The economy is finally growing again after the housing and economic crisis, but the public’s interest in financial education seems to be growing even more rapidly. The need for financial education has increasingly gained the attention of a very diverse audience - from major banking companies, policymakers and government agencies, to grass-roots community interests groups, nonprofits and economic development experts.
Financial management skills make a significant difference between personal economic security and insecurity. A lack of adequate knowledge about banking products and how to manage personal finances can negatively affect an individual’s day-to-day economic situation, Such lack of knowledge can also drastically hinder a person’s ability to save for longer-term financial goals, such as buying a home or paying for higher education.
The 2012 Consumer Financial Literacy Survey conducted by the Center of Economic Education found that 80% of adults in the United States admitted that they could benefit from advice and answers to everyday financial questions. The survey also reported that 56% of adults in the United State do not have a budget and 33% do not pay their bills on time – up from 28% in 2011. Another recent survey just released in late February by the personal finance website Bankrate.com showed that nearly a quarter of Americans currently have more credit card debt than emergency savings and that a little over 15% have no savings at all.
A lack of financial education makes low and moderate income individuals especially vulnerable to financial scams and predatory lending. Additionally, some communities are further disadvantaged by language or cultural barriers, lack of technological skills, or even access to technology, which is ubiquitous in the consumer banking experience.
Financial products and services are becoming more diverse and sophisticated. This increasing complexity is partially a result of the changes in technology, which affect both the type and delivery of financial services. While this is making it much more difficult for individuals to make appropriate and effective financial decisions, there is an increased responsibility that is expected of individuals for their own financial security. This requires consumers to be actively engaged to manage their money effectively.
So what exactly is a financial education program? Currently, financial education programs come in all shapes and sizes. Generally speaking, financial education programs teach knowledge about banking tools, basic financial topics such a debt and credit, and personal financial management skills.
Financial education programs typically start by providing simple, engaging, and culturally and linguistically appropriate lessons about basic financial topics. However, increased knowledge alone does not necessarily translate into a change in behavior. The most successful financial education programs do not simply deliver the information, but tailor the instruction to the current needs of the participants to be able to better facilitate and inspire a change in financial management behavior. The best programs motivate participants to set financial goals and create a plan and act on that plan to achieve their goals.
In East Palo Alto, three organizations - Renaissance Entrepreneurship Center, Community Legal Services (CLESPA) and Nuestra Casa - have joined forces to provide a financial education program to the community. Offered in both Spanish and English, Secure Future$, or Futuros Seguro$, includes a four week (8 hour) financial education course that covers a wide range of banking topics and financial management techniques.
The program also offers one-on-one coaching sessions to all participants. During these sessions, the participants speak privately about their specific financial needs, set appropriate financial goals, and create and commit to their own personal action steps to help them reach their goals.
The program also offers an incentive system that awards prize drawing tickets to participants for various activities such as attending class, opening newaccounts, tracking their spending, setting up direct deposit with their employers or even increasing their savings and/or credit score. The tickets are entered into a drawing for various prizes up to $300. Drawings take place at a one of three community workshops each year, which brings participants together for food and fun. These workshops also address financial topics beyond those covered in the classes, such as secured credit cards, tax preparation services and matched savings accounts.
Secure Future$ and other financial education programs in the Bay Area view their work as an investment not only in individuals but also in the community. Well-informed and financially educated individuals are able to make thoughtful and effective financial decisions for themselves and their families. This security on the individual level, fostered by programs like Secure Future$, is the foundation of financial security for the community as a whole.
Jennifer Witte is the program associate for the Renaissance Entrepreneurship Center in East Palo Alto. She can be contacted at the agency's office by phone at (650) 321-2193.