Consumer Trends in the Private, Public, and Non-Profit Sector

Policy Paper
Jan. 25, 2011

The National Endowment for Financial Education commissioned experts to write four white papers for their "Quarter Century Project: 25 Years of Research in Financial Education." Ray Boshara of the New America Foundation was a member of the team tasked to write on the theme of "Consumer Trends and New Opportunities:  What are the emerging trends, new opportunities, and what is promising in the field of financial education? What is the impact of public policy on Americans’ financial behaviors and what policy changes are needed and why?" This white paper is the result of their efforts.

Americans across the country clearly need help. In December 2009, the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation in consultation with the Treasury Department completed the first National Financial Capability Study in the United States. It found that:

  • Nearly half of survey respondents reported facing difficulties in covering monthly expenses and paying bills.
  • The majority of consumers do not have “rainy day” funds set aside for anticipated financial emergencies and similarly do not plan for predictable life events, such as their children’s college education or their own retirement.
  • More than one in five Americans reported engaging in high-cost, alternative borrowing methods, such as payday loans and pawn shops.
  • While many consumers believed they were adept at dealing with day-to-day financial matters, they nevertheless engaged in financial behaviors that generated expenses and fees and exhibited a marked inability to do basic interest calculations and other math oriented tasks.
  • Few consumers compared the terms of financial products or shopped around before making financial decisions (FINRA Foundation, 2009).

When put alongside the economic difficulties many families in the United States are currently facing, the results highlight how important it is for financial education leaders to search for more effective strategies. Better financial education outcomes are not, however, achieved in a vacuum. The broader context in which financial education is promoted, and the broader context in which it is received, matter enormously to the success of our efforts moving forward. In our view, the context for financial education efforts in the years ahead includes: (1) broader economic and financial trends, which have worked, and are likely to continue to work, against the wealth accumulation efforts of low- and middle-income Americans, (2) the coming financial services overhaul legislation, which holds the potential to lead to better financial outcomes for millions of Americans, (3) the lack of evidence of the effectiveness of many financial education programs, which could, if not corrected, reduce the resources spent on financial education, and (4) the behavioral economics field, which is already having a significant impact on government, employer, and nonprofit efforts to promote saving and financial education nationwide.

Click here to read the entire paper.