Evaluating Financial Education Programmes

Transcription

1 Evaluating Financial Education Programmes Improving Financial Literacy International Conference hosted by the Russian G8 Presidency in Cooperation with the OECD 30 November 2006, Moscow Christina Tan Deputy Director & Head, Consumer Issues Division Monetary Authority of Singapore

2 Outline Financial Education Common Goals Financial Literacy Evaluating Progress Evaluating Financial Education Programmes - Sharing examples based on Singapore s experience

4 Common Goals To enable consumers to achieve fair dealing To enable consumer make more informed and effective financial decisions To enable consumers to take responsibility for their financial decisions

5 Benefits of Financial Education Empower consumers to make more informed investment decisions More sophisticated investors help the market grow in depth and liquidity Less reliance on the state But does financial education really work?

6 Studies Show That Financial Education Makes A Difference USA - 1.5% 1 increase in average savings rates among adults who attended high schools in states with financial education requirements in public schools. USA - Availability of retirement-focused financial education in the workplace increased average savings rates by 1.65% 2. Australia - The lack of financial education costs the average wage earner $790,000 3 over their lifetime. Source: 1) Bernham D., Garret D., and Maki, D Education and Saving: The Long Term Effects of High School Curriculum Mandates, National Bureau of Economic Research, USA, July 1997; 2) Bernham, D. and Garret, D. The Determinants and Consequences of Financial Education in the Workplace: Evidence from a Survey of Households, National Bureau of Economic Research, USA, June 1996; 3) Study by government taskforce on financial literacy, Australia October 2005

8 Conducting A Financial Literacy Survey

9 First National Financial Literacy Survey (2005) Objectives Measure current levels of financial literacy among different segments of Singaporeans. Gauge Singaporeans attitudes towards financial matters. Identify gaps in financial knowledge and actions. Identify areas where more consumer education is needed & the most effective channels for delivery.

10 Defining Financial Literacy the ability of individuals to make informed judgements and take effective decisions in managing their finances Actions Knowledge Key attributes: What steps Singaporeans have taken to manage their money. What active plans Singaporeans have made to plan for their future / retirement. For Singaporeans who invest, what steps they have taken to understand what they invest and monitor investment performance. Key attributes: What level of understanding do Singaporeans have of the risks and implications of common financial products: - Loans. - Life insurance policies. - Investment products.

11 Three Tiers of Financial Literacy Tier III : Investment Know-How Tier II : Financial Planning Tier I : Basic Money Management

12 Survey Findings are Encouraging Generally good money management habits. ACTIONS Singaporeans recognise the importance of planning for their finances and have taken some basic steps in financial planning. Singaporeans who invested take a considered approach in their investment decisions. KNOWLEDGE Generally knowledgeable about their loans. Understand risks inherent in investments & importance of diversification.

13 Areas for Improvement Inadequate Savings for Emergencies Only 32% of Singaporeans have cash savings of at least 3 times their monthly income. Inadequate Retirement Planning Only 24% have actually calculated how much they would need when they retire. Inadequate Understanding of Common Financial Products Singaporeans are not aware of basic features of common financial products such as life insurance, unit trusts and structured deposits.

14 Developed a Financial Literacy Score Scored questions which test Singaporeans financial actions and knowledge. Weighted score assigned for each response. Scores were aggregated and normalised across a scale to derive a Financial Literacy Score. Financial Literacy Score = (Adjusted aggregated score for Action + Adjusted aggregated score for Knowledge) (Score range value for Action + Score range value for Knowledge) X 100

15 Financial Literacy Scores By Tiers Total Singapore Population Action Knowledge Financial Literacy Score Tier I Basic Money Management Tier II Financial Planning/ Retirement Planning Tier III Investment Know- How TOTAL

16 Financial Literacy Score by Education (Total Financial Literacy Score) No form al education (47) Action Know ledge Prim ary (56) ITE (65) Secondary (66) JC/Pre-U/A-Levels (71) Polytechnic/Diploma (71) University Degree/Postgraduate (75)

17 Financial Literacy Score by Monthly Household Income (Total Financial Literacy Score) <$1k (56) Action Knowledge $1k - $1,999 (61) $2k - $2,999 (65) $3k - $3,999 (68) $4k - $4,999 (70) $5k - $5,999 (72) $6k - $9,999 (75) > $10k (77)

18 Main Survey Findings by Segments Low financial literacy Moderately Low Average Moderately High High financial literacy 27% of Students 25% of Housewives 33% of Unemployed 40% of Retirees All other segments: Students Working Singles Working Marrieds Working Parents Pre-retirees Housewives Unemployed Retirees 34% of Working Marrieds Mean 72 80

19 Financial Literacy Scores by Segments Tier 1 (Basic money management) Tier 2 (Financial planning) Tier 3 (Investment know-how) Overall Mean Score Retirees Unemployed Students Housewives Pre-retirees Working Singles Working Parents Working Marrieds Total Population

20 Interest in Financial Education 50% of Singaporeans indicated that they were interested in learning more about how to manage their money. Students, working marrieds and working parents were more likely to be interested in financial education programmes compared to retirees and low-income. Among those not interested in financial education, 40% cited insufficient money as the main reason while 32% said they have no time or it is not their priority.

