Good Partners Make Great Programs

By Michael Staten, Professor and Director, TCAI

Partnerships have been a hallmark of the Take Charge America Institute’s operations since its founding seven years ago. Not only do good partners expand what we can accomplish with limited resources, but they also make projects more fun and rewarding for everyone involved. In this issue I’d like to tell you about several of our key partnerships, including two exciting new initiatives that have developed over the past year.

Without question, our oldest and broadest partnership has been through our Family Economics and Financial Education (FEFE) project. This nationwide collaborative effort brings together content experts, school administrators, and teachers to create activity-based personal finance lessons for high school and middle school students. Classroom teachers provide an endless stream of creative ideas for new activities that we incorporate into revised lessons in an ongoing cycle of program development and improvement. An interactive FEFE educator website helps to sustain an ongoing dialogue between FEFE staff at the University of Arizona and teachers nationwide who put the material in front of their students. As a result, the FEFE lesson plans and materials are constantly changing and improving based on teacher feedback about what works. As of January 2011, the curriculum has over 23,000 registered educators nationwide who can access and download all parts of the curriculum, free of charge. FEFE’s success and popularity is largely attributable to a project model built on a true partnership with teachers and schools.

The quality of FEFE lessons was acknowledged by the U.S. Treasury Department when it recently announced its 2011 National Financial Capability Challenge and accompanying teacher toolkit. This year’s Challenge is intended to help high school educators motivate and teach students the critical skills to improve their budgeting, saving and investing capabilities. The Challenge culminates in a voluntary online exam for high school students that will provide a yardstick for measuring their financial knowledge and decision skills. 

The educator toolkit on the Treasury’s website contains lessons from a select group of financial education curriculum providers, including three FEFE lessons (Understanding Your Paycheck; Types of Insurance; Protecting Yourself Against Identity Theft). Readers can learn more about the Challenge and the educator toolkit at www.challenge.treas.gov.

In another important partnership, TCAI has been collaborating with several national organizations to develop and pilot-test a professional development program for teachers to improve their core knowledge of personal finance concepts. Beginning in March, 2010, the National Endowment for Financial Education (NEFE) took a leadership role to create a financial literacy training institute for K-12 teachers. NEFE brought together representatives from the Council on Economic Education, the FDIC, FEFE/University of Arizona, the National Jump$tart Coalition, and Junior Achievement to discuss a collaborative training effort. Discussions also included input from both the U.S. Departments of Education and Treasury. An initial pilot training event was held for the Chicago Public Schools in August 2010. Based on feedback from that event, the curriculum agenda for a full 3-day training program was created during the fall of 2010. The pilot test of the 3-day “institute” hosted 150 Colorado teachers in Denver in January 2011. The local partners, including Colorado Jump$tart, the Colorado Council on Economic Education, and of course the NEFE team did a marvelous job in pulling together an ambitious event on a relatively short notice. Sample materials from all of the collaborating organizations were made available to teachers (in a scaled-down version of the Treasury Challenge toolkit mentioned above), but the focus of the three days was on content training, not curriculum options.

Organizers of an event like this one always hope that the program hits the mark with the audience. There is reason to think the demand is there. NEFE-funded research conducted at the University of Wisconsin in 2009 found that fewer than 20% of teachers surveyed nationwide felt competent to teach financial education topics, and 70% said they were willing to get formal financial education training. Having attended the entire January pilot institute (during which I led a half-day “Credit and Debt” training module) I can attest to both the enthusiasm of the teachers and the high value they placed on the content, as revealed in their comments and questions. I am convinced that these types of professional development opportunities are much needed and worth the effort. Note to potential funders: Resources devoted to training the trainers leverage very quickly into widespread impact on students. Future pilot opportunities (and the inevitable need for funding) are under discussion. TCAI will continue to do what we can to support this important effort. Stay tuned – as the concept evolves there may be a version of the training institute opening near you.

What the Financial Crash Taught Our Kids

Warm and Fuzzy Financial Ed Doesn't Cut It Anymore

American Banker June 24, 2011

Posted June 23, 2011 |  Michael E. Staten and Dan Iannicola Jr.

