Evaluating Financial Education Programmes Improving Financial Literacy International Conference hosted by the Russian G8 Presidency in Cooperation with the OECD 30 November 2006, Moscow Christina Tan Deputy Director & Head, Consumer Issues Division Monetary Authority of Singapore
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Evaluating Financial Education Programmes - OECD · Australia - The lack of financial education costs the average wage earner $790,0003 over their lifetime. Source: 1) Bernham D.,
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Evaluating Financial Education Programmes
Improving Financial LiteracyInternational Conference hosted by the Russian G8 Presidency in Cooperation with the OECD30 November 2006, Moscow
Christina TanDeputy Director & Head, Consumer Issues DivisionMonetary Authority of Singapore
Outline
Financial Education – Common Goals
Financial Literacy – Evaluating Progress
Evaluating Financial Education Programmes- Sharing examples based on Singapore’s experience
Outline
Financial Education – Common Goals
Financial Literacy – Evaluating Progress
Evaluating Financial Education Programmes- Sharing examples based on Singapore’s experience
Common Goals
To enable consumers to achieve fair dealing
To enable consumer make more informed and effective financial decisions
To enable consumers to take responsibility for their financial decisions
Benefits of Financial Education
Empower consumers to make more informed investment decisions
More sophisticated investors help the market grow in depth and liquidity
Less reliance on the state
But does financial education really work?
Studies Show That Financial Education Makes A Difference
USA - 1.5%1 increase in average savings rates among adults who attended high schools in states with financial education requirements in public schools.
USA - Availability of retirement-focused financial education in the workplace increased average savings rates by 1.65%2.
Australia - The lack of financial education costs the average wage earner $790,0003 over their lifetime.
Source: 1) Bernham D., Garret D., and Maki, D “Education and Saving: The Long Term Effects of High School Curriculum Mandates”, National Bureau of Economic Research, USA, July 1997; 2) Bernham, D. and Garret, D. “The Determinants and Consequences of Financial Education in the Workplace: Evidence from a Survey of Households”, National Bureau of Economic Research, USA, June 1996; 3) Study by government taskforce on financial literacy, Australia October 2005
Outline
Financial Education – Common Goals
Financial Literacy – Evaluating Progress
Evaluating Financial Education Programmes- Sharing examples based on Singapore’s experience
Conducting A Financial Literacy Survey
First National Financial Literacy Survey (2005)
Objectives
Measure current levels of “financial literacy” among different segments of Singaporeans.
Gauge Singaporeans’ attitudes towards financial matters.
Identify gaps in financial knowledge and actions.
Identify areas where more consumer education is needed & the most effective channels for delivery.
Defining Financial Literacy“the ability of individuals to make informed judgements and take effective decisions in
managing their finances”
Actions
Key attributes:• What steps Singaporeans have
taken to manage their money.• What active plans Singaporeans
have made to plan for their future / retirement.
• For Singaporeans who invest, what steps they have taken to understand what they invest and monitor investment performance.
Knowledge
Key attributes:• What level of understanding do
Singaporeans have of the risks and implications of common financial products:
• - Loans.• - Life insurance policies.• - Investment products.
Three Tiers of Financial Literacy
Tier II : Financial Planning
Tier III : Investment Know-How
Tier I : Basic Money Management
Survey Findings are Encouraging
AC
TION
S
Generally good money management habits.
Singaporeans recognise the importance of planning for their finances and have taken some basic steps in financial planning.
Singaporeans who invested take a considered approach in their investment decisions.
KN
OW
LEDG
E
Generally knowledgeable about their loans.
Understand risks inherent in investments & importance of diversification.
Areas for Improvement
Inadequate Savings for EmergenciesOnly 32% of Singaporeans have cash savings of at least 3 times their monthly income.
Inadequate Retirement PlanningOnly 24% have actually calculated how much they would need when they retire.
Inadequate Understanding of Common Financial ProductsSingaporeans are not aware of basic features of common financial products such as life insurance, unit trusts and structured deposits.
Developed a Financial Literacy Score
Financial Literacy Score
X 100
(Adjusted aggregated score for Action + Adjusted aggregated score for Knowledge)
(Score range value for Action + Score range value for Knowledge)
=
Scored questions which test Singaporeans’ financial actions and knowledge.Weighted score assigned for each response.Scores were aggregated and normalised across a 0 – 100 scale to derive a Financial Literacy Score.
