Financial Competencies in Practice Jeanne M. Hogarth Division of Consumer & Community Affairs Federal Reserve Board The analysis and conclusions set forth in this presentation represent the work of the authors 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.

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 Education Needed (data from 2003) Spending & saving None Investments Spending & investment Saving & investment General – all 3 topics Basic – all 3 topics

Financial Management Building Blocks (Rutgers Cooperative Extension)

Family Economics Financial Education (University of Arizona)

DRAFT Core Competencies Core CompetencyKnowledgeAction/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 Knowledge Gross versus net pay Benefit and taxes Education is important Action/Behavior Understand your paycheck Learn 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

Saving Knowledge Saved 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 Action/behavior Start 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

Borrowing Knowledge 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) Action/behavior Plan, 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

Protecting Knowledge Act now to protect yourself from potential catastrophe later Identify theft, fraud, scams Action/behavior Choose appropriate insurance; Build up an emergency fund; Shop around Protect your identity; Avoid fraud and scams; Review your credit report

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  Lerner goals  Program goals

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

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

Thank you! Any questions?