Financial Education
  Part 2: Financial Literacy Programs and Consumers

Providers and Focus of Financial Literacy Training

Efforts to improve the quality and increase the amount of the financial information provided to consumers have been in place for many years. In a broad sense, the disclosure of key terms and costs of lending and deposit transactions dictated by federal consumer protection laws constitute a financial education tool, as they are intended to enable consumers to compare the same type of information across products.  Although the utility of disclosure documents has been debated, disclosures are generally viewed as an important mechanism for communicating important information to consumers.

What is new is the proliferation of programs. A study commissioned by Fannie Mae found that two-thirds of the ninety financial literacy programs that it examined were begun in the 1990s and that three-fourths of those were initiated in the late 1990s or 2000.¹

The providers of financial literacy programs are a diverse group that includes employers, the military, state cooperative extension services, community colleges, faith-based groups, and community-based organizations. Commercial banks are also important providers of financial literacy education. All but two of the forty-eight retail banks responding to a recent survey by the Consumer Bankers Association reported contributing to financial literacy efforts in some way.² Many banks consider their engagement in this area a way to expand their customer base and promote goodwill, and such activities are often given favorable consideration in examinations for compliance with the Community Reinvestment Act.

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The content and audience of financial literacy programs also vary considerably. Some programs, such as the Federal Deposit Insurance Corporation’s ‘‘Money Smart’’ curriculum, offer comprehensive information intended to familiarize households with the fundamentals of saving and credit.  Other programs are intended to facilitate the attainment of a specific goal, such as home ownership, savings accumulation, or debt reduction.³ Some programs are intended for a broad audience. Others are designed for a particular group, such as high school students or military personnel. For the banks surveyed by the Consumer Bankers Association, prospective homeowners were the most common focus.  Another major target audience was training for youth: Three-fourths of the responding banks reported that they support financial literacy programs in public schools, through direct investment and participation in training initiatives.⁴

The American Bankers Association Education Foundation offers bankers a variety of information resources to promote the importance of savings and credit management and sponsors a Personal Economics Program in which banks work with educators to teach people of all ages about banking services and financial management.⁵  Banks and other depository institutions also collaborate with community development organizations as a means of increasing their reach. For example, some financial institutions support the  National Community Reinvestment Coalition’s financial literacy initiative designed to help bring low - and moderate - income communities, minority groups, and individuals into the financial mainstream. One component of the program helps banks and local community groups develop mutually beneficial strategies for promoting financial literacy.

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Employers are also common providers of financial education, and many sponsor informational and training sessions that employees can attend during the workday. For example, the Federal Reserve Board has in recent years periodically hosted sessions focusing on homebuyer orientation, budgeting and credit management, and savings for retirement and children’s education. The Department of Defense, which determined that financial wellness contributes to quality of life and affects military readiness, incorporated comprehensive financial education in its basic training programs for certain personnel.

Financial Literacy Sources: Federal Reserve Bulletin November 2002, Pages 448 - 449

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