DEFINING FINANCIAL WELL-BEING

Transcription

1 DEFINING FINANCIAL WELL-BEING APRIL 2015 NATIONAL DISABILITY INSTITUTE WASHINGTON, DC

2 Moderator/Presenter Michael R. Roush, MA Director, Real Economic Impact Network National Disability Institute

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6 Submitting Questions For Q&A: Please use the chat box or Q&A box to send any questions you have during the webinar to Michael Roush or Nakia Matthews and we will direct the questions accordingly during the Q&A portion. If you are listening by phone and not logged in to the webinar, you may also ask questions by ing questions to Please note: This webinar is being recorded and the materials will be placed on the National Disability Institute website at 6

7 Technical Assistance If you experience any technical difficulties during the webinar, please use the chat box to send a message to the host Nakia Matthews, or you may also nmatthews@ndi-inc.org. 7

8 National Disability Institute A national research and development organization with the mission to promote income preservation and asset development for persons with disabilities and to build a better economic future for Americans with disabilities.

9 NDI s Real Economic Impact Network An alliance of organizations & individuals dedicated to advancing the economic empowerment of people with disabilities. Consists of more than 4,500 members located throughout the United States. Includes non-profits, community tax coalitions, asset development organizations, financial education initiatives, corporations & private-sector businesses, federal/state/local governments & agencies, and individuals & families with disabilities. All partners join forces to embrace, promote & pursue access to & inclusion of people with disabilities in the economic mainstream. Sign-up at

10 Today s Agenda Overview of Consumer Financial Protection Bureau (CFPB) and resources/tools available Overview of financial well-being Highlights of CFPB s report titled Financial well-being: The goal of financial education Highlights of CFPB s report titled Consumer Voices on Credit Reports and Scores Questions and Answers 10

11 Presenter Irene Skricki Senior Financial Education Program Analyst Office of Financial Education Consumer Financial Protection Bureau

12 Consumer Financial Protection Bureau Financial well-being and consumer credit reports presentation Webinar for the National Disability Institute April 8, 2015 Irene Skricki Senior Financial Education Program Analyst Office of Financial Education This presentation is being made by a Consumer Financial Protection Bureau representative on behalf of the Bureau. It does not constitute legal interpretation, guidance or advice of the Consumer Financial Protection Bureau. Any opinions or views stated by the presenter are the presenter s own and may not represent the Bureau s views. Note: This document was used in support of a live discussion. As such, it does not necessarily express the entirety of that discussion nor the relative emphasis of topics therein.

13 The Consumer Financial Protection Bureau The CFPB helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. Educate An informed consumer is the first line of defense against abusive practices. Enforce We supervise banks, credit unions, and other financial companies, and we enforce federal consumer financial laws Study We gather and analyze available information to better understand consumers, financial services providers, and consumer financial markets.

14 Consumer Education and Engagement Office of Financial Education within CEE Consumer Engagement Special Population Offices Financial Education Financial Empowerment Servicemember Affairs Older Americans Students OFE Mission: Educate and empower consumers to make better informed financial decisions. 14

15 Office of Financial Education (OFE) Promote more effective financial education for more consumers through trusted sources. Support and strengthen channels for delivering financial education to consumers. Encourage consumers to ask, plan and act and support them with tools to do so. Undertake foundational research to improve the impact of financial education and identify elements of effective practices.

16 Tools and Resources for Financial Educators 16

17 Owning a Home consumerfinance.gov/owning-a-home 17

18 Paying for College consumerfinance.gov/paying-for-college 18

19 Submit a complaint 19

20 Ask CFPB This is the footer 20

21 consumerfinance.gov/parents

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23 CFPB Community Education Project Goal: Making libraries the go-to resource for financial education in every community National Partners: Institute of Museum and Library Services American Library Association Public Library Association Reference and User Services Association FINRA Investor Education Foundation USDA Cooperative Extension Service Money Smart Week by the Federal Reserve Bank of Chicago Federal Deposit Insurance Corp. Federal Trade Commission Over 1700 library branches nationwide are involved to date 23

24 Your Money, Your Goals Training enhances confidence about discussing finances with clients Training provides clear examples of effective communication techniques Modular toolkit is user-friendly with plain language text Available for download in English and Spanish 2 4

25 Issues facing older Americans Managing Someone Else s Money Guides Reverse Mortgage Guide Senior Designations Guide Protecting Residents from Financial Exploitation Money Smart for Older Americans 25

