Growing Knowledge from

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1 Growing Knowledge from SEED November 2006 Lessons learned from the Saving for Education, Entrepreneurship, and Downpayment Initiative Learning to save: Lessons on financial education By Carl Rist and Sarah Harger Growing Knowledge from SEED is intended to distill lessons from the Saving for Education, Entrepreneurship, and Downpayment (SEED) Initiative. This edition reviews the financial education SEED community partners are providing to SEED accountholders and their parents. It also presents initial lessons on financial education from SEED and suggests some implications of these lessons for public policies designed to deliver children s savings accounts at scale. The lessons in this brief were gathered from visits to each of the 12 SEED community partners, communication with SEED staff at partner organizations, and semi-annual reports submitted to CFED by the SEED community partners. The information in this brief was excerpted from a forthcoming paper by CFED and is based largely on anecdotal data. Further lessons on financial education in SEED will be gathered as part of the formal research component of the SEED Initiative. In early 2005, the personal savings rate among Americans turned negative meaning that Americans spend more money than they take in. People manage this dissaving by using credit cards or home equity loans, spending savings from previous years, or selling investments and assets. 1 Americans overall do not understand the importance of saving and many low-income people do not believe that their finances will permit them to save. For people who live from paycheck to paycheck, a lack of savings coupled with a large debt load could be disastrous. Even a brief interruption of income could threaten residential stability and lead to late bill payments. Financial education, defined as training to help families acquire the information and skills necessary to take control of their personal finances, can encourage saving behavior. Such education is a core component of the SEED Initiative. Moreover, for public policies designed to deliver children s savings accounts at scale, SEED offers some early and important lessons about how financial education should be organized.

2 Delivering financial education in the seed Initiative Financial education is an important component of the SEED Initiative for two main reasons. First, children are more likely to develop strong, life-long savings habits if they receive quality instruction that helps them understand the importance of saving. Second, since research on adults indicates that financial education can result in increased savings, 2 strong financial education in SEED is likely to increase the savings performance of SEED accountholders. When the 12 SEED community partners designed their financial education curricula, it was important for them to address four key questions: n Who is the audience? n What kind of financial education curriculum should be used? n Where should the financial education be delivered? n Should participation be mandatory, should families receive incentives for participating, or both? The following information describes how the SEED partners addressed these questions. Audience Understanding the primary audience of financial education in children s savings programs is critical. While SEED accounts are designed to encourage children and youth to save, most experts agree that parents play a critical role in their children s attitudes toward money. Given this, most SEED partners provide financial education to both children and parents in their programs. Two partners, Juma Ventures and Mile High United Way, provide financial education to their high school-aged participants only, not their parents. On the other hand, partners with younger accountholders tend to focus their financial education on the parents rather than children. Financial education curricula Most financial education curricula cover basic subjects, such as designing a family budget, finding ways to save, managing credit wisely, understanding banking services, buying insurance, and paying taxes. SEED partners use a variety of financial education curricula in their programs. Some partners adopted third-party curricula in their entirety; others combined elements from third-party curricula with a curricula they developed themselves; and still others use only their own curricula. 3 Three partners use Financial Fitness for Life (developed by the National Council on Economic Education) to educate their youth and one also uses it for adults. Two partners use Your Money & Your Life (developed by the University of Illinois Cooperative Extension) for their adult participants. Overall, innovation and constant improvement are a hallmark of SEED financial education efforts. Delivery of financial education Financial education in the United States is primarily delivered through a network of community-based providers, such as Cooperative Extension offices, community action agencies, churches, and other nonprofits. Financial education in SEED is also delivered mostly through communitybased organizations. However, SEED partners are testing at least two important innovations delivering financial education in the classroom and online. Three partners deliver financial education in the classroom during the regular school day. At the People for People Charter School in Philadelphia, all SEED participants (who are currently in middle school) receive financial education from their classroom teacher during the school day as part of the curriculum for all students. At the Delmar-Harvard Elementary School in St. Louis and at Fundación Chana y Samuel Levis in Puerto Rico, all SEED accountholders regularly receive financial education in a classroom session taught by the SEED coordinators. Juma Ventures in San Francisco is experimenting with online financial education. Instead of attending classes,