Total Singapore Population
Action Knowledge Financial Literacy Score
Tier I Basic Money Management
72 76 74
Tier II Financial Planning/Retirement Planning
64 61 62
Tier III Investment Know-How
67 59 58
TOTAL 70 65 67
Financial Literacy Scores By Tiers
Financial Literacy Score by Education(Total Financial Literacy Score)
73
72
70
70
73
64
56
76
70
71
63
59
51
41
0 20 40 60 80 100 120 140 160
UniversityDegree/Postgraduate
(75)
Polytechnic/Diploma(71)
JC/Pre-U/A-Levels(71)
Secondary (66)
ITE (65)
Primary (56)
No formal education(47)
ActionKnowledge
Financial Literacy Score by Monthly Household Income(Total Financial Literacy Score)
72
72
70
70
71
70
69
62
80
77
74
70
66
62
56
52
0 20 40 60 80 100 120 140 160
> $10k (77)
$6k - $9,999 (75)
$5k - $5,999 (72)
$4k - $4,999 (70)
$3k - $3,999 (68)
$2k - $2,999 (65)
$1k - $1,999 (61)
<$1k (56)ActionKnowledge
Main Survey Findings by Segments
807267
Mean
55
Moderately Low
Average Moderately High
High financial literacy
Low financial literacy
27% of Students25% of Housewives33% of Unemployed
40% of Retirees
34% of Working Marrieds
All other segments:•Students
•Working Singles•Working Marrieds•Working Parents
•Pre-retirees•Housewives•Unemployed
•Retirees
Financial Literacy Scores by SegmentsTier 1
(Basic money management)
Tier 2 (Financial planning)
Tier 3 (Investment know-how)
Overall Mean Score
Retirees 65 55 50 59
Unemployed 68 53 58 61
Students 71 51 57 62
Housewives 72 60 51 64
Pre-retirees 73 63 58 67
Working Singles 77 64 62 70
Working Parents 77 68 63 71
Working Marrieds 80 71 65 74
Total Population 74 62 58 67
Interest in Financial Education
• 50% of Singaporeans indicated that they were interested in learning more about how to manage their money.
• Students, working marrieds and working parents were more likely to be interested in financial education programmes compared to retirees and low-income.
• Among those not interested in financial education, 40% cited insufficient money as the main reason while 32% said they have no time or it is not their priority.
Financial Literacy Scores for Those Interested in Financial Education
Action Knowledge Total
Interested (n=1006) 73 69 70
Not Interested(n=1017)
67 61 63
Preferred Means of Receiving Financial Education
9%
19%
20%
21%
54%
0%
10 20 30 40 50 60
Courses
Online learning tools
Talks / seminars /workshops
Consum er guides
Newspaper colum ns,radio / TV
programmes
Base: Total Respondents (n=2,023)
Outline
Financial Education – Common Goals
Financial Literacy – Evaluating Progress
Evaluating Financial Education Programmes- Sharing examples based on Singapore’s experience
What Do We Evaluate?
REACH RETENTION REACTION
MoneySENSE Industry Working Group (MIWG)
Financial Industry Assocns Consumers Assocn
Context: Structure of MoneySENSE Rests on Partnerships
MAS MCYS MOM CPF BoardMOE People’s Assocn
Financial Education Steering Committee (FESC)
- Feedback- Conduct activities- Report on industry
initiatives
Funding, Endorsement, Overall Policy
Direction
Variety of Channels & Yardsticks
Target Audience YardsticksChannels
Roadshows
Seminars / Talks
Games/ Workshops
Mass Media
Consumer Guides / Website
Families
Low-Income / Financial Assistance
School-children
Retirees / Pre-retirees
Working Adults
Housewives
Outreach Numbers
Feedback Forms
Webpolls / Survey
Contest Participation
Website Hit Rates
Cost Effectiveness Of Different Programmes
Roadshows
Seminars / Talks
Games/ Workshops
Mass Media
Website
Total Cost
Cost Per Person Reached
• How much do participants learn?
• Do they take steps to better manage their expenses?
• How much do participants learn?
• Do they take steps to better manage their expenses?
Outline
Financial Education – Common Goals
Financial Literacy – Evaluating Progress
Evaluating Financial Education Programmes- Example 1: Workshops / Games- Example 2: Mass Media- Example 3: Roadshows
REACH:Small groupsHigher cost per attendee as compared to seminars
Workshops / Games
RETENTION:High degree of interaction between participants and trainerGood participation in quiz questions to test understandingGood recall of key messages
REACTION:Overall positive feedback
Participants more likely to implement what they learn when there is follow-up action
Workshops / Games
Examples of Follow-Up Action:
Volunteers follow up with individuals who attended basic money management workshops
Students who attend financial education game workshops are encouraged to draw up their own pocket money budgets
Outline
Financial Education – Common Goals
Financial Literacy – Evaluating Progress
Evaluating Financial Education Programmes- Example 1: Workshops / Games- Example 2: Mass Media- Example 3: Roadshows
Mass Media Initiatives
• Newsletters & educational articles
• Radio: Recorded capsules, interviews, DJ chats
• TV Game Shows
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Surge in website hit rates when there are media activities.
