Life-Cycle Investing: Financial Education and Consumer Protection

Life-Cycle Investing: Financial Education and Consumer Protection (a summary)
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This is the other half of FCAC's mandate, and Menke noted that the agency is a federal regulator charged with enforcing the rights of financial consumers. Currently, FCAC makes sure that financial institutions and payment card network operators comply with legislation and industry commitments intended to protect consumers. One example is product disclosure, said Menke: "We are putting a renewed effort into ensuring that disclosure is clear and that the presentation of the information is readily accessible.

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At the same time, many youth are taking on debt to finance their post-secondary education. While financial products can help young people achieve their goals e. A national survey also helped identify gaps and problems to address. She also identified challenges to the introduction of financial education in schools and ways to overcome those.

For instance, the role of policymakers in promoting awareness and buy-in within the education system on a national level should be enhanced. Since teachers already face pressures to deliver existing curricula, financial education must be made a national priority to make it sustainable within the school system. Jane Rooney, Director, Financial literacy and consumer education with FCAC, discussed her organization's support and efforts to develop a high school financial product that is available on a national basis.

Teacher training was essential to support use of the resource since many teachers are uncomfortable with this topic. Fostering relationships with "teacher champions" helped to promote awareness and use. Mitch Murphy, education consultant and member of the Task Force on Financial Literacy, discussed the importance of financial education in schools as part of Canada's national strategy. For him, national leadership is key to ensuring that it is included in school curricula across the country. Finally, Leeanna Pendergast, Member of Provincial Parliament for Kitchener—Conestoga in Ontario, discussed her work as Chair of The Working Group in Financial Literacy in Ontario, which made recommendations to the Curriculum Council about the knowledge and skills required to support the development of financial literacy among Ontario students.

The question is, how do we know whether these goals are actually being achieved? And how do we know our financial education programs are even reaching the right audiences or addressing the right problems? As financial education initiatives proliferate in response to greater attention and funding from policymakers and other organizations, program providers are now being asked to answer questions like this.

They are being asked to employ robust metrics and evaluation frameworks that can determine whether or not they are making an impact on participants. During the conference, presenters sought to answer these questions by tackling two main topics: the importance of national and global measures of financial literacy and the growing significance of evaluation in financial education programming. Another session focused on evaluation of financial education programs: are they working, and if not, how can they be adjusted or retooled to make them more effective?

According to speaker Adele Atkinson, a policy analyst with the Financial Education and Consumer Protection Unit of the OECD, it is imperative that policy makers have a robust measure of financial literacy in order to create targets and set objectives. The goal of this survey is to collect internationally comparable data using a short survey that captures all of the core elements of financial literacy.

She presented high-level findings from 12 countries that had recently collected data as part of a large-scale piloting process: Armenia, the Czech Republic, Estonia, Germany, Hungary, Ireland, Malaysia, Norway, Peru, Poland, the U.

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Survey participants were asked to respond to around 20 questions on knowledge, behaviour and attitude. Knowledge of basic financial concepts was tested using a variety of questions covering topics such as simple and compound interest, inflation and risk diversification. The behaviour component of the survey focused on three key areas: day-to-day money management, financial planning and choice of financial products. Preliminary results, looking at how people responded to 7 of the knowledge questions in 12 pilot countries, showed that levels of financial knowledge are relatively low.

In each of the pilot countries, fewer than half the population answered 6 or 7 questions correctly.

Paper statistics

Both countries were seeking unbiased and good quality data to support the development of a national strategy on financial literacy and identify segments of the population in need. Both also wanted data to build a case for ongoing funding to build more sustainable financial education programs in the future. Presenter Aleksander Rychwalski, Department of Education with the Polish Financial Supervision Authority, noted that the overall findings for Poland show Poles have sufficient numerical skills but limited knowledge and understanding of how financial markets work.

Specific statistics gleaned from the Polish pilot survey include:. In addition, South Africa is characterized by a vast cultural and linguistic diversity, with 11 official languages and a large rural-urban split, which means that the day-to-day living conditions and realities of people living in that country can vary tremendously based on location and socio-economic background.

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She felt that the flexibility built into the questionnaire was key to make allowances for middle- and low-income countries. Specific results from South Africa include:. Jennifer Robson, Senior policy research officer, with Policy Research Initiative in Canada presented the results at the conference. Researchers set out to measure five key areas of financial literacy in Canada: making ends meet, keeping track, choosing products, planning ahead and staying informed.

Researchers were able to examine financial literacy by a number of factors including age and income level. Indeed, factor analysis allowed for identification of target audiences. Key findings from Canada include:. Overall, the survey found Canadians are doing "relatively well in all areas," but there are areas where they need help. Moreover, 75 percent say they have challenges in one or more areas. Specific target areas identified are keeping on track of spending money, planning ahead and staying informed. It can be used to measure overall levels of financial literacy, and identify both the topics that need covering most urgently and the specific target groups most in need of support.

But how can we tell whether financial education programs are effective in addressing the key topics and reaching the target audience? Program evaluation is essential to ensure programs are doing what they are supposed to do—without evaluation, it is impossible to know whether money spent on programming is having a positive effect. Evaluation can be described as:. The right evaluation method will help you to determine a programme's value, impact and effectiveness and take appropriate action. For the best results in evaluating your financial education programme, you need to plan your evaluation at the same time as developing your programme.

