By Theresa Witham
I've been thinking about financial literacy a lot lately. People in--and out of--the financial services industry are talking about it a lot too.
To learn what credit unions are doing, CUES conducted a survey late last year and released a white paper outlining the results. Financial Education in Credit Unions is available free to CUES members and non-members.
Here are a couple of highlights:
When asked to rank (with one being most important) four goals for improving members' financial situations, respondents said:
- increasing members' awareness about what they should be doing financially,
- educating members,
- helping members take action to meet their goals, and
- encouraging members to change behavior.
How are CUs delivering financial education? 54 percent of respondents reported using workshops; 58 percent use e-mails or newsletters; and 69 percent use printed newsletters or magazines.
A short time after our survey was released, I was browsing through Time magazine when I saw the headline "How to Teach Kids About Money." What really drew me in was the subhead "Today's conventional wisdom isn't working. What will?"
The article, by Barbara Kiviat, claims that there is little evidence that traditional classroom-based financial literacy courses help students make better financial decisions outside of school.
"A 2008 survey of college students conducted for the JumpStart Coalition for Personal Financial Literacy found that students who'd had a personal-finance or money-management course in high school scored no better than those who had," Kiviat writes. Read the JumpStart press release here.
While traditional programs may not work, letting young kids manage real money and make real decisions does show promise.
One such example is the Ariel Community Academy, a Chicago charter school for grades K-8. It is a public school with corporate sponsorship from financial services firm Ariel Investments.
From the Arial Investments Web site:
"In addition to the mandated Chicago public school curriculum, ACA has incorporated concepts of investing and financial literacy into the classroom. Through a partnership with Nuveen Investments, a Chicago-based investment and trust company, the Ariel-Nuveen Investment Program awards each incoming first grade class a $20,000 grant. This money is designated to the class as a whole and follows the students until their graduation
"In the early years the money is invested and managed by a group comprised of representatives from Ariel and Nuveen. However, as the students advance through the school’s unique investment curriculum, they become actively involved in making the investment decisions. In fact, a Junior Board of Directors (made up of seventh and eighth grade students) is ultimately responsible for deciding how the $20,000 is invested. Upon graduation all profits that have accumulated in the class’ account are divided in half. One half is given by the students in the form of a class gift to improve the school. The other half is distributed among the graduates as cash or matched contributions toward a 529 college savings plan, depending on each student’s choice. The original $20,000 grant is then turned over to the next incoming first grade class, making the program self-perpetuating."
Per the Timearticle, for the first-time ever, last year's graduating class had less than the original $20,000 thanks to a dismal stock market. Is that too painful a lesson for 8th graders?
Adults for the most part have plenty of real-life financial experience. They bounce checks. They see fees add up over late payments. And if they are smart and contribute early in their careers to a 401(k) program or other retirement fund, they'll have the joy of seeing their funds increase more and more, thanks to that wonderful thing called compound interest!
But as the last few years have demonstrated, adults also made a lot of really bad mortgage decisions. So I wonder if some adults need refresher courses to get back on track.
I think the real-world experience that the Ariel Community Academy kids are getting is a great idea. But I also think that a lot of adults would benefit from a back-to-the-books approach. Sometimes we just need a little refresher. And to be honest, most adults never got to experience a program like the ACA one so they make their mistakes with a lot more at stake!
And while the research may show that traditional financial literacy doesn't help students outside the classroom, it doesn't say anything about whether it will help adults make better decisions. I am with Christopher Stevenson in thinking that financial literacy, especially when offered by a trusted credit union, can make a difference.
In fact, according to a new Filene Research Institute report, college students about to graduate are an ideal target for financial education. Read more about the one-day seminar that has been tested with great success over the past five years at the University of Wisconsin-Madison in this article.
Looking for training options for your members? Here is a shameless plug: CUES offers online financial courses for CU members in its Financial Success Suite and for CU employees in Educated Investor University. Why do employees need financial literacy education? Check out my colleague Leisa Goodman's recent post.
Theresa Witham is a CUES editor.