At the height of the massive financial turmoil that rocked the United States in 2008 and 2009, some of us in the financial literacy movement recognized that what was unfolding was more than just an historic economic calamity; it was a national teachable moment.

Consumer financial illiteracy was certainly not the main cause of the crash, but poor choices by consumers in the housing and mortgage markets were important contributors. Since then American consumers have learned some painful financial lessons on topics ranging from housing finance to portfolio management to basic household budgeting.

But while mom and dad were worried about foreclosures, plummeting investments and making ends meet during a recession, what were their kids taking from all of this? We recently asked that question in a national opinion poll of high school students which was commissioned by the University of Arizona's Take Charge America Institute for Consumer Financial Education and Research and was conducted by The Financial Literacy Group.

Like previous studies, our research confirmed that young people have significant gaps in financial knowledge, but unlike earlier research, this study also probed their attitudes. We wondered if youth would show the same low level of confidence in financial institutions demonstrated by adults post-crash.

In this vacuum of financial knowledge, it appears that young people's opinions about the financial system have been shaped by the constant drumbeat of negative stereotypes and criticisms so dominant in the public discourse during and since the crash. The result? A healthy skepticism about financial institutions has soured into cynicism, where teenagers almost expect to be victimized by financial firms. The poll of 878 students at 18 high schools spread over 11 states shows that the majority strongly distrusted financial institutions even while expressing great confidence in other things like their likelihood to find employment and to achieve financial security. Many of them failed to disagree with even the most extreme negative characterizations of the financial services industry.

For example, 60 percent of students polled firmly believe that credit card companies often entice people into taking on more debt that they can handle, while 70 percent believe that businesses try to "trick" young people into spending more than they should. Only 25 percent of students disagreed with the statement, "the stock market is rigged mostly to benefit greedy Wall Street bankers," and only 17 percent disagreed with the statement, "banks are mostly interested in getting my money through hidden fees."

In addition to distrust, responses also indicated a lack of knowledge and understanding about the basic workings of personal finance.

Sixty-eight percent did not know that owning stocks is a riskier form of investment than owning government bonds, and 79 percent did not know that banks and credit unions typically have lower fees than check cashing stores for the same services. When asked about credit scores, more than half didn't know that a high credit score is better than a low score. Additionally, only 15 percent were aware that credit unions are different than banks with respect to their not-for-profit status.

This isn't just about bad PR for the industry. Adolescents with this level of distrust of financial institutions become adults who don't open bank accounts, invest for retirement, insure against risks or finance important purchases like college educations or homes. This type of financial disengagement could push a generation of consumers away from mainstream institutions and toward risky alternative service providers or toward simple inaction, which has its own perils. Moreover, the industry will need to attract talent from this generation to fill its ranks in the years ahead. Additionally, these students will soon become the voters who will help determine the legislative fate of these companies for decades to come.

So what does all this mean for the industry?

Perhaps these results suggest a fresh look at what is becoming a familiar topic for financial institutions — financial education. To their credit, many financial institutions have for years committed funds and volunteer hours to support youth financial education. But it tends to be done in the spirit of philanthropy or compliance, disconnected from their business lines, while the real resources go elsewhere.

That pre-crash view is simply outmoded now. These findings suggest that enlightened financial institutions should view youth financial literacy as no longer being about "warm and fuzzy," but about profit and loss.

Perhaps what these figures show financial institutions is that financial education should not be something nice they do for the kids, but something smart they do for their shareholders. By putting their considerable financial, marketing, and political muscle behind educating the next generation of consumers, employees, and voters, the industry will likely find a strongly positive return on its investment.

In contrast, to passively endorse the status quo is to allow young people to continue to rely upon industry stereotypes, harsh sound-bites and overly simplistic characterizations of the pillars of our financial system.

Our years of experience working on behalf of the financial literacy movement tell us that we are at a crossroad, and that the time to begin aggressive action is now. Many historians point to Vietnam and Watergate as watershed moments that caused a generation of young Americans to become deeply disillusioned with government for decades that followed. In light of these polling numbers, we can't help but wonder if the financial crash will have a similar effect on the next generation's view of the financial sector.

