Wednesday, December 7, 2011
FINANCIAL EDUCATION NEEDS TO GO IN A NEW DIRECTION, SAYS CFA DIRECTOR
“Financial education efforts – as distinct from individual financial counseling – have not been particularly effective. The most effective type of financial education is personal, practical and experiential.” Making financial education personally relevant to the consumer is the key to successfully influencing behavior according to Steve Brobeck, Executive Director of the Consumer Federation of America, today at a Women in Housing and Finance Foundation (WHF Foundation) luncheon. Dr. Brobeck told the attendees that his research findings show that much financial education has limited effectiveness.
“Even financial education at the high school level has had little impact, “ said Dr. Brobeck. There are a variety of reasons why current financial education efforts aren’t working. For one, researchers seem to have a bias in showing greater success than the data actually reflect. Additionally, there are challenges in presenting such information to a large number of people. Dr. Brobeck also indicated that most consumers, especially high school students, do not see the relevance of financial education when it comes to selecting financial products. Even when purchasing those products, consumers rely more on friends, family, and others they know than any insights they gained in a financial education course.
Dr. Brobeck also discussed some ways to improve the effectiveness of these programs. “Successful financial education starts in the home,” he said. “The most effective educators are the parents, and almost all parents recognize this. This type of financial education is effective, personal, practical and experiential.” If parents are not able to do this, the schools can. “Teach students money management by asking them to research their own household budgets.” Schools can also teach the importance of consumer research by having students compare financial products.
There is no simple solution to more effective financial education, according to Dr. Brobeck. “It would be helpful if we could all be not just financial educators, but financial education marketers.” He cited examples of effective “message marketing,” such as those campaigns against drunk driving, for the use of safety belts, and awareness of safe sex practices. Similar approaches to financial education could be more useful.
Dr. Brobeck has served as executive director of the Consumer Federation of America since 1980. CFA is an association of nearly 300 non-profit consumer groups that seeks to advance the consumer interest through research, advocacy, and education.
The event, held at the offices of K&L/Gates, raised funds for the Women in Housing and Finance Foundation. Thanks to the event sponsors, the Foundation raised more than $8,500 at the luncheon. The monies will underwrite the WHF Foundation’s financial empowerment programs that are targeted to helping low-income and disadvantaged women and children gain the financial and life management skills they need to become economically independent.
WHF Foundation President Lisa Andrews expressed heartfelt thanks to all the sponsors: Silver Sponsor Banco Popular, and Bronze Sponsors: The Conference of State Bank Supervisors, the National Association of REALTORS, PricewaterhouseCoopers, and Credit Union National Association.