26 Tell your story consumerfinance.gov/yourstory 26

27 CFPB Financial Education Discussion Group on LinkedIn 27

28 OFE s Research Agenda Understanding Consumers Consumer behaviors, motivations, perceptions, and attitudes, including the challenges facing consumers in the financial products and services marketplace Understanding the Financial Education Field The landscape of the financial education field and the successes and challenges of financial education practitioners Understanding Effective Practices What financial education practices are effective in educating and empowering consumers to make well-informed financial decisions and improve their financial well-being 28

29 Understanding Financial Well-Being Project Contribution A way to quantify the ultimate goal of financial education strategies Growing consensus that individual financial well-being is the ultimate goal of financial literacy Project Goals Define financial well-being from the consumer perspective Research the key knowledge, skills, attitudes and behaviors that contribute to individual financial well-being Develop a way to directly measure financial well-being

30 Methodology Worked with a team of expert researchers to: Review and synthesize literature from multiple fields Conduct in depth 1:1 qualitative interviews with diverse group of consumers - both working age and older - and financial professionals Consult with academic and practitioner experts 30

31 What financial well-being is Summary: Financial well-being is a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life. Elements of financial well-being: Having control over day-to-day, month-to-month finances Having the capability to absorb a financial shock Being on track to meet financial goals, and Having the financial freedom to make choices that allow one to enjoy life 31

32 The four elements of financial well-being Present Future Security Control over your day-to-day, month-tomonth finances Capacity to absorb a financial shock Freedom of choice Financial freedom to make choices to enjoy life On track to meet your financial goals 32

33 What influences financial well-being Personality and attitudes How you tend to think, feel, and act. Social and economic environment What surrounds you in your family and community. Decision context How a particular decision is presented. Knowledge and skills What you know, and what you know how to do. Behavior What you actually do. Available opportunities What options are open to you. Personal financial well-being How satisfied you are with your financial situation. 33

34 Research led to hypotheses in three areas Personality and attitudes How you tend to think, feel, and act. Social and economic environment What surrounds you in your family and community. Decision context How a particular decision is presented. Knowledge and skills What you know, and what you know how to do. Behavior What you actually do. Available opportunities What options are open to you. Personal financial well-being How satisfied you are with your financial situation. 34

35 Hypotheses: Financial behaviors Behavior What you actually do. Four behaviors support financial well-being: Effective routine money management Financial research and knowledge-seeking Financial planning and goal-setting Following through on financial decisions Balance Ask Plan Act 35

36 Hypotheses: Financial knowledge Existing literature suggests that: Knowledge and skills What you know, and what you know how to do. Factual knowledge in and of itself is not sufficient to drive behavior or behavior change The link between knowledge and behavior is mediated by attitudes, personality, and decision context Our primary hypothesis is that: The type of knowledge most likely to support or predict financial behaviors supportive of financial well-being is a set of skills we call financial ability 36

37 Financial ability is an influential part of financial knowledge What is financial ability? Knowing when and how to find reliable information to make a financial decision; Knowing how to process financial information to make sound financial decisions; and Knowing how to execute financial decisions, adapting as necessary to stay on track. What influences it? Upbringing, social context, personal networks, personal observation and experience, education 37

38 Hypotheses: Personal traits Internal frame of reference Comparing yourself to your own standards, not to others Perseverance Being highly motived to stay on track in the face of obstacles Executive functioning Having a tendency to plan for the future, control impulses, and think creatively to address unexpected challenges Financial self-efficacy Personality and attitudes How you tend to think, feel, and act. Believing in your ability to influence your financial outcomes 38

39 Concluding Thoughts This research is a foundation Developing measurement tools Extending to youth Hypothesis testing Novel contributions of this project are: Consumer-derived definition of financial well-being Testable hypotheses about the personal traits that support positive financial behaviors A concept of financial ability to further explore the skill component of financial literacy An overall framework for financial well-being that brings together many existing threads of research, policy and practice 39

40 Questions? 40

41 Listening to Consumer Voices on Credit Reports and Scores Our goals: Help consumers make wellinformed financial decisions and achieve their own financial goals Understand what consumers know and how they think about financial issues What we did: We listened to consumers talk, in their own voices, about their experiences with credit reports and scores. Listen to consumers to inform our financial education initiatives

42 Why Do Credit Reports Matter? Consumers who view their credit reports can identify and correct errors in a credit file. Consumers with accurate perceptions of their credit standing may be better equipped to access credit, or shop for favorable credit terms. Consumers who check their credit reports have access to information that may help them focus on and improve their financial situation.

