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Financial Education: What Is It and What Makes It So Important? cr C O M M U N I T Y REINVESTMENT report BY VIRGINIA HOPLEY C O M M U N I T Y A F FA I R S R E S E A R C H A N A LYST FEDERAL RESERVE BANK OF CLEVELAND SPRING Results from the Federal Reserve Bank of Cleveland’s Community Affairs survey The need for financial education—knowledge that helps 2003 people make sound, informed financial decisions—has become PUBLISHED BY THE FEDERAL RESERVE BANK OF CLEVELAND economic development practitioners. Rising consumer debt and increasingly important for financial institutions and community low household saving rates show Americans’ growing need for financial education, as do other indicators (see below). Why is the need for financial education so pressing? Today’s consumers are no less knowledgeable than past generations;1 rather, quickly accelerating changes in the financial services market have increased all Americans’ need for financial literacy, regardless of income or educational background. Consumers must choose from a wide array of providers and complex new financial products, and they have become more responsible and involved in asset building and retirement planning. Long-term investments that affect future financial well-being require deliberate, informed decisions. Demographic changes—such as new immigrant populations, a growing proportion of elderly in certain regions, baby boomers CONTINUED INSIDE WHY AMERICANS NEED FINANCIAL EDUCATION About 10 million low- and moderate-income households are “unbanked,” that is, they do not have accounts in 2 any mainstream bank. 3 More than 1 million Americans filed for bankruptcy each year between 1990 and 2000; during this period, total 4 bankruptcy filings, including businesses, increased 90.6 percent. The Jump$tart Coalition for Personal Financial Literacy surveyed high school seniors nationwide on their knowledge of personal finance. In 2002, students answered 50.2 percent of the questions correctly, down from 51.9 percent 5 in 2000 and 57.3 percent in 1997. These are all considered failing grades. On average, adults scored 57 percent on basic economic knowledge, according to the Standards in Economics Survey conducted in 1999 for the National Council on Economic Education.6 Three-fifths of U.S. households stated that their expenses were higher than their income, according to the 7 Federal Reserve Board’s 1998 Survey of Consumer Finances. 1 Excerpted from remarks by Governor Edward M. Gramlich, “Financial Literacy,” May 2, 2002. 2 John P. Caskey, “Reaching Out to the Unbanked,” Washington University Center for Social Development, 2000, p. 1. 3 The Wall Street Journal, February 11, 2000. 4 Ben Jackson, “Programs Tout Financial Literacy for All Ages,” American Banker, April 5, 2002. Data obtained from the Administrative Office of the U.S. Courts. 5 “From Bad to Worse: Financial Literacy Drops Further Among 12th Graders,” Jump$tart Coalition News, April 23, 2002. Please refer to Web site www.jumpstart.org. 6 “Literacy Survey: Results from the Standards in Economics Survey,” National Council on Economic Education. Please refer to Web site www.ncee.net. 7 Jeanne M. Hogarth, and Chris E. Anguelov, “Can the Poor Save?” Proceedings of the Association for Financial Counseling and Planning Education, 2001. COMMUNITY REINVESTMENT REPORT 2 preparing for retirement, literate citizenry and eco- (see Resources sidebar, and college students gradu- nomic security: “Building page 10). In a Systemwide ating with debt—highlight bridges between community financial literacy initiative, the need for all populations organizations, our educational Community Affairs Offices to understand the basics of institutions, and private at each Federal Reserve planning for their financial business will be an essential Bank have supported similar present and future. aspect of our efforts to efforts through publications, increase familiarity with new hosting conferences and of credit and the rise of the technological and financial workshops, helping launch subprime lending market tools that are fundamental the America Saves program, are other changes that to improving individual and developing educational make financial education economic well-being. And tools like the Federal Reserve imperative. Informed con- the success of such efforts Bank of Dallas’ Building sumers are less likely to will have a significant bearing Wealth Guide and Web site.11 The greater availability become victims of fraud and 8 on how well prepared we A host of other organiza- abusive lending practices. are to meet the challenges tions also have a vested Low- and moderate-income of an increasingly knowledge- interest in understanding individuals and those not served by the mainstream 10 based economy.” To this end, the Federal and promoting financial education. These include financial system may stand Reserve has developed a financial