Some of the programs surveyed specifically address cultural perceptions about money. Others convey the fundamentals of the U.S. banking system to address distrust of banking systems based on negative prior experience. Still others deal with culturally sensitive issues such as reticence to discuss financial matters with strangers or the tendency to use an informal banking network among community members.
In any effective financial education program, attitudes must shift before behavior can change. The good news is that almost all participants across a number of studies report that financial education has helped them change their thinking about money.
Learning theory states that adults look for personal relevance in course topics — they learn better by "doing." Therefore effective financial education must provide examples that refer to "real-life" experiences. Also, the type of teaching media affects the way individuals learn. In-class discussions and different modes of presentation such as vocal, visual or graphic can help make material relevant to the target population's life experience and value system.
Program logistics that accommodate the specific needs of the population being served help ensure a course's success. Scheduling class times and locations that are convenient for participants, providing child care and transportation, and appropriate refreshments are all issues that need to be addressed with potential participants in mind.
"Dynamic partnering" is another hallmark of successful programs. Partners who share similar goals, constituents or geographic territory can help each other support their respective missions. Partnering can be especially beneficial to IDA programs. A recent report prepared for the U.S. Department of Health and Human Services notes that "developing and delivering a financial literacy curriculum for accountholders were among the most challenging aspects of establishing an IDA project." A good partnership can help meet this challenge.
For instance, Consumer Credit Counseling Service chapters of Greater New Orleans and Baton Rouge, as well as Louisiana State University's cooperative extension service have both partnered with the Jump$tart Coalition and the IDA Collaborative to promote financial education. The organizations work closely together using many different delivery systems to ensure that quality financial education is available to adults and children throughout the state.
Successful evaluation and follow-up
Almost all organizations use some form of follow-up to evaluate the effectiveness of their programs. The extent of the evaluation, however, varies greatly. Common evaluation tools include pre- and post-class surveys and tracking participants to determine if they have opened or expanded banking services, increased savings, reduced debt, repaired credit, or purchased a major asset. In addition, formal focus groups or recordings of informal conversations with class participants can yield important information.
Evaluation methods and measurement tools may be specified by funding sources or researchers. A financial evaluation format produced by the University of Illinois' School of Social Work is posted on the National Center on Poverty Law's website at http://www. povertylaw.org/advocacy/fllip/evaluation_report.cfm.
Many national advocacy groups and philanthropic organizations are pushing for more concrete research on what constitutes effective financial education. They are also monitoring the impact of financial education and working with nonprofits, faith-based groups and community development corporations to establish effective financial education programs. The momentum for establishing solid financial education programs will clearly continue to build.
By Nancy Montoya, regional community development manager in the Atlanta Fed's New Orleans Branch.