43 What We Did: Methodology In May and June 2014, we conducted a series of focus groups with a total of 308 consumers In 4 regions: Atlanta, Boston, Saint Louis, Seattle We heard about consumer attitudes, perceptions, motivations, actions around credit reports and scores This gave us qualitative insights into a broad range of consumer thinking, but it was not a representative sample Since we screened for experience with financial products/decisions, participants were generally more credit-active and had more knowledge of the credit reporting system than the general population

44 What We Heard: Knowledge and Confusion Areas of some consumer knowledge High levels of awareness, interest, and concern Credit history affects access to credit, cost of credit, other issues Multiple bureaus and multiple scores Financial behavior impacts scores Some events fall off the credit report over time Areas of some consumer confusion Difficult to disentangle credit reports and credit scores Puzzled by the differences in information across their various reports Uncertain how to access free credit reports Uncertain if accessing free report will impact scores Felt that scores were not within their control 4

45 How Did Consumers Check? Consumers accessed their credit reports/scores in several ways: Online, proactively accessed through AnnualCreditReport.com or other sites Some consumers were uncertain which site offered free credit reports On a credit card statement, or online from their financial institution Some had questions about what actions to take once they had seen their scores Other ways, such as a credit monitoring service, as a result of a data security breach, by lenders, or after being denied credit

46 What We Heard: Difficulty Obtaining and Understanding Credit Reports Obtaining credit reports/scores Consumers were uncomfortable with, or had difficulty navigating, the security questions on AnnualCreditReport.com They were unsure if requesting copies of their credit reports could negatively affect their credit scores Understanding credit reports/scores Many consumers felt overwhelmed when looking at their credit report Some consumers said that they were confused because they did not recognize the names of financial institutions on their credit report

47 What We Heard: Consumer Use of Credit Report/Score Information Many consumers seemed to have a binary sense of credit scores: people with high credit scores received favorable offers, while all other received high-cost offers As a result, consumers were discouraged about value of incremental improvements in credit scores Many consumers said they were not sure how to improve their scores Consumers rarely reported trying to use their credit reports/scores to negotiate around credit access or cost

48 Consumer Credit-Checking Patterns Active Checkers Motivated by fraud or error Gauging their progress Former Checkers Don t need to now Expecting no change Tried it and didn t like it Non- Checkers. Don t see the need Fear the process Avoiding the pain Passive Checkers Has seen credit score but don t know what to do.

49 Implications of the Focus Groups Provide targeted financial education Design financial education to meet consumers where they are Different messages or resources for different segments Make it easier to check Consumers feel that credit reports are hard to get, hard to read Efforts by credit reporting agencies could make it easier for consumers to access and interpret their reports Help people take action Open Credit Score Initiative provides an opportunity to engage consumers Consumers may be motivated to learn more, check their credit report, and take action

50 Questions? 50

51 MyFreeTaxes MyFreeTaxes is a national initiative championed by three leading nonprofits - United Way, Goodwill Industries International, and National Disability Institute - sponsored by the Walmart Foundation Powered by H&R Block, is the only tax filing software to offer FREE federal and state tax preparation assistance for qualified individuals in ALL 50 states MyFreeTaxes partners with more than 1,000 community, nonprofit and faith-based organizations, local, state and government agencies that promote and provide on the ground support for the program Since 2009, MyFreeTaxes online and in-person tax preparation and filing services have helped millions of individuals and families claim more than $10 billion in tax credits and refunds Join a community of partners today by registering on the new Affiliate Portal and find information and resources to promote and implement MyFreeTaxes partners@myfreetaxes.com

52 AMERICAN DREAM EMPLOYMENT NETWORK (ADEN) Authorized national administrative employment network under the Social Security Administration Ticket to Work Program Administrative duties performed by NDI Ticket experts, employment services delivered by qualified service providers across the country Individuals receiving Social Security disability benefits age who want to join the workforce can participate ADEN core services: job support and placement, work incentives counseling, financial wellness resources, and long-term employment supports. Partnerships with champion employers who strive for diverse workforce and hire individuals with disabilities ADEN is a division of National Disability Institute info@americandreamen.org AmericanDreamEN.org

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54 Wrap-Up & Thank You Join us for our next webinar: Wednesday, May 13, 2015 at 3pm ET Helping Clients Manage Their Financial Stress Highlights from APA s Money and Stress Report Presenter: American Psychological Association Check out future webinars and archived webinars (such as today s recording),

55 Find us at: twitter.com/realeconimpact facebook.com/realeconimpact youtube.com/user/realeconomicimpact flickr.com/photos/realeconomicimpact/ realeconomicimpact.tumblr.com