institutions, regula- to benefit even more from strong educational component, tors, consumer advocacy financial education; research encouraging every American groups, schools, certain shows that learning to budget to learn more about our government agencies, and and save early on will financial system and their policymakers. Clearly, increase household wealth personal finances. Chairman financial literacy can have Greenspan and other officials a positive impact on all of have testified before Congress the Community Affairs System promotes financial about the importance of Offices’ constituents. education to help sustain a financial literacy. Every three strong national economy years, the Board of Governors and to support the System’s collects data through its economic growth objectives Survey of Consumer Finances, by promoting community which facilitates research economic development and on household finances and fair and impartial access to savings. Recently the Fed credit. Chairman Greenspan has developed a Web site has articulated the connec- offering comprehensive, tion between a financially interactive economic education 9 over time. The Federal Reserve 8 The fall 2002 issue of CR Forum addresses regulatory efforts against predatory lending in the Fourth Federal Reserve District. Please contact the Community Affairs office to obtain a copy. 9 Remarks by Federal Reserve Chairman Alan Greenspan, “Economic Development and Financial Literacy,” January 10, 2002. 10 Testimony by Federal Reserve Chairman Alan Greenspan, “Financial Literacy,” February 5, 2002. 11 www.dallasfed.org/ca/wealth/index.html Federal Reserve Bank of Cleveland Financial Education Survey District are delivering finan- on program curricula, partic- Community Affairs Office cial education and learn the ipants, measurement and considers financial education specific details of each pro- evaluation, and the organiza- a critical factor in effective gram. This was the purpose tion’s interest in collaborating community economic devel- of the exploratory survey of with the Federal Reserve opment. This office supports financial education programs, Bank on financial education community reinvestment, which the Community Affairs efforts. Respondents were fair lending, and economic Office sent to Fourth District also asked to identify other development activities constituents in spring 2002, financial education programs throughout the Fourth including community devel- of which they were aware; Federal Reserve District, opment corporations, finan- the survey’s second mailing which includes all of Ohio, cial institutions, grassroots went to those programs. eastern Kentucky, western and faith-based organiza- Pennsylvania, and the tions, government agencies, to about 1,500 organizations northern panhandle of academic institutions, and produced 164 completed West Virginia. foundations. The Community responses, representing Affairs Office was especially several kinds of community could determine a meaningful interested in programs economic development role in financial education, targeting low- and moderate- practitioners (see below). it needed to know which income individuals. The organizations in the Federal survey included open- Reserve Bank of Cleveland’s and closed-ended questions Before Community Affairs The two survey mailings TYPES OF SURVEY RESPONDENTS 63 financial institutions 27 community development corporations 24 “other” organizations 21 government agencies (14 local, 3 state, 3 federal, 1 unspecified) 17 social service organizations 4 schools or universities (3 four-year institutions and 1 unspecified) 3 faith-based institutions 3 foundations 2 grassroots advocacy organizations 12 12 A partial list of “other” organizations includes Community Development Financial Institutions, community action agencies, public housing authorities, legal services, trade associations, and settlement houses. COMMUNITY REINVESTMENT REPORT 3 The Cleveland Fed’s Thirty-two percent of COMMUNITY REINVESTMENT REPORT 4 programs for 20 years provided by banks, founda- respondents deliver a financial or more; several did not know tions, government entities education program; 12 percent the age of their programs. (such as HUD and housing fund a financial education Most of the respondents who authorities), and other program; and 2 percent do do not currently deliver a nonprofit organizations both. Fifty-six percent do program believe that financial (religious organizations, neither but responded to the education is important for the Urban League, and the survey and offered insight their constituents. Neighborhood Reinvestment into financial education 13 Financial education Corporation, for example). issues. Table 1 below curricula vary greatly, from Thirty-four percent of breaks down providers of one-on-one counseling with respondents receive no external financial education programs no formal materials to highly assistance or sponsorship