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"Build Your Financial Literacy Toolkit" was presented at the Center for Health Literacy Conference 2011: Plain Talk in Complex Times by Jeanne M. Hogarth, PhD, Manager, Consumer Education and Research Section, Consumer & Community Affairs, Federal Reserve Board. Description: This session will help you identify the personal finance knowledge and skills that your clients need to make informed financial decisions and integrate these into your resources and programs.
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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!