Evaluation is systematic, evidence-based, and measures or makes assessments in helping to make decisions. Presenters agreed that evaluation should ideally be built into a project or program at the beginning, although they also recognized that there are benefits to evaluating even long-standing programs. The costs of the evaluation must be built into the budget for the initiative, noted moderator Diana Crossan, Commissioner with the Retirement Commission of New Zealand.

Evaluation should also be started early so that the program can be refined, retooled or redesigned as needed. Key good-practices she shared are:. Presenter Janet M.

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However, funders now want rigorous and standardized evaluation and practitioners want relevant, flexible and appropriate evaluation. Still, she said, program providers often have to be convinced that it is possible to effectively evaluate their programs. They often feel it is too challenging to do, whereas Murray believes it can and should be done by community organizations themselves.

Rigorous evidence-based work is important but the process is not more important than the product, she pointed out. To that end, the Government of Canada should offer resources and tools to support and enhance the evaluation capabilities of financial literacy education providers, particularly voluntary agencies.

Empirical evidence is not just a key component of national strategies—it can also help to identify the needs of a specific target audience. The study aims to test levels of financial literacy among year-olds. It is the first large-scale international study to assess the financial literacy of young people, and the results will be available in Understanding the needs of year-olds on an international level can drive policymakers to ensure that financial literacy is included on the basic school curricula of countries around the world.

Gathering empirical data is a first step toward this and can help educators determine the best path forward for addressing their needs. A plenary session on gender differences in financial decision-making highlighted some key differences between men and women when it comes to money-related choices. On average, women live longer than men and have shorter and less consistent working lives.

Women are therefore at risk of poor financial outcomes, said Lusardi, adding that, for many, divorce or the death of a spouse precipitates poverty. Women tend to say they know less and they also tend to be more cautious when answering test questions than men, preferring to say that they don't know the answer, rather than taking a guess. Interestingly, she finds the gender differences are pronounced in the United States, while financial knowledge gaps between men and women in economies with a relatively recent market economy e.

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The third conference on the future of life-cycle saving and investing, entitled “​Financial Education and Consumer Financial Protection,” was. Life-Cycle Investing: Financial Education and Consumer Protection [Zvi Bodie, Siegel B. Laurence, Stanton Lisa] on *FREE* shipping on.

Russia or eastern Germany when comparing it to western Germany tend to widen as those nations become more economically developed. In other countries without empirical evidence, women are also perceived to have less financial knowledge than their male peers. The OECD and its INFE will therefore develop more in-depth research to identify and quantify gender differences so that they can be addressed through programming and education.

In the end, both Lusardi and Hung concluded that gender does matter when it comes to financial literacy, because women with lower financial literacy levels are vulnerable and could end up participating less in financial markets, paying higher costs for services and putting themselves at higher risk for poverty.

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Even the best financial education programs will fail if people cannot access them or if people do not have access to financial services in the first place. Developing and sustaining appropriate delivery channels for financial education is perhaps the biggest challenge facing policymakers. During the conference, the question of access and availability of financial products and financial education programs was addressed on several fronts: financial inclusion, the role of community-based organizations and the rise of social marketing and other innovative delivery approaches.

How can policymakers and financial educators build and leverage these access points? And what best practices should they keep in mind as they seek to reach out to new audiences? These questions were answered at different points throughout the conference. Financial inclusion is defined as "the process of ensuring access to appropriate financial products and services needed by vulnerable groups, such as weaker sections and low-income groups at an affordable cost in a fair and transparent manner by mainstream institutional players.

Access to financial products is a first step in the need for financial literacy. Indeed, lack of financial literacy is often tied to lack of access to financial products or failure to use them even when they are available. These issues are of concern in the developing world. For example, a report by the OECD notes:. In South Africa, a recent survey found that nearly 60 percent of the people surveyed do not understand the term "interest. But does technological innovation equal financial inclusion—and what should the role of financial education be? These questions were the topic of a conference workshop where presenters from both the non-profit and private sectors shared their views and findings. Notably, policymakers in India have made financial inclusion a priority, according to Dr K. Chakrabarty, Deputy Governor of the Reserve Bank of India, which asked all Indian banks to formulate school board-approved financial inclusion plans for the next three years.

The goal is to achieve planned, sustained and structured financial inclusion throughout India. India's challenge is the same one faced by many countries in a world where 2.

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Of those who do use financial services in Africa, Asia and the Middle East, at least two-thirds of them live on less than five dollars a day. In other countries struggling with large segments of the population who do not have access to financial services, technology is playing a major role in bringing increasing numbers of people online and into the realm of formal financial services.

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Denise Dias, Policy specialist with the Consultative Group to Assist the Poor CGAP noted that technology is playing a huge role in pulling people out of poverty in Mexico, giving them access to banking services that were previously unreachable. Three factors present limits to access: long distances and low population density; high costs relative to income; and low levels of basic literacy. Dias also discussed the merits of branchless banking to assist with bringing access to financial services to populations. Branchless banking extends to customers who could not be reached profitably with traditional branch-based financial services.

Dias also stated that is it increasingly important that financial education accompany new technologies: "Education can help increase adoption and usage of new models and products through enhanced capability and better understanding by clients," she explained.