Money SmartA financial education program

Luke W. ReynoldsChief, Outreach & Program

DevelopmentFederal Deposit Insurance

Corporation

Why is the FDIC involved in financial education?

Reasons include: Unbanked To help fight predatory lending Complicated Financial Landscape

– Market innovations

Money Smart

• Money Smart is FDIC’s financial education curriculum– Over 495,000 copies have been

distributed– Over 1 million consumers have been

trained– Over 1,400 organizations are members of

the Money Smart Alliance

• Money Smart has received recognition

Two Versions for Adults: Instructor-Led & Self-Paced

Self-PacedInstructor-Led

Money Smart modules

Module 2: Borrowing Basics

Module 3: Check it Out

Module 4: Money Matters

Module 5:Pay Yourself First

Module 6: Keep it Safe

Module 1: Bank on It

Module 10:Your Own Home

Module 9: Loan to Own

Module 8: Charge it Right

Module 7: To Your Credit

Instructor-Led Curriculum

• Each module is structured identically• Comprehensive guide for instructors• Take-home booklet for participants• Overheads• Duration of each module: 1-2 hours• Available in: English, Spanish, Chinese,

Korean, Vietnamese, & Russian• Version for blind or visually impaired• Revised as of August of 2006

Computer-Based Instruction (CBI)

(Self-Paced) Curriculum• Online or CD-ROM• 20-30 minutes per module• Available in English and Spanish• Revised in 2007

Money Smart for Young Adults

Helping Young Adults LearnThe Basics of Handling their Money and

Finances

Survey of Money Smart Participants

• A Longitudinal Evaluation of the Intermediate-term Impact of the Money Smart Financial Education Curriculum upon Consumers’ Behavior and Confidence (2007)

• Goal: measure results of Money Smart training in the months following the course

• Unique because of focus on broad audience

Methodology

• Three phases– Before taking the course– Immediately after the course– 6-12 months following the course

Who participatedIllustration 1: Demographic summary of the 631 respondents*

Age Under 25 years

25-34 years 35-44 years 45-54 years

55 years or older Unknown

Total

85 (13%)

188 (30%) 186 (30%) 118 (19%)

53 (8%) 1 (0%)

631 (100%)

Education Less than high school

High school Some college or trade

College Postgraduate work

Unknown Total

79 (13%)

162 (26%) 266 (42%) 78 (12%) 45 (7%)

1 (0%) 631 (100%)

Race/Ethnicity White

African American Asian

Latino Other

Unknown Total

163 (26%) 290 (46%)

22 (4%) 122 (19%)

28 (4%) 6 (1%)

631 (100%)

Annual Income

Under $10,000 $10-000-$19,999 $20,000-$35,000

$35,000 or over Unknown

Total

133 (21%) 170 (27%) 175 (28%) 118 (19%)

35 (5%) 631 (100%)

Observations-starting course

Illustration 4: Breakdown of respondents’ reasons for not having a checking account at the beginning of the course

Reason for not having a checking account Yes No Total

No need for account 38 (28%) 96 (72%) 134 (100%)

Request to open bank account was rejected 14 (10%) 120 (90%) 134 (100%)

Minimum balance or fees are too high 13 (10%) 121 (90%) 134 (100%)

Use a check-cashing store 13 (10%) 121 (90%) 134 (100%)

Don’t know how to use one 10 (7%) 124 (93%) 134 (100%)

Don’t trust financial institutions 6 (4%) 128 (96%) 134 (100%)

Don’t have proper identification 3 (2%) 131 (98%) 134 (100%)

No financial institutions in neighborhood/area 1 (1%) 133 (99%) 134 (100%)

Some other reason 59 (44%) 75 (56%) 134 (100%)

Money Smart Survey Results

Findings include:• Immediately after completing the

course: – 69 percent of respondents reported an

increase in their level of savings, – 53 percent reported their debt

decreased, and – 58 percent stated they were more likely

to comparison shop.

Money Smart Survey Results (cont.)

• 6-12 months following the course: – 13 percent of participants who already had a

checking account opened a different type of account at the same bank & 22 percent opened a checking account elsewhere, showing the ability to comparison shop

– 43 percent of those without a checking account opened a checking account

– 37 percent of those without a savings account opened a savings account

– 28 percent of those with checking accounts and 22 percent of those with savings accounts began using direct deposit for the first time

Money Smart Survey Results (cont.)

– 61 percent of those not using a spending plan/budget at the end of the course were using one

– 95 percent of those who used a spending plan/budget at the end of the course still used it

– 12 percentage point increase in those who “always” pay bills on time compared to the beginning of the course

Opinion questionsIllustration 32: Responses to “I am in control of my money.”

Phase Agree Disagree Not sure Total

Pre-training survey 428 (69%) 105 (17%) 91 (15%) 624 (100%)

Post-training survey 516 (82%) 57 (9%) 54 (9%) 627 (100%)

Follow-up survey 574 (91%) 47 (7%) 8 (1%) 629 (100%)

Illustration 34: Responses to “I understand the way I spend my money enough to make a budget.”

Phase Agree Disagree Not sure Total

Pre-training survey 487 (78%) 55 (9%) 81 (13%) 623 (100%)

Post-training survey 580 (92%) 19 (3%) 29 (5%) 628 (100%)

Follow-up survey 584 (93%) 35 (6%) 11 (2%) 630 (100%)

Illustration 35: Responses to “I am comfortable doing business with a bank or credit union.”

Phase Agree Disagree Not sure Total

Pre-training survey 528 (84%) 25 (4%) 72 (12%) 625 (100%)

Post-training survey 556 (89%) 19 (3%) 51 (5%) 626 (100%)

Follow-up survey 572 (91%) 46 (7%) 12 (2%) 630 (100%)

Student Satisfaction

• Approximately 95 percent of respondents reported that they were satisfied with their Money Smart course

Financial education: the foundation

Trust between consumer and financial institution

Trust between consumer and financial institution

Developing a budget and saving moneyDeveloping a budget and saving money

Buying a home and/or starting a small businessBuying a home and/or starting a small business

Establishing Relationship with a Bank / Credit UnionEstablishing Relationship with a Bank / Credit Union

Opening a Savings and/or Checking AccountOpening a Savings and/or Checking Account

Creation of long-term assets

Creation of long-term assets

Building wealthBuilding wealth

Financial Education Can Be the Building Block to...Financial Education Can Be the Building Block to...

Questions?

Luke Reynolds(202) 898-6724

lureynolds@fdic.gov

Thank you