The Importance of Targeting Different Audiences Through Financial Education St. Petersburg, June 26-27, 2012 Annamaria Lusardi GWSB and Global Center for Financial Literacy
Lessons from Financial Literacy/Capability Surveys Using the Financial Capability Study Financial literacy/capability surveys can be used to: Analyze knowledge and behavior and do monitoring and evaluation Learn about similarities and differences in the population and across groups Identify and target vulnerable groups
US National Financial Capability Study The 2009 National Financial Capability Study includes three linked surveys: 1. National Survey: Nationally-projectable telephone survey of 1,488 American adults 2. State-by-State Survey: Online survey of approximately 28,000 respondents (roughly 500 per state + DC) 3. Military Survey: Online survey of 800 military personnel and spouses We are doing a second wave in 2012 (going in the field in July 2012)
Analyzing the Financial Capability data Some findings with implications for policy Financial illiteracy is widespread in the population o Lack of awareness Important to look not only at assets but also at liabilities (debt and debt management) Important area where difficulties emerge Financial illiteracy can be linked to behavior o Those who know the least pay the highest cost for financial services
Analyzing the Financial Capability data (cont.) Very large differences in literacy/capability even among similar demographic groups o One size does not fit all Wide geographical differences Some groups are particularly vulnerable o Young o Old o Women
The Geography of Financial Literacy in the US Highest High Average Low Lowest 6
Financial Literacy around the World (FLat World) Financial literacy questions used in US data have been added to national surveys in: The Netherlands Sweden Germany Italy New Zealand Japan Russia See special issue of Journal of Pension Economics and Finance, Fall 2011
Special Issue of JPEF, October 2011 Financial Literacy Around the World (FLat World) Planning a special issue of the journal Numeracy
FLat World Similar patterns across countries 1. Financial literacy is lowest among: Rural areas Young Old Women 2. Women answer in the same way across countries: they say they do not know
Geographical differences Wide difference across regions We found very large regional differences in: US Italy Russia Some of these differences reflect: Rural/urban difference North/South A lot is left unexplained
Targeting specific groups The need for targeting Recognize differences in knowledge, needs and interest in financial education programs Increase effectiveness of programs Focus on vulnerable groups
Targeting women Focus on women Very large and persistent gender differences But women know they do not know Women are more likely to influence others Women are more likely to participate in financial education programs
Gender Differences in Self-Reported Literacy (U.S. data Survey with TNS ) On a scale of 1(very low) to 7 (very high), how would you assess your overall financial knowledge?
Mother s education and financial literacy of the young (NLSY data) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 86% 78% 80% 74% 70% 58% 61% 50% 48% 40% 43% 36% Interest Rate Infla6on Risk Diversifica6on Less than high school High school Some college College
Targeting the young Focus on the young Need to prepare young generations to a new economic environment Easy and cheap to reach them (they are at school) Create engagement and curiosity at a young age
Targeting the elderly Focus on the elderly Very low levels of financial knowledge Wide mismatch between actual and perceived knowledge Ideal targets for scams Severe consequences of mistakes in the decumulation phase of life-cycle
From research to applications Financial Literacy Center (FLC) s programs We have designed programs that target these specific groups We have combined quantitative and qualitative data to design our programs We have put together a large team of researchers We have done 29 projects in 2 years (with funds from the US Social Security Administration)
» A Financial Bootcamp for Women
Video game: Celebrity Calamity Project with Doorways to Dreams (founder is from Harvard Business School)
Turning to the Young: Using videos Step 3: Risk diversification = don t put all your eggs in one basket
Modules for students and teachers
A Museum of Saving to promote fin literacy
A Museum of Saving in Italy
A Museum of Saving in Italy
A Museum of Saving in Italy
Turning to the elderly and other groups Financial Literacy: Implications for Retirement Security and the Financial Marketplace Covers developing countries as well
Where do we go next Areas where more work can be done Use new data on financial capability across countries Use new data from 2012 PISA to target the young Need for more programs and more evaluation to know what works
Concluding Thank you for your attention More information on these programs is provided on the FLC web site: http://www.rand.org/labor/centers/financial-literacy/ projects.html My e-mail: alusardi@gwu.edu