FDIC Money Smart Financial Education Program
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Transcript FDIC Money Smart Financial Education Program
Money Smart
A financial education program
Gregory Housel
816-234-8047
[email protected]
Federal Deposit Insurance Corporation
What is the FDIC?
Insures deposits to at least
$250,000
Promotes Safety and Soundness of insured
financial institutions
• Regulates financial institutions for compliance
with consumer laws and regulations
• Facilitates community development efforts
Why is the FDIC involved
in financial education?
Reasons include:
1. To help fight predatory lending
2. To encourage financial institutions to
identify unbanked or underserved
markets
3. To assist consumers in shaping their
financial future
4. Complicated financial landscape
Why is the FDIC involved
in financial education?
1. To help fight predatory lending
– What is predatory lending?
– Financial education as a tool to fight
predatory lending
Why is the FDIC involved
in financial education?
2. To encourage financial institutions to
identify untapped markets
– 17 million people are unbanked
– 43 million people are underbanked
– 60 million combined (25.6% of U.S.
Households) unbanked/underbanked
Why is the FDIC involved
in financial education?
3. To assist consumers in shaping their
financial future
– Key issues:
• The high cost of being unbanked
• LMI unemployment rates
• Understanding credit rating
• Impact on building personal wealth
• Retirement
Why is the FDIC involved
in financial education?
4. Complicated Financial Landscape
– Market innovations
The need for financial education
• Little or no personal savings
• Households with credit cards carry
balances; average balance is $4,951
• Lack of using budgets
• Growth in alternative service providers
• Homeownership Foreclosures
(TransUnion)
Conceptual Framework
Many times people make bad financial
decisions because they do not know
enough to make good financial decisions.
75% of the population is 18 years or older
and outside of school.
(Kansas City Federal Reserve Bank)
Having Money Helps, Having Education
Helps More
Bankruptcy records indicate that even though
the median winner of a large cash prize
could have paid off all of his unsecured debt
or increased equity in new or existing assets,
he chose not to do either.
(The Ticket to Easy Street? The Financial Consequences of Winning the Lottery)
Nearly one third of multimillion dollar lottery
winners become bankrupt in just a few short
years after they’re big win.
(Associated Content)
Understanding Financial Terms
Asset:
A valuable item that is owned.
Wealth:
What you own minus what you owe.
Income: Amount of money received for
doing work.
Average Income Per Household 2008
MEDIAN
$50,303
MEAN
$68,424
Federal poverty level reached 13.2% in 2008.
Almost 42,000,000 lived below the poverty level.
Family of 1
Family of 2
Family of 3
Family of 4
Family of 5
$10,830
$14,570
$18,310
$22,050
$25,790
More Education - More Money
Persons, age 25+ w/ earnings
2007 Annual Earnings
Lifetime
Some High School
$23,000
$1,734,226
High school graduate
$29,000
$2,186,634
Associates degree
$35,000
$2,639,041
Bachelor’s degree
$45,000
$3,393,059
Master’s degree
$56,000
$4,222,467
*Lifetime defined as 40 years of full-time work with a 3% annual cost-of-living increase. Statistics reflect 2007 full-time workers.
40% of households earn less than $37,000
per year.
(Condition of Education 2009 and MSN)
College Degree or High School Diploma
Amount of time it takes to Surpass High