for by organizational type. structured programs. The their programs. subjects covered by respond- Financial Education Program Information Most of the financial education programs repre- The majority of respondents ing programs are basic to (91 percent) deliver programs any financial curriculum in traditional classrooms (see table 2). or workshops and a large Most financial education percent offer one-on-one sented in the survey findings programs are collaborative: counseling (77 percent). are relatively new. Nearly 58 percent rely on a funded The overlap of responses half of the organizations partnership and 15 percent shows that many organizations administer programs that have in-kind sponsorship offer more than one format are five years old or less (for speakers, curriculum for their financial education (49 percent), while only development, and so on). initiatives, depending on Integral sponsorship and participants’ needs. Twenty- partnerships typically are five percent of respondents 11 percent of them have offered financial literacy Ta b l e 1 SERVICES PROVIDED BY VARIOUS TYPES OF ORGANIZATIONS Organization type Deliver program Fund program Financial institutions 26% 42% Community development corporations 23% 11% Social service/grassroots organizations 21% 16% Other 13% 5% Government agencies 9% 5% Faith-based organizations 4% 0% Foundations 2% 5% Schools or universities 2% 16% Total 100% 100% 13 Because some organizations offer more than one financial education program or initiative, the results presented in this report may sum to more than 100 percent. offer programs designed to tions, videos, budgeting work “train the trainer,” meaning sheets, interactive case studies that they prepare instructors and participant modules, and and organizations to deliver open-book tests. The length of time allotted A few organizations (9 percent) for completing the programs use the Internet as a teaching also varies widely—from tool, and an equal percent one-time introductory classes use other formats, such as to classes scheduled over a self-study, community period of time, to intensive seminars, and consumer fairs. one-on-one counseling with The materials and formats loan or mortgage applicants. Better Housing League of Greater Cincinnati, “Life as a Homeowner” and “How to Buy a House” www.betterhousing.org/education/education.htm Paul Strassels, “Credit when Credit Is Due” www.creditwhencreditisdue.com Fannie Mae Foundation, “Opening Doors to Homeownership” www.fanniemaefoundation.org used to teach financial The most common format Federal Deposit Insurance Corporation (FDIC), “Money Smart” education vary tremendously for an adult course, however, www.fdic.gov/consumers/consumer/ moneysmart/index.html —from no formal curriculum, is 12 to 18 hours spread to curricula developed in- over weeks or even months, house, material provided with homework assignments by sponsoring agencies, and between class sessions. Freddie Mac, “Your Route to Homeownership” resources used nationally Counseling is usually www.freddiemac.com/homebuyers (see Resources sidebar on scheduled as needed, pages 10 and 11). Besides depending on the resources Kentucky Housing Corporation, “Yes You Can…Own a Home” books and brochures (many available and the sponsoring www.kyhousing.org/homeownership/ education/yyc.cfm of which were enclosed with organization’s expertise. Some survey responses), effective programs, such as Individual teaching tools include skits Development Accounts or and role playing, presenta- Cleveland Saves, are on-going. Federal Trade Commission, “Credit” www.ftc.gov/bcp/menu-credit.htm National Council on Economic Education, “Financial Fitness for Life” www.fffl.ncee.net National Foundation for Credit Counseling, “Keys to Homeownership” www.nfcc.org Ta b l e 2 SUBJECTS COVERED IN FOURTH DISTRICT FINANCIAL LITERACY PROGRAMS Saving 94% National Urban League, “CreditSmart” Budgeting 94% www.nul.org/resources/financial_literacy/ creditsmart.html Credit repair 85% Purchasing a home 72% Predatory lending 68% National Endowment for Financial Education, “High School Financial Planning Program” Financing major purchases 60% www.nefe.org/pages/highschool.html Investing 43% Other 36% Additional topics that are frequently covered include financial education basics for entrepreneurs and small businesses (including developing a business plan); home maintenance; wealth creation; and wise spending habits. U.S. Department of Housing and Urban Development, “Consumer Information” www.hud.gov/consumer/index.cfm COMMUNITY REINVESTMENT REPORT 5 financial education programs. Financial Education Curricula and Courses Used by Surveyed Programs Federal Reserve Bank of Cle COMMUNITY REINVESTMENT REPORT 6 Financial Education Because formats are so could not answer this teers and in-kind instructors; varied, there is no “average” question definitively because and 26 percent use outside frequency of program offer- their