Michael E. Staten is an economist and director of the University of Arizona's Take Charge America Institute for Consumer Financial Education and Research. Dan Iannicola Jr. is the former deputy assistant secretary for financial education at the U.S. Treasury Department and presently the chief executive of The Financial Literacy Group consulting firm.

 http://www.americanbanker.com/bankthink/Financial-Education-Teens-Staten-1039334-1.html

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About Your Money-Think interest, budgets, taxes and credit

Article from The University of Arizona Alumnus and Advancing Arizona Magazine

Spring 2011

Michael E. Staten

Professor and Director of Graduate Studies in the Norton School of Family and Consumer Sciences, Director of the Take Charge America Institute, and Take Charge America Endowed Chair

About Your Money 

Think interest, budgets, taxes, and credit

 

I asked my tax-prep expert the other day how much her 20- or 30-something clients know about their own finances. “Absolutely nothing,” she exclaims. “They just live for today.”

And for Michael E. Staten, a professor in the Norton School of Family and Consumer Sciences, that constitutes a career-long challenge.

Staten has become a master at getting middle schoolers through graduate students to think systematically (or at all) about compound interest, budgets, and planning.

For starters, he poses an old math-class problem. Which would you rather have — $50,000 in cash or a penny that would double in value each day for a month? (Have your own answer? OK, save it and read on.)

Right answers, he says, aren’t as important as getting students to grasp concepts like saving, investing, borrowing, and taxes. Staten directs the Take Charge America Institute for Consumer Financial Education and Research (TCAI), which has designed a national school curriculum on personal finance used in 24,000 classrooms, reaching up to a million students. You can learn more about the project, based at the Norton School of Family and Consumer Sciences, at tcainstitute.org.

Since 1987, the parent group, Take Charge America, a nonprofit based in Phoenix, has offered credit counseling and debt management, helping people repay about $3 billion in debts. At the UA, Staten’s research focuses on credit issues, and he teaches money, consumers, and the family, a lower-division general-education class, and retail financial services, an upper-division class that raises questions about real estate, student loans, insurance,and banking. We fired off a few questions of our own:

So if you are in mid-recession trouble, where do you begin?
“First, be patient. The recovery has started, but there’s a lot of dead overhang. You may owe more on your home than its value. But things are improving, very slowly. Way too many houses for sale are driving down prices. Only Nevada seems worse than Arizona. The good news is that consumer confidence data show spirits are starting to rebound.

“If you’re among the unemployed, the lack of resurgence in hiring highlights the importance of using networks to recreate and reinvent yourself. You have to find where you can be useful. Alumni networks have never been more important. This is a good lesson for young alums in the early stages of a career. Invest in building your network.”

Are you talking about social media?
“Yes, the younger age groups are already using Twitter and Facebook, and that spills right over into job seeking. LinkedIn is a good way to do professional networking. (LinkedIn launched in 2003 and reached one million members in 494 days; it claims 90 million members now and says a million new ones join every 12 days.) I do it. Facebook is another example. I haven’t joined, but my wife has and she says, ‘Mike, just get on it.’ She’s exactly right.”

What are some steps to take while we await the recovery?
“One, for all households out there: Establish or rebuild an emergency fund, with a goal of three to six months of take-home pay, in liquid form. Up until 2007, people ignored this — it was an uphill roller-coaster ride and things were always getting better. Now people realize they need this reserve fund to get through the tough times.

“Two, save for retirement. That’s especially true for younger alums. Young people can accumulate tremendous wealth with modest savings early on, beginning at 24 or 25. When you are older, you can’t take advantage of a long compounding period. We can already forecast that Social Security is going to be truncated, with a higher retirement age and reduced benefits for higher incomes. So take care of yourself now.

“Three, know your credit profile, and know what your credit score means. It affects the terms when you borrow, when you rent, or apply for a job. Bad news may tip the scale to somebody else. If there’s stuff in there that’s not correct, you can get it out of there. Every consumer can pull one free report from each of the major bureaus every year.” (See annualcreditreport.com to check yours.)

Meanwhile, Staten is researching accuracy in consumer credit reports for the Federal Trade Commission and will report to Congress next year on his findings.

Now, of course you chose the penny that doubles daily, compounding into millions of dollars in a month, if you know the basics of personal finance. Try that problem on your 13-year-old. You’ll be helping Staten’s cause.