Response Rate (%)
(Average No. of Responses / Circulation of Paper)
Run 1 Run 2
0.14%
0.12%
Response of Similar
Contests in Paper
Paper 1
0.09%
0.03% - 0.15%0.32%
0.13% 0.05% - 0.15%
0.27% 0.13% - 0.54%
Paper 2
Paper 3
REACH & RETENTION: Example of
Contest Response Rates for Print Media Initiatives
TV Game Show: Dollar & Sense (神机妙算)
TV Game Show: Dollar & Sense (神机妙算)
REACH• Over 1.3 million viewers
• About 60% aged between 18 and 45; 36% above age 45
• Mix of professionals, executives, business persons, blue collar workers and housewives
• Incremental increase in viewership throughout entire series
RETENTION• Tested recall of key messages via SMS contests
Outline
Financial Education – Common Goals
Financial Literacy – Evaluating Progress
Evaluating Financial Education Programmes- Example 1: Workshops / Games- Example 2: Mass Media- Example 3: Roadshows
MoneySENSE Roadshows
MoneySENSE Roadshows
REACH• Over 89,000 visitors at 3-day roadshow at a mall
• Over 33,000 students at roadshows at 5 polytechnics
RETENTION• Overall positive feedback from attendees
• Good recall of key messages
• Encouraging mini financial literacy survey findings among polytechnic students
High awareness of the amount one should set aside to provide for emergencies
28%
40%
68%
0%
10%
20%
30%
40%
50%
60%
70%
Aware of the need tohave 3-6 mths' savings
Do not have at least 3mths savings
National Financial LiteracySurveyPolytechnic Survey
Challenge is for students to act on what they know and set aside savings to provide for emergencies
Key Findings Among Polytechnic Students
Tier 1: Basic Money Management
34% are already recording or monitoring their expenditures (compared to 30% of respondents in the National Survey)
40% have already drawn up a budget
78% are aware that interest is charged on outstanding credit card balance if one pays only the minimum sum
60% are aware that their monthly long term debt commitments should not exceed 35% of their gross monthly income
Key Findings Among Polytechnic Students
56%
33%
1%
17%
54%
13%7%2%
5%
0%
3%2%0%
10%20%30%40%50%60%
School daysStart work
Work for a few years
Get marriedFirst c
hild
Spare cash
Polytechnics National Survey
Students recognise the need to start financial planning early
Key Findings Among Polytechnic Students
Tier 2: Financial Planning
Students are aware of retirement planningAbout half (47%) recognise that investments will be an important source for their retirement fundAbout one third (32%) recognise that insurance could be an important source for their retirement fundAbout half (51%) know that they will need two thirds of their last drawn income when they retireThree quarters (78%) know that their Central Provident Fund savings will not provide them their last drawn income compared with 58% for the National Survey
Key Findings Among Polytechnic Students
Tier 3: Investment Know-howStudents generally have more investment knowledge
Risk-Return trade-offs (93% vs 75%) Diversification strategy (83% vs 66%)
Students are generally more aware of terms and conditions for common investment productsAll bonuses in insurance products are not guaranteed (93% vs 42%)14-day free look period for life insurance policies (74% vs 52%)7-day cancellation period for unit trusts (64% vs 34%)Fees and charges affect investment returns (83% vs 56%)Penalties may apply for early withdrawal of structured deposits (75% vs 57%)
Key Findings Among Polytechnic Students
Going Forward
Challenge: Encourage polytechnic students to translate knowledge to action
In Progress: MoneySENSible Youth Awards
. . . Summing Up
Variety of Yardsticks
REACH RETENTION REACTION• Outreach
statistics and profile of audience
• Total cost vs cost per person
• Feedback forms, surveys, quizzes to test recall of key messages
• Commitments by participants
• Follow-up actions• Enhance financial
literacy in the longer term
Key Challenges in Measuring Effectiveness
Experience & circumstances
Knowledge & understanding Skills
Personality
Confidence & attitudes
BEHAVIOUR
Many Factors Influence Consumers’ Behaviour
Source: Adult financial capability framework developed by UK FSA and Basic Skills Agency, 2004
No One Perfect Tool
Key challenges:Understanding consumer attitudes and behaviour in making financial decisionsIdentifying cause-effect relationships between financial education and making of financial decisionsMonitoring long term effect of consumers’ financial decisions