Scientists have found that people begin in infancy to understand numbers. But the leap from simple numeric concepts to the management of one’s personal finances seems like a large one.
Last month, the Massachusetts Financial Education Collaborative (MFEC) and other involved organizations announced the opening of a centralized office to help coordinate the varied financial education efforts available throughout the state.
“There was financial education going on around the commonwealth, but it was extremely fragmented,” said Margaret Miley, executive director of the Midas Collaborative, a nonprofit organization that spearheaded the creation of the MFEC and creation of its staffed office. “People didn’t know where to go.”
But now that the public knows where to go, or at least has access to a clearinghouse of financial education programs and initiatives, how will the commonwealth and the groups involved with the formation of the office – including the banking industry – measure its success?
That’s trickier.
David Floreen, executive vice president of the Massachusetts Bankers Association (MBA), said the effectiveness of financial literacy programs is difficult to measure.
“There aren’t many hard data out there,” said Heather Johnson, a spokesperson for the state Executive Office of Education.
Inconclusive Data
Banks in Massachusetts have been involved with financial education for the past 15 years, Floreen said. In that time, the MBA has noticed that much of the financial education received by young people is provided by parents or other family.
“It’s haphazard. It’s scattered.” Floreen said.
Despite a heavy push from President Barack Obama – who in early in 2008 formed the President’s Advisory Council on Financial Literacy with a directive to, in part, “improve financial education efforts for youth in school and for adults in the workplace” – actual participation in available financial education programs has been uninspiring.
In 2010, 1,910 Massachusetts high school students and 69 teachers participated in the National Financial Capability Challenge put on by the U.S. Department of Education and the U.S. Department of the Treasury. Those students represented 45 schools. There are more than 400 high schools in Massachusetts.
The state’s average score was 69 out of 100.
From the relatively few that do participate in one variety of financial education or another, it is difficult to measure the success or failure of those efforts. Floreen said current financial education efforts today were “pretty much where health education was a generation ago.”
“We certainly have fewer students today driving drunk and engaging in promiscuous sexual behavior without protection,” Floreen said, although it’s equally difficult to attribute that trend to organized education efforts.
Similarly, it can’t be said with certainty that “savings have increased and levels of debt have gone down” as a result of financial education programs, Floreen said. “The data is not entirely conclusive.”
Marketing As Education?
But Floreen said there’s “enormous demand” for financial education. To banks, it might seem like a golden opportunity. An informed consumer is a bank’s best customer, and if a bank is the one doing the informing, successful customer recruitment is almost assured.
But still, results have been inconsistent, Floreen said.
“Is that a marketing issue? Yeah, to some extent. It’s a community awareness issue. It’s an opportunity to demonstrate to a community that a bank operates there and it does have a spill-over effect,” Floreen said.
But the industry must tread lightly. Consumers, even if they’re not particularly savvy with their finances, are very aware of marketing disguised as education, Floreen warned.
“Today’s consumer is pretty sophisticated,” he said. “They’re going to see through that.”
For reasons of propriety, however, banks are prohibited from selling at officially sanctioned education office events, Miley said.
“Everybody’s very clear about their roles,” Miley said, noting that “a fair amount of what’s out there for financial education has been developed by financial institutions.” Through the Midas Collaborative, those materials are used almost anonymously, she said.
Among the top recommendations made by the President’s Advisory Council on Financial Literacy is one that suggests either the U.S. Congress or state legislatures “should mandate financial education in all schools for students in grades Kindergarten through 12. For those schools without access to curricula, require the adoption of Money Math: Lessons for Life, a ready-to-use curriculum created by the Department of the Treasury and endorsed by the council.”
A law to that effect is currently winding its way through the U.S. Senate, Miley said, and would provide a solid financial education foundation currently lacking in public schools.