financial education organizations such as ings. Most structured classes offerings are loosely Americorps, Vista, and and workshops are offered at structured or not quantifiable. other financial professionals, regular intervals (for example, Sixty percent of the to deliver their programs.15 monthly or quarterly), respondents who offer a depending on the depth financial education program programs (74 percent) offer of the curricula; others are engage full-time staff to incentives for completing a offered continuously (that deliver it, with most of them course. This is consistent is, 150 seminars a year), (44 percent) employing only with research finding that daily (information provided one person; one respondent adults must have an incentive by a state government employs four full-time staff, to enroll and finish training. agency’s 800 number), or the highest number report- Some researchers believe that The great majority of on demand. One-on-one ed. Nineteen percent of for long-term effectiveness, counseling tends to be these organizations use part- course completion must on-going as needed by the time staff; 13 percent have be tied to an action such as client. Many respondents no paid staff but use volun- opening a checking or savings 14 TYPES OF INCENTIVES OFFERED FOR COURSE COMPLETION Monetary stipend Individual Development Account match Down payment/closing-cost assistance 30-minute consultation with a financial advisor Raffle for a savings bond Notifying a credit bureau of successful course completion $3,000 first-time homebuyer grant Assistance for financing home repairs HUD certificate with letter for 1/2% reduction on FHA financing Accounts with a small starting balance to encourage use of bank products $10 certificate to open a savings account Possible pre-approval for buying a home 14 Seven respondents did not specify the number of full-time staff. 15 Totals exceed 100 percent because some organizations use a combination of staff to deliver their program. veland continued... It is also essential that educators explain the how— as well as the why—of saving. share gets information from the media.18 When developing a curriculum and teaching a course, it is important to recognize 16 account. Respondents use a edge, and helps ensure that one financial education variety of creative incentives that consumers apply program cannot meet the beyond a certificate of their knowledge; needs of every audience. includes attractive, useful Programs must be tailored knowledge that is rela- to the particular needs of tively easy to apply; diverse groups of students, addresses values as well such as immigrants, low- as knowledge; and moderate-income provides hands-on learn- adults, and the elderly. porated in designing financial ing in addition to study- Learning styles vary as well, literacy initiatives. Stephen ing; and so using a variety of learning benefits large numbers of media and resources will completion (see bottom of page 6). What financial education curriculum is most effective? Some preliminary research findings can easily be incor- Brobeck, Executive Director 17 of the Consumer Federation people. more likely reinforce financial of America, lists five principles The majority of individuals education principles and for success. According to learns to manage their change people’s behavior these, effective financial finances through personal over time. It is also essential education: experience; a smaller share that educators explain the seeks to change behavior, learns from friends and how—as well as the why— not just increase knowl- family; and the smallest of saving.19 16 Katy Jacob, Sharyl Hudson, and Malcolm Bush, “Tools for Survival: An Analysis of Financial Literacy Programs for Lower Income Families,” Woodstock Institute, 2000. 17 Stephen Brobeck, “Effective Financial Education: The Role of Cleveland Saves,” Planning & Action, May/June 2002. Excerpted with permission; please refer to article for full text. 18 Jeanne M. Hogarth, Marianne A. Hilgert, and Jane Schuchardt, “Money Managers—The Good, the Bad and the Lost,” Proceedings of the Association for Financial Counseling and Planning Education, 2002. 19 Maude Toussaint-Comeau, and Sherrie L.W. Rhine, “Delivery of Financial Literacy Programs,” Policy Studies, Federal Reserve Bank of Chicago, December 2000, p. 3 COMMUNITY REINVESTMENT REPORT 7 n Survey COMMUNITY REINVESTMENT REPORT 8 Program Participants most serve more than one Financial education programs age group. When asked to of mechanisms to market represented in these survey rank the age groups that their programs, the most results target several different typically participate in their common being referrals from populations; on average, programs, 55 percent said a broad range of sources,22 each respondent served three they served people of all followed by brochures, populations. The groups ages. Among organizations newsletters, financial institu- most