21 Financial Literacy Scores for Those Interested in Financial Education Action Knowledge Total Interested (n=1006) Not Interested (n=1017)

22 Preferred Means of Receiving Financial Education Newspaper columns, radio / TV programmes 54% Consumer guides 21% Talks / seminars / workshops 20% Online learning tools 19% Courses 9% 0 % Base: Total Respondents (n=2,023)

24 What Do We Evaluate? REACH RETENTION REACTION

25 Context: Structure of MoneySENSE Rests on Partnerships MAS MCYS MOE MOM CPF Board People s Assocn Financial Education Steering Committee (FESC) Funding, Endorsement, Overall Policy Direction - Feedback - Conduct activities - Report on industry initiatives MoneySENSE Industry Working Group (MIWG) Financial Industry Assocns Consumers Assocn

26 Variety of Channels & Yardsticks Channels Target Audience Yardsticks Roadshows Seminars / Talks Games/ Workshops Mass Media Consumer Guides / Website Working Adults Families Low-Income / Financial Assistance School-children Housewives Retirees / Preretirees Outreach Numbers Feedback Forms Webpolls / Survey Contest Participation Website Hit Rates

27 Cost Effectiveness Of Different Programmes Total Cost Mass Media Roadshows Seminars / Talks Games/ Workshops Website Cost Per Person Reached How How much do do participants learn? Do Do they they take take steps to to better manage their their expenses?

28 Outline Financial Education Common Goals Financial Literacy Evaluating Progress Evaluating Financial Education Programmes - Example 1: Workshops / Games - Example 2: Mass Media - Example 3: Roadshows

29 Workshops / Games REACH: Small groups Higher cost per attendee as compared to seminars RETENTION: High degree of interaction between participants and trainer Good participation in quiz questions to test understanding Good recall of key messages

30 Workshops / Games REACTION: Overall positive feedback Participants more likely to implement what they learn when there is follow-up action Examples of Follow-Up Action: Volunteers follow up with individuals who attended basic money management workshops Students who attend financial education game workshops are encouraged to draw up their own pocket money budgets

32 Mass Media Initiatives Newsletters & educational articles Radio: Recorded capsules, interviews, DJ chats TV Game Shows Surge in website hit rates when there are media activities

33 REACH & RETENTION: Example of Contest Response Rates for Print Media Initiatives Response Rate (%) (Average No. of Responses / Circulation of Paper) Response of Similar Contests in Paper Run 1 Run 2 Paper % 0.14% 0.03% % Paper 2 Paper % 0.12% 0.05% % 0.27% 0.09% 0.13% %

34 TV Game Show: Dollar & Sense ( 神机妙算 )

35 TV Game Show: Dollar & Sense ( 神机妙算 ) REACH Over 1.3 million viewers About 60% aged between 18 and 45; 36% above age 45 Mix of professionals, executives, business persons, blue collar workers and housewives Incremental increase in viewership throughout entire series RETENTION Tested recall of key messages via SMS contests

37 MoneySENSE Roadshows

38 MoneySENSE Roadshows REACH Over 89,000 visitors at 3-day roadshow at a mall Over 33,000 students at roadshows at 5 polytechnics RETENTION Overall positive feedback from attendees Good recall of key messages Encouraging mini financial literacy survey findings among polytechnic students

39 Key Findings Among Polytechnic Students 70% 60% High awareness of the amount one should set aside to provide for emergencies 68% Challenge is for students to act on what they know and set aside savings to provide for emergencies 50% 40% 30% 20% 10% 28% 40% National Financial Literacy Survey Polytechnic Survey 0% Aware of the need to have 3-6 mths' savings Do not have at least 3 mths savings

40 Key Findings Among Polytechnic Students Tier 1: Basic Money Management 34% are already recording or monitoring their expenditures (compared to 30% of respondents in the National Survey) 40% have already drawn up a budget 78% are aware that interest is charged on outstanding credit card balance if one pays only the minimum sum 60% are aware that their monthly long term debt commitments should not exceed 35% of their gross monthly income

41 Key Findings Among Polytechnic Students Students recognise the need to start financial planning early 60% 50% 56% 54% 40% 30% 33% 20% 10% 0% School days 17% Start work Work for a few years 13% 2% Get married 7% 1% First child 5% 2% 3% 0% Spare cash Polytechnics National Survey

42 Key Findings Among Polytechnic Students Tier 2: Financial Planning Students are aware of retirement planning About half (47%) recognise that investments will be an important source for their retirement fund About one third (32%) recognise that insurance could be an important source for their retirement fund About half (51%) know that they will need two thirds of their last drawn income when they retire Three quarters (78%) know that their Central Provident Fund savings will not provide them their last drawn income compared with 58% for the National Survey

43 Key Findings Among Polytechnic Students Tier 3: Investment Know-how Students generally have more investment knowledge Risk-Return trade-offs (93% vs 75%) Diversification strategy (83% vs 66%) Students are generally more aware of terms and conditions for common investment products All bonuses in insurance products are not guaranteed (93% vs 42%) 14-day free look period for life insurance policies (74% vs 52%) 7-day cancellation period for unit trusts (64% vs 34%) Fees and charges affect investment returns (83% vs 56%) Penalties may apply for early withdrawal of structured deposits (75% vs 57%)

44 Going Forward Challenge: Encourage polytechnic students to translate knowledge to action In Progress: MoneySENSible Youth Awards

45 ... Summing Up

46 Variety of Yardsticks REACH RETENTION REACTION Outreach statistics and profile of audience Total cost vs cost per person Feedback forms, surveys, quizzes to test recall of key messages Commitments by participants Follow-up actions Enhance financial literacy in the longer term

47 Key Challenges in Measuring Effectiveness Many Factors Influence Consumers Behaviour Experience & circumstances Personality Knowledge & understanding Skills Confidence & attitudes BEHAVIOUR Source: Adult financial capability framework developed by UK FSA and Basic Skills Agency, 2004

48 No One Perfect Tool Key challenges: Understanding consumer attitudes and behaviour in making financial decisions Identifying cause-effect relationships between financial education and making of financial decisions Monitoring long term effect of consumers financial decisions

49 ~ Thank You~