1. Jeanne M. Hogarth Federal Reserve Board Marianne Hilgert in the Division of Consumer & Community Affairs, assisted with preparation for this presentation. The analysis, comments 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. Does Education Work? How Do We Know?

2. Research on What Works u NEFE High School Financial Planning Program v Increased knowledge, skills, and confidence v http://www.nefe.org/pages/hsfppevaluation.html u Financial/consumer education in high school v Financial education in high school associated with higher savings and net worth as an adult v Bernheim, Garrett, & Maki, Journal of Public Economics, June 2001, 435-465

3. Research on What Works u Credit counseling v Improved credit scores, better credit management, lower delinquency v http://www.federalreserve.gov/communityaffairs/nation al/CA_Conf_SusCommDev/pdf/statenmichael.pdf u Homeownership counseling v Lowered 90-day delinquency rates v http://www.federalreserve.gov/communityaffairs/national/CA_Conf _SusCommDev/pdf/zornpeter.pdf

4. Research on What Works u Retirement planning v Save More Tomorrow s Increased participation in 401k, increased rates of contribution, high retention after 3 years s http://gsbwww.uchicago.edu/fac/richard.thaler/resear ch/SMarT14.pdf v Members of TIAA-CREF s Revised retirement savings goals, plan to modify saving & investment s http://www.federalreserve.gov/communityaffairs/nati onal/CA_Conf_SusCommDev/pdf/clarkrobert.pdf

5. Research on What Works u Money 2000 v Increased savings, decreased debts v http://www.rce.rutgers.edu/money2000/research.asp v http://www.rce.rutgers.edu/money/pdfs/handlemone y.pdf u American Dream Demonstration (IDAs) v Financial education increases savings (maxes out at 8-10 hours) v http://gwbweb.wustl.edu/csd/Publications/2002/ADD report2002.pdf

6. Research on What Works u Employee Financial Education v Increased 401k participation & improved other financial behaviors v Kim, Kratzer, & Leech, Proceedings of AFCPE Conference, 2001. v Garman, Kim, Kratzer, Brunson, & Joo, (1999). Financial Counseling and Planning,1999, 10(1), 79-88. u A word of caution – most studies based on self- selection v What would effects be if people were randomly assigned to an educational program or not?

7. Connecting Knowledge & Behavior u What do they know? Vs What do they do? v (www.federalreserve.gov/pubs/bulletin/2003/0703lea d.pdf) u Cash flow u Saving u Credit u Credit reports u Retirement saving u Investments

8. Cash Flow u Connection: v Your bank doesn’t call to warn you if you write a check that overdraws your account. 62% s Reconcile checkbook every month75 v Making late payments can make it hard to get a loan 94 s Pay bills on time 88 u Disconnect s Use a spending plan or budget 46

9. Saving u Connection: v You should have an emergency fund that covers two to six months of your expenses.94% s Have savings account 80 u Disconnect s Have emergency fund63 u Partly connected? v With compound interest, you earn interest on your interest, as well as on your principal 72

10. Credit u Connection v The APR is the most important thing to look at when comparing credit card offers if you expect to carry a balance.84% s Pay credit cards in full each month61 s Compare offers before applying for a card35 u Partly connected? s Know about $50 liability limit if credit card is lost or stolen 50 u Disconnect s Misperception about how credit counseling agencies work78

11. Do people shop?

12. Protect your credit rating u Disconnect v Your credit report includes employment data, your payment history, any inquiries made by creditors, and any public record information. 81% s Review credit reports58

13. Retirement Saving u “Don’t leave money on the table” u Partly Connected v The earlier you start saving for retirement, the more money you will have. 92% s Have any retirement plan/account 63 u Disconnected s Have 401(k) or company pension plan 45 s Participate in employer’s 401(k) plan 37

14. Investments u Connection v Over the long-term, stocks have the highest rate of return on money invested.56 s Have any investment accounts52 v Mutual funds do not pay a guaranteed rate of return.52 s Have mutual fund46 u Concern v Investment products bought at your bank are not covered by FDIC insurance.33

15. The Good, the Bad, and the Ugly LowMediumHigh Cash Flow Saving Investment Credit

16. How do people learn?

17. How do people want to learn? u Media (TV/radio, magazines, newspapers) 71% u Brochures/print materials 66 u Video 64 u Internet 56 u School 53 u Community courses 53

18. What we didn’t ask: u Learning from peers u Employer-based programs u Counseling & coaching u Planning ahead -- wills & advance directives u How people sort through sources of info v “Unbiased” vs commercial information on fill in the blank

19. How will we know if we’re making a difference? u Information is not education v Need to change behaviors u Credit scores go up u Savings rates go up u Bankruptcies go down u Self-anchoring measures

20. Subjective Measures of Making a Difference u Satisfaction with life and lifestyle u Attitudes -- feel confident u Feel prepared for events -- getting married, home buying, having kids, taking vacations, college education, home repairs, car buying, retirement

21. Resources u www.federalreserveeducation.org u www.federalreserveeducation.org/ fined/index.cfm u www.chicagofed.org/cedric/financial_educ ation_research_center.cfm u http://www.frbatlanta.org/consumer.cfm