Financial Literacy Initiatives: What Works
The housing and investment crisis beginning in 2008 revealed some of the financial dysfunction in American households. Research has shown that those with lower financial literacy are less likely to have a checking account, emergency fund or retirement plan, and are more likely to take pay-day loans, pay only minimum credit card balances, take on unaffordable mortgages and carry debt.
A 2010 paper by The Brookings Institution, “Financial Literacy: What Works? How Could It Be More Effective?” looks at existing research on a range of financial literacy programs that attempt to address these problems. Many of the conventional approaches to financial literacy, it turns out, are not sufficient.
The findings include:
- School-based: High school financial management classes do not appear to positively impact saving behavior.
- Credit Counseling: Enhanced credit counseling does not seem to lower the risk of mortgage default.
- Community-based: There are no conclusive studies measuring the efficacy of community-based education initiatives.
- Employer-based: Workplace education initiatives have been shown to raise retirement plan participation and contributions, and overall savings.
- Financial planning: Spending any time on financial planning, whether independently or with a financial professional, is associated with higher savings rates.
The authors suggest that some kinds of public awareness campaigns and online tools and resources offer additional opportunities to increase financial literacy. However, to motivate more responsible savings behavior, systems also need to be put in place to help simplify choices and encourage better decision-making.
Tags: consumer affairs, financial crisis, retirement
Note to instructor: The suggested assignments are designed for flexibility. They can be used in whole or part and can be adapted to a particular task -- for example, the newswriting assignments could be applied to the writing of the headline, the lead, the nut graph or the full story. Material from the assignments could also be combined with other material, for example, in the writing of a background, feature or local-angle story.
Read the Brookings Institution study "Financial Literacy Initiatives: What Works."
- Summarize the study in fewer than 40 words.
- Express the study's key term(s) in language a lay audience can understand.
- Evaluate the study's limitations. (For example: Do the results conflict with those of other reliable studies? Are there weaknesses in the study's data or research design?)
Read the issue-related Dallas Morning News article "Three Moms Teach Students the Basics -- From Wall Street to Main Street -- at Addison School."
- If you were to rewrite the article based on knowledge of the study, what key changes would you make?
- Write a lead (or headline or nut graph) based on the study.
- Spend 60 minutes exploring the issue by accessing sources of information other than the study. Write a lead (or headline or nut graph) based on the study but informed by the new information. Does the new information significantly change what one would write based on the study alone?
- Interview two sources with a stake in or knowledge of the issue. Be prepared to provide them with a short summary of the study in order to get their response to it. Write a 400-word article about the study incorporating material from the interviews.
- Spend additional time exploring the issue and then write a 1,200-word background article, focusing on major aspects of the issue.