Jeanne M. Hogarth - Build Your Financial Literacy Toolkit

Build Your Financial Literacy Toolkit

Jeanne M. Hogarth Federal Reserve Board

The analysis and conclusions set forth in this presentation represent the work of the author and do not indicate concurrence of the Federal Reserve Board, the Federal Reserve Banks, or their staff. Mention or display of a trademark, proprietary product, or firm in the presentation by the authors does not constitute an endorsement or criticism by the Federal Reserve System and does not imply approval to the exclusion of other suitable products or firms. 1

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FLEC Engages Large Portion of Federal

Government

• Board of Governors of the Federal Reserve

• Commodity Futures Trading Commission

• Department of Agriculture• Department of Defense• Department of Education• Department of Health and

Human Services• Department of Housing

and Urban Development• Department of Labor• Department of Treasury• Department of Veterans

Affairs• Federal Deposit Insurance

Corporation

• Federal Trade Commission• General Services

Administration• National Credit Union

Administration• Office of the Comptroller

of the Currency• Office of Personnel

Management• Office of Thrift Supervision• Small Business

Administration• Social Security

Administration• Securities and Exchange

Commission• White House

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President’s Advisory Council on Financial

Capability Created by Executive Order in January 2010

Advises the President and the Treasury Secretary on methods to strengthen and enhance coordination between existing public and private sector financial education efforts and methods to identify effective financial education and financial access approaches

Knowledge is not enough

• Humans are often not rational decision makers in many parts of their life

• We often know what we should or need to do, but do not do it– Eating – Sleeping– Risky Behavior– Money

What we know vs. what we do - eating

What we know vs. what we do - sleeping

What we know vs. what we do - money

Developing learner-driven educational

opportunities

What do consumers know? What do they need to know?

What do consumers do? What should they do?

What do consumers want to do– what are their goals?

What are your program goals? What are the resources? How do people want to learn?

Financial Management Building Blocks(Rutgers Cooperative Extension)

Family Economics Financial Education(University of Arizona)

Core CompetenciesCore Competency Knowledge Action/Behavior

EARNING • Gross versus net pay• Benefit and taxes• Education is important

• Understand your paycheck• Learn about potential benefits and taxes• Invest in your future

SPENDING • The difference between needs and wants

• Develop a spending plan• Track spending habits• Live within your means• Understand the social and environmental impacts of your spending decisions

SAVING

• Saved money grows• Know about transaction & liquid accounts• Know about financial assets (checking and saving accounts, bonds, stocks, mutual funds)• How to meet long-term goals and grow your wealth

• Start saving early; Pay yourself first• Understand and establish a relationship with the financial system• Comparison shop; Balance risk and return• Save for retirement, child’s education, and other needs; Plan for long-term goals; Track savings and monitor what you own

BORROWING• If you borrow now, you pay back more later

• The cost of borrowing is based on how risky the lender thinks you are (credit score)

• Avoid high cost borrowing; Plan, understand, and shop around• Understand how information in your credit

score affects borrowing• Plan and meet your payment obligations• Track borrowing habits• Analyze renting versus owning a home

PROTECT• Act now to protect yourself from potential catastrophe later

• Identify theft/fraud/scams

• Choose appropriate insurance Build up an emergency fund Shop around• Protect your identity Avoid fraud and scams Review your credit report

Earning

KnowledgeGross versus net

payBenefit and taxesEducation is

important

Action/BehaviorUnderstand your

paycheckLearn about

potential benefits and taxes

Invest in your future

Spending

Knowledge The difference

between needs and wants

Action/behavior Develop a spending

plan Track spending habits Live within your

means Understand the social

and environmental impacts of your spending decisions

Spending -- Tools

Spending -- Tools

Spending -- Tools

Saving

KnowledgeSaved money grows Know about liquid

& transaction accounts

Know about financial assets (bank accounts, bonds, stocks, mutual funds)

How to meet long-term goals and grow your wealth

Saving

Action/behaviorStart saving early--

pay yourself first Understand &

establish a relationship with the financial system

Comparison shop; balance risk and return

Plan for long term goals (e.g., save for child’s education, retirement

Track savings and monitor what you own

Saving – Tools

Saving – Tools

Saving – Tools

Borrowing

KnowledgeIf you borrow now,

you pay back more later

The cost of borrowing is based on how risky the lender thinks you are (credit score)

Borrowing

Action/behaviorPlan, understand,

and shop around; Avoid high cost borrowing

Understand how information in your credit score affects borrowing

Plan and meet your payment obligations

Track borrowing habits

Analyze renting versus owning a home

Borrowing -- Tools

Borrowing -- Tools

Borrowing -- Tools

Protecting

KnowledgeAct now to protect

yourself from potential catastrophe later

Identify theft, fraud, scams

Manage risks with insurance and other resources

Protecting

Action/behaviorChoose appropriate

insurance; Build up an emergency fund; Shop around

Protect your identity; Avoid fraud and scams; Review your credit report

Protecting -- Tools

Protecting -- Tools

Protecting -- Tools

Seeking advice

Complex products

Infrequent decisions

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Seeking advice

Complex products

Infrequent decisions

“Self medicate”See a G.P.See a specialist

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How to use these in your programs

Assessment for learner-driven experiences What are their goals? Who needs what content? What level of content?

Tracking progress Stages of behavior change Learner goals Program goals

How will we know if we’re

making a difference?

Information is not education Need to change behaviors

Credit scores go upSavings rates go upBankruptcies go downSelf-anchoring measures

Subjective Measures of Making a Difference

Satisfaction with life and lifestyleAttitudes -- feel confidentFeel prepared for events -- getting

married, home buying, having kids, taking vacations, college education, home repairs, car buying, retirement

Any questions?

Thank you!