Our progress on financial education

MAR 25 2013

BY IRENE SKRICKI AND DUBIS CORREAL

Financial education is an important component of our work. We help consumers understand the opportunities, risks, and consequences associated with financial products, services, and decisions.

Listening and learning

As part of our outreach, we have held four listening sessions across the country with more than 120 people who are leaders in financial education. We also issued a “request for public information” – a formal way of asking for public input – about effective financial education. We received more than 100 comments, including collective letters from a range of organizations, individuals, financial institutions, and other groups. We heard loud and clear that a comprehensive approach to financial education is needed and in order to be effective, it has to be salient, well-timed, integrated, and comprehensive.

Studying what works

We have two major projects underway that will teach us more about what works in financial education.

• Financial education evaluation: We are working with the Urban Institute to evaluate two financial coaching programs so we can better understand how to improve financial decision making among consumers. The Financial Clinic in New York City operates one of the programs and Branches (formerly South Florida Urban Ministries), in Miami, operates the second one. This research will provide evidence of the effectiveness of financial coaching as a strategy to help empower consumers. We will share the results from this research widely with the financial education field, policymakers, and the public.
• Measuring financial health: Understanding what combinations of knowledge, skills, behaviors, and attitudes help consumers succeed in achieving their own financial goals will help us improve policies and practices. To build this knowledge, we are working with the Corporation for Enterprise Development to develop rigorously tested measures of consumer financial knowledge, behavior, wellbeing, and related factors. We hope to learn which elements of financial knowledge have a positive effect on financial well being, and what else contributes to financial well being. We will share the critical elements we identify with other financial educators and help them build it into their work.

Designing new strategies

We are also developing and testing new financial education strategies to build on insights from the field of behavioral psychology. We are working on an initiative to help consumers overcome common financial challenges they face on a regular basis.

For example, people who start a new job may feel overwhelmed and fail to sign up for their employer-sponsored retirement account. Behavioral psychology research has shown that if new employees are automatically signed up (but have the option to opt out at any time), enrollment rates are much higher – and those employees who are automatically signed up are pleased about their participation.

We’ll take a close look at what other problems like this might exist, what behavioral issues might be swaying the decision and prototype solutions based on well-researched hypotheses. We will then evaluate the effectiveness of these solutions. As with our other projects, we’ll share our research with financial educators, policymakers, and the public.

Tools for consumers

We are focusing on developing new tools and resources designed to help consumers live better financial lives:

• Consumers who want clear answers to common questions about consumer financial products and services can ask CFPB.
• From start to finish, we can help consumers make informed decisions about paying for college.
• If you’re looking for fliers or brochures about financial information, they’re available to order for free. Many are also available in Spanish.