Financial Capability &Family Financial

Stability Michelle D. Greene Deputy Assistant Secretary for Financial Education and Financial AccessUS Department of the Treasury

Financial capability is a key part of financial stability

Administration commitment to financial education/capability Presidential Proclamation – Financial Literacy Month (Apr. 2010) Executive Order created President’s Advisory Council on

Financial Capability (Jan. 2010) White House joined FLEC (Jan. 2010)

Opportunity and Responsibility

Financial Literacy in the Federal Government

Financial Literacy and Education Commission (FLEC)

President’s Advisory Council on Financial Capability

Treasury Department Agencies, programs, interagency efforts

White House Council on Women and Girls Interagency Working Group on Domestic

Violence

Our Priorities and Approach Make it evidence-based

Put it where it works

Focus it where it’s needed most

Increase access

Work with state and local governments, private and non-profit sectors

Financial Education

Core competencies & metrics

Catalogue of federal programs

mymoney.gov revamp

National Strategy

FINRA U.S. Financial Capability Survey

National Strategy 2010

VisionSustained financial well-being for

U.S. individuals and families

The national strategy will set the strategic direction for policy, education, practice, research, and coordination in the area of financial education and literacy.

MissionSet strategic direction so individuals

and families can make informed financial decisions

GoalsIncrease access and awareness

Identify core competenciesEstablish standardsIdentify what works

FINRA U.S. Financial Capability Survey - Objective

Annamaria Lusardi (Dartmouth College)

Applied Research & Consulting LLC (ARC)

FINRA Investor Education Foundation

Office of Financial Education, U.S. Treasury Department

Additional input from: Craig Copeland, Employee Benefit

Research Institute (EBRI) American Institute of Certified Public

Accountants (AICPA) Bob Willis, Univ. of Michigan, past PI

of U.S. Health and Retirement Study

Establish a baseline measure of the ability of Americans to manage their money.

Multi-Disciplinary Team:

Copyright 2007, FINRA Investor Education Foundation

Study MethodologyNational Financial Capability Study includes three linked surveys:

1. National Survey: Nationally-projectable telephone survey of 1,488 American adults

2. State-by-State Survey: Online survey of approximately 25,000 respondents (roughly 500 per state + DC)

3. Military Survey: Online survey of 800 military personnel and spouses

Copyright 2007, FINRA Investor Education Foundation

Four Key Financial Capability Components

1. Making Ends Meet

2. Planning Ahead

3. Managing Financial Products

4. Financial Knowledge and Decision-Making

Copyright 2007, FINRA Investor Education Foundation

FINRA U.S. Financial Capability Survey – Making Ends Meet

Very difficult14%

Not at all difficult51%

Somewhat difficult35%

In a typical month, how difficult is it for you to cover your expenses and pay all your bills?

Signs of Financial Strain

No66%

Yes33%

In the past 12 months, have you experienced a large drop in income which you did not expect?

Those Most at Risk Are Least Prepared for Emergencies...

49% 45%

31%26% 23%

44%

0%

20%

40%

60%

80%

100%

Total Female 18-29 <$25K Less thanHS

HS grad

% R

espo

nden

ts

Respondents with emergency or rainy day funds that would cover expenses for 3 months

Copyright 2007, FINRA Investor Education Foundation

FINRA U.S. Financial Capability Survey -Many Americans Don’t Plan Ahead

Yes: Other Savings

26%

Yes: Tax-Advantaged

Account14%

No58%

Don't know

2%

Are you setting aside any money for your children's college education?

No51%

Yes49%

Have you set aside an emergency or rainy day fund?

Yes42%

No58%

Have you ever tried to figure out how much you need to save for retirement?

Planning for Retirement

42% 39%

23%17%

22%28%

0%

20%

40%

60%

80%

100%

Total Female 18-29 <$25K Less thanHS

HS grad

% R

espondents

FINRA respondents who have tried to plan for retirement

Retirement Accounts & Investments

Respondents who…

Total <$25K $25-$75K

>$75K Less than HS

HS Some College

College

Have a retirement plan via employer

51% 13% 61% 83% 22% 39% 54% 76%

Have other retirement accounts

28% 4% 27% 57% 7% 14% 26% 55%

Have stocks, bonds or mutual funds outside of retirement accounts

46% 17% 47% 72% N/A 34% 46% 66%

Financial Literacy

Count of correct and incorrect quiz answers (total 5 questions)

Number of correct answers Number of incorrect answers

2.722.46

2.162.69

2.02 2.032.29

1.14 1.14 1.45 1.02 1.38 1.28 1.32

00.5

11.5

22.5

33.5

44.5

5

Total Female 18-29 60+ <$25K Less thanHS

HS grad

Mea

n

Copyright 2007, FINRA Investor Education Foundation

Self-Perception versus Financial Behavior

However, 24% who strongly agreed and 40% who agreed engaged in behaviors that generated fees or high costs.

Copyright 2007, FINRA Investor Education Foundation

“I am good at dealing with day-to-day financial matters”Respondents with credit cards and checking accounts

50% Strongly agreed

20% Agreed

13%

9% Disagreed

9%

71-3

4

56

Key Websites

Education Network (FLEC’s state and local group) To join, email: OFE@do.treas.gov

Our websites www.mymoney.gov (FLEC) www.treas.gov (Treasury)