3 high school-aged accountholders at Juma work through 34 MoneySKILL modules at their own pace and Juma staff review the students lessons and quizzes online. Juma helps make this delivery mechanism work by providing a computer lab on-site. The self-paced aspect of this approach allows students to move through the lessons at a rate appropriate for their needs, instead of forcing a whole classroom of students to move at the same pace. However, Juma has discovered that it still needs to augment the online training with face-to-face workshops to ensure full comprehension of the material. Incentives and participation requirements Another fundamental question in children s savings programs is how to encourage accountholders and their parents to participate in financial education. In SEED, nearly all of the community partners use some form of incentive as a tangible reason for accountholders and/or their parents to participate in financial education classes. The incentive most commonly used in SEED is cash payments to participants (or their parents, in the case of younger children). Some SEED partners encourage participants to deposit these payments into their SEED accounts and others require participants to deposit their incentives. The amounts of the incentives are substantial in some cases up to $250 for classes at the Boys and Girls Clubs of Delaware or minimal in others $1 per after-school club meeting at Delmar-Harvard Elementary School. Four of the 12 SEED partners make at least a portion of their financial education services mandatory. Before SEED participants could open their accounts, Fundación Chana y Samuel Levis required them to attend the first financial education class and Mile High United Way required their foster youth to complete financial education. At Cherokee Nation and Juma Ventures, which serve high school-aged youth, participants cannot make matched withdrawals until they complete their financial education. On the other hand, at the Oakland Livingston Human Service Agency in Michigan and the Southern Good Faith Fund in Arkansas, financial education for parents and children is completely voluntary. Early lessons n There is no one size fits all financial education curriculum for children and youth. One common thread that has emerged from the SEED Initiative is that the learning needs of participants in children or youth savings programs vary by age, language ability, and ethnicity and that no single curriculum can meet them all. n Financial education for children is critical but don t forget the parents. All accountholders must receive financial education. However, since parents play a key role in teaching children about money, their involvement is critical. This is especially true with younger children who lack their own source of income and rely on their parents to contribute savings to their accounts. n Involving parents in financial education adds a layer of complexity. Involving parents in financial education can be challenging since they have many other demands competing for their time and attention and may not be reached easily through institutions that primarily serve children. Even if parents understand the importance of classes, their attendance still may be sporadic. n Providing incentives for participation in financial education can help to increase attendance, but it is not a panacea. Most SEED partners believe that incentives have helped to substantially increase attendance at financial education classes, especially among adults. However, incentives have not helped the partners to achieve full participation. Moreover, some partners, such as the Southern Good Faith Fund, report significant adult participation in classes without incentives. Other factors that appear to encourage participation by adults are a high level of trust between the sponsoring agencies and the families; topics that are initiated by parents and delivered at levels appropriate to the learners; high-quality classes scheduled with parents needs in mind; availability of dinner and/or child care; and a familiar, convenient location. n School-based delivery of financial education shows promise. Providing financial education at school

4 is one obvious way to solve the challenge of full participation. The initial experience of SEED partners shows promise in integrating financial education into an existing curriculum. However, this experience is still relatively new and the numerous demands facing public schools, especially the requirements of the No Child Left Behind Act, could make implementation an up-hill struggle. n Online financial education can be an effective tool, especially for older youth. The experience at Juma Ventures indicates that online financial education should be explored further. However, this option requires a high level of access to the Internet. Experience to date also indicates that online delivery can reduce, but not totally eliminate, the need for face-to-face instruction. Policy recommendations Lessons to date with financial education in the SEED Initiative suggest a number of implications for the design and implementation of public policies to establish a universal, progressive system of asset-building accounts for all children starting at birth. n Include financial education in any policy designed to create children s savings accounts. Given the importance of financial education in helping individuals acquire the information and skills necessary to take control of their finances, financial education should be a component of any proposal for establishing matched savings accounts for children. The ASPIRE Act, 4 for example, calls explicitly for programs to promote financial literacy among both children and parents. n Include parents in financial education, especially for accounts established at birth or in the early years. Because parents play such an important role in teaching children about money and in managing finances for minors, any proposal for creating matched savings accounts for young children should include financial education for parents as well as children. The ASPIRE Act calls for this explicitly. Creating incentives for parental participation may be necessary, but these should be simple and easy to administer. n Incorporate financial education into the curriculum at school. Any proposal for universal or largescale children s savings accounts will need a streamlined, cost-effective system for delivering financial education. While public schools already face a wide range of requirements and mandates for educating children, the reality is that no other single institution could reach as many children. Moreover, integrating financial education into the school curriculum is possible. Several SEED partners have experienced success with this and most states have included financial education in their public education standards (though only seven make personal finance a requirement for high school graduation). 5 n Don t leave out community-based organizations in building systems to deliver large-scale financial education. While schools offer a streamlined system to deliver financial education at scale, proposals for universal children s savings accounts should make provisions for community-based organizations (such as those involved in SEED) to provide financial education services to families who need additional support. A recent report by Social and Enterprise Development Innovations in Canada argues that community-based financial education providers are essential for making sure that the promise of universally available matched savings accounts can be realized for all families, including those of low incomes. 6 1 News Release: Gross Domestic Product. July 28, Bureau of Economic Analysis, U.S. Department of Commerce. Accessed August 14, www. bea.gov/bea/newsrel/gdpnewsrelease.htm. 2 Mark Schreiner, Margaret Clancy and Michael Sherraden, Saving Performance in the American Dream Demonstration, A National Demonstration of Individual Development Accounts: Final Report, (Center for Social Development, George Warren Brown School of Social Work, Washington University in St. Louis), October Many financial education curricula have been developed by nonprofit organizations, banks, and universities. This paper refers to those publicly available curricula as third-party curricula. 4 See 5 National Council on Economic Education, Survey of the States, March See Why Financial Capability Matters: Synthesis Report on Canadians and Their Money from a national symposium on financial capability held on June 9-10, 2005 in Ottawa, (