often targeted consist that specified one or more tions, Web sites, and religious of low- and moderate-income age groups, the largest organizations. Less frequently individuals, followed by proportion (28 percent) used methods are print first-time homebuyers and designated 26 to 35 as their advertising and public service community groups. The targeted age group, followed announcements, followed by “other” category includes by 36 to 50 (13 percent) and schools and libraries. The credit union members, 18 to 25 (9 percent). The topics most often deemed employee groups, small age group least likely to be essential for basic curricula business owners, homeless targeted by financial educa- are listed at the bottom of heads of households, tion programs were those page 9. particular geographic areas, 65 and older, followed by students, and individuals those 51 to 65. with disabilities, to name program identified a respondent did not identify geographic region as a target population. its service area; the levels mentioned are gram participants’ ages; listed in table 4.21 TARGET GROUPS IDENTIFIED IN SURVEY 20 mentioned a wide variety most commonly (98 percent) specified pro- TABLE 3 Respondents also Every financial education a few (see table 3). Only one Almost all respondents Respondents use a number TABLE 4 SERVICE AREAS Low- and middle income individuals 81% County 57% First-time homebuyers 53% City 47% Other 45% Neighborhood 21% Community groups 38% Neighborhood residents 34% Other (for example, multi-county, 17% bank assessment area, church congregation) Elderly 13% State 13% Instructor trainees 11% National 2% 20 The total exceeds 100 percent because respondents were asked to check as many groups as apply. 21 Some respondents selected more than one geographic unit as their target area. 22 Including housing authorities, homeless shelters, Habitat for Humanity, tenants in business incubators, city agencies (inspectors and housing reports), city council members, social service agencies, nonprofits, other students and teachers, friends and relatives, realtors, HUD, Attorneys General offices, banking regulators, Department of Jobs and Family Services. of complementary topics that are not currently provided but are needed by their clients; these topics include OBSERVATIONS FROM SURVEY RESPONDENTS Financial literacy is a necessary component of the financial products and services that banks offer their communities. Early intervention is essential for participants. assistance, home repair/ maintenance, and reverse Adults will not participate in a program that does not show positive results. Successful programs are enjoyable, accessible, timely, and structured for adults. mortgages. Some respondents also noted that certain of their client groups lack basic financial education: residents of rural areas, non–English speakers, elderly residents, and elementary and high Financial education is the key to success; many financial problems result from poor decisions, lack of education, and scarce resources for answering clients’ questions. Financial education should begin early (junior/middle schools) and should also reach senior citizens. Teaching materials must be written at a sixth-grade reading level. school students. Several organizations highlighted the importance of developing programs to give entrepreneurs’ businesses a better chance of succeeding, while others underscored their need to serve larger numbers of students with a broader range of program offerings. Programs should teach students how to control their own finances; they should award graduates a certificate that recognizes their ability to make personal money management decisions and build a sound financial portfolio. Credit unions can deliver financial education programs in low-income and rural areas; one program in the Fourth District is a unique partnership between a financial institution, a nonprofit organization, and a public school system. It is unnecessary to develop new curricula; rather, the existing ones need better marketing. ESSENTIAL TOPICS FOR BASIC CURRICULA Credit: history, wise use and management, cards, reports, repair, how it works Budgeting: how to manage a budget Saving: importance of and methods First-time home buying: the process, mortgage financing, and down payment assistance Predatory lending: what it is, how to avoid it, and what to do if you believe you are a victim. COMMUNITY REINVESTMENT REPORT 9 investing, child support COMMUNITY REINVESTMENT REPORT 10 Financial Education Resources Program Impact generally are informal: Cumulatively, survey respon- students’ self-evaluations American Association of Retired Persons, “Money and Work” dents had more than 18,000 or those completed by graduates in 2001; since instructors, follow-up www.aarp.org/money the inception of their telephone calls, or, in a few programs, the figure is cases, surveys. 