5 Financial education in SEED SEED partner Curriculum Incentives Delivery Beyond Housing/NHS Kids: Financial Fitness for Life. Parents: Organization s own curriculum. Kids: $1/club meeting, up to $20/ year. Parents: $20 for each of two workshops/school year. Kids:.5 hrs/wk in class, 1 hr/wk in afterschool club. Parents: Occasional. Boys and Girls Clubs of Delaware Kids: Curriculum from the Univ. of Delaware, Delaware Money School and Financial Fitness for Life. Parents: Finding Pathways to Prosperity. Kids: None. Parents: $10/hour up to $250 for first cycle of classes; no incentives for subsequent cycles. Kids: 1.5 hrs/wk for 6 weeks. Parents: In development. Cherokee Nation Kids: Financial Fitness for Life, Building Native Communities, and My Decisions (online). Parents: Financial Fitness for Life, Building Native Communities. Kids: In development. Parents: $12.50/ class. Kids: 1.5 class hrs/mo (starts 1/07). Parents: Weekly for 6 weeks. Foundation Communities Kids: Organization s own curriculum (includes elements of Practical Money Skills and Hands On Banking). Parents: Organization s IDA curriculum (tailored for SEED). Kids: Range from $25 $100 for various accomplishments (i.e, good grades). Parents: $100/money management class and $100 for investment trainings. Kids: 1 hr/mo and in summer camp. Parents: Occasionally, for 10 hours. Fundación Chana y Samuel Levis Kids: Organization s own Spanish curriculum. Parents: Organization s own Spanish curriculum. Kids: $225 at completion. Parents: $225 at completion. Kids: l hr/mo in class. Parents: 12 class hrs, 2-3 hrs of individual budgeting training. Harlem Children s Zone Kids: Kids Can Save. Parents: Credit Where Credit is Due. Kids: $30/workshop up to $150. Parents: $50/workshop up to $250. Kids: Quarterly. Parents: Quarterly. Juma Ventures Kids: MoneySKILL (online). Parents: N/A. Kids: $25/pre-test and $175/online module. Parents: N/A. Kids: Self-paced (online). Parents: N/A. Mile High United Way Kids: Young Americans Bank curriculum, modified to include elements of Jim Casey Youth Opportunities Initiative curriculum. Parents: N/A. Kids: $100/financial education class. Parents: N/A. Kids: Two 6-hr classes at program start. Parents: N/A. Oakland Livingston Human Service Agency Kids: Organization s own curriculum. Parents: Your Money & Your Life for adult only courses and organization s own curriculum for parent-child workshops. Kids: None. Parents: None. Kids: 1.5 hrs 2x/yr. Parents: 1.5 hrs 2x/yr + five 2.5-hr sessions. People for People, Inc. Kids: Organization s own existing entrepreneurship curriculum, including elements of the Rural Entrepreneurship through Action Learning curriculum. Parents: In development. Kids: None. Parents: $25/class. Kids: Once/week in class during the school year. Parents: Quarterly. Sargent Shriver Nat l Center on Poverty Law Kids: Financial Fitness for Life, Money Savvy Generation (modified). Parents: All My Money, Your Money & Your Life, and Pathways to Prosperity. Kids: Up to $50/school year. Parents: $50/class. Kids: 15 classes over 8 weeks. Parents: 4 classes/yr. Southern Good Faith Fund Kids: Organization s own curriculum. Parents: Organization s IDA curriculum and own curriculum for parent-child workshops. Kids: None. Parents: None. Kids:.5-hr parentchild workshops 2x/yr. Parents: 2 hrs 3-4x/ mo,.5-hr parent-child workshops 2x/yr.

6 I Can Save Beyond Housing s I Can Save SEED program works with 74 thirdand fourth-grade students (second and third grade at enrollment in SEED) at Delmar-Harvard Elementary School in St. Louis. The SEED coordinator initially provided financial education, using the Financial Fitness for Life curriculum, during a weekly after-school club. Last spring, after working carefully with the principal and teachers at Delmar- Harvard, the SEED coordinator also began teaching financial education in the classroom each Friday. Though some students are not SEED accountholders, the SEED coordinator makes the lessons applicable to all students, while making important connections to college planning and SEED accounts. This experience will provide critical information about the challenges and opportunities of delivering in-class financial education to students saving in SEED or other children s savings account programs. 777 N Capitol Street, NE Suite 800 Washington, DC Presorted First Class Mail U.S. Postage PAID Capitol Heights, MD Permit #4168