800/424-3410 Consumer Federation of America, America Saves 1.5 million. Just over Less than half of the www.americasaves.org half of the respondents respondents (47 percent) (57 percent) try to measure follow their graduates for the impact of their financial some time period after education program, most training. Their methods frequently by tabulating include surveys and quarterly 202/387-6121 Federal Reserve Bank of Boston, “Identity Theft: Protect Yourself” video 800/409-1333 Federal Reserve Bank of Chicago, Financial Education Research Center www.chicagofed.org/cedric/financial_education_ research_center.cfm Federal Reserve Bank of Cleveland, “Personal Financial Education” www.clevelandfed.org/Consumer/PersFinLit/index.cfm and “I Love Being Self-Employed” Microenterprise Training Video 216/579-2846 Federal Reserve Bank of Dallas, “Building Wealth: A Beginner’s Guide to Securing Your Financial Future” www.dallasfed.org/ca/wealth/index.html 214/922-5254 23 As financial education programs grow in number and size, it will become more important to measure their impact and to gauge whether participants’ behavior changed after training. meetings with graduates to track those who purchased a home or were able to remain in their homes, as well as obtaining data on loan repayments. Because many of the programs are new and modestly funded, methods of evaluating impact and tracking graduates have numbers of home and car not been formalized or purchases, bank accounts implemented in most cases. opened, businesses started, As financial education and jobs obtained by program programs grow in number graduates. Other organizations and size, it will become more look at graduates’ remedies of unfavor- important to measure their impact and to gauge whether able situations: participants’ behavior debt reduction, changed after training. fewer bankruptcies Such measurements will help and foreclosures, improved credit reports, and bringing determine the effectiveness of financial education and will identify the training mortgages current. The methods that have the greatest measurement methods positive impact. 23 Includes some estimates by respondents; other respondents could not answer this question. Conclusion and Next Steps Most community economic delinquency: borrowers in development practitioners this study who received pre- and policymakers agree that purchase counseling have, on financial education is a average, a 19 percent lower Federal Reserve Bank of San Francisco, “Guide to Financial Literacy Resources” fundamental need that 90-day delinquency rate.26 www.frbsf.org/community/webresources/ bankersguide.pdf Finally, education is Federal Reserve System, “Economic Education” age, and income group. only one of the variables Many challenges still lie that affect financial well- ahead for all players involved being; other factors, such in delivering a successful as employment, income, program. The concepts of age, and health, also affect Foundation for Financial Literacy financial education are an individual’s financial www.financialliteracyusa.org sometimes abstract and situation.27 For most of us, complicated; they must be financial education is a simplified, applied to real process that continues as life situations, and tied to a our financial situations and goal that will be meaningful needs change over time. outside the classroom.24 www.federalreserveeducation.org FirstGov for Consumers www.consumer.gov/yourmoney.htm 800/882-8723 GE Center for Financial Learning www.financiallearning.com/ge/home.jsp Jump$tart Coalition for Personal Financial Literacy www.jumpstart.org 888/45-EDUCATE Despite the challenges Junior Achievement Different demographic and possible limitations of niches, cultures, and age financial education, it has 719/540-8000 groups must be reached and evoked great interest and taught financial education optimism in the Federal National Community Reinvestment Coalition, Financial Literacy Campaign principles; to be effective, a Reserve’s Fourth District. www.ncrc.org curriculum may need to be While 32 percent of survey tailored to each segment of respondents deliver a pro- National Council on Economic Education the community. gram, 73 percent expressed www.ncee.net Research findings on the an interest in attending a www.ja.org 202/628-8866 800/338-1192 effectiveness of financial “best practices” seminar on National Endowment for Financial Education literacy programs are mixed.25 the topic. In addition, survey www.nefe.org Participants can realize a results point to the need to program’s benefits soon develop program evaluation after learning the concepts; instruments,28 as well as a however, it has not yet been system to track graduates. 301/589-5600 proved that behaviors are These measures can evaluate ameliorated over the long programmatic impact; over National Foundation for Teaching Entrepreneurship term. Recent research by time, they could suggest 800/367-6383 Freddie Mac shows that whether the cycle of poverty counseling can be effective for low- and moderate- U.S. Department of the Treasury, Office of Financial Education in reducing mortgage income individuals can be 303/741-633 National Foundation for Credit Counseling www.nfcc.org www.nfte.com http://www.treas.gov/offices/domesticfinance/financial-institution/fin_ed.html Wall Street Institute 24 Margaret Clancy, Michal Grinstein-Weiss, and Mark Schreiner, “Financial Education and Savings Outcomes in Individual Development Accounts,” Washington www.wallstreetinstitute.org University Center for Social Development, 2001, p. 3. 25 Sandra Braunstein, and Carolyn Welch, “Financial Literacy: An Overview of Practice, Research and Policy,” Federal Reserve Bulletin, November 2002, p. 445. 26 Abdighani Hirad, and Peter M. Zorn, “A Little Knowledge Is a Good Thing: Empirical Evidence of the Effectiveness of Pre-purchase Homeownership Counseling,” Freddie Mac, May 2001. 27 Excerpted from remarks by Vice Chairman Roger W. Ferguson, Jr., “Reflections on Financial Literacy,” May 13, 2002. 28 Woodstock Institute recently released Evaluating Your Financial Literacy Program: A Practical Guide. Available at www.woodstockinst.org. 202/261-3531 COMMUNITY REINVESTMENT REPORT 11 affects every demographic, Financial Education Resources, continued Acknowledgments broken with this type of Please contact the following members of the Community Affairs staff if you have questions or would like additional copies of this publication. intervention. The Community with community-based Affairs staff at the Federal organizations and other Reserve Bank of Cleveland service providers will give will continue to identify financial institutions a CLEVELAND financial literacy programs presence and impact they Mark Sniderman in the Fourth District and might not otherwise achieve Senior Vice President and Director of Research Developing partnerships monitor current financial in hard-to-reach communities. 216/579-2044 education issues, initiatives, Financial institutions that Ruth Clevenger and trends. encourage such training Vice President and Community Affairs Officer Financial institutions will benefit in other ways too can play an integral as well: with checking and Cassandra McConnell role in supporting financial savings accounts that will Manager, Community Affairs education. The recently be opened by the previously released Consumer Bankers unbanked; and by having Research Analyst Association’s 2002 Survey better-informed consumers 216/579-2891 of Bank Sponsored Financial who can utilize more Laura Kyzour Literacy Programs validates sophisticated technology Administrative Assistant financial institutions’ impor- and products, becoming tance in promoting economic stronger loan applicants and 216/579-2474 Virginia Hopley 216/579-2846 CINCINNATI Jeff Gatica Senior Advisor 513/455-4281 29 education (see table 5). more reliable borrowers. Their findings also show Communities also benefit Editor in Chief Virginia Hopley that “banks continue to by having financially Community Affairs Liaison invest significant resources informed residents. When Cassandra McConnell 513/455-4350 in the development and people are aware of the long- Editor PITTSBURGH delivery of financial education term impacts of their financial Michele Lachman Dan Holland programs. Expanding their decisions, they are empowered Graphic Designer 412/261-7947 reach into underserved com- to consume, save, and invest Visit us on the World Wide Web munities has become a prior- wisely. Their economic well- www.clevelandfed.org ity, as shown by their efforts being promotes greater asset to build partnerships with accumulation and wealth community-based organiza- creation, enabling their com- tions and national nonprofits.” munities to grow and prosper. Candis Smith Senior Advisor The views stated here are those of the author and are not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System. Managing Editor Lori Boehm Special thanks to Candis Smith for her assistance with this project. We welcome your comments regarding this CR Report; please email them, or requests for additional copies, to virginia.l.hopley@clev.frb.org. TABLE 5 BANK-SPONSORED FINANCIAL LITERACY PROGRAMS Materials may be reprinted provided that the source is credited. Please send copies of reprinted materials to Virginia Hopley, Community Affairs, Federal Reserve Bank of Cleveland, P.O. Box 6387, Cleveland, Ohio 44101-1387. 97% of responding banks sponsor financial literacy programs or support them through partnerships; 60% say their programs target predatory or abusive lending practices; 97% offer mortgage and home ownership counseling; 96% target low- and middle-income individuals; and 62% are geared toward minorities. 29 Consumer Bankers Association, 2002 Survey of Bank-Sponsored Financial Literacy Programs, April 2002. Available at www.cbanet.org. COMMUNITY REINVESTMENT REPORT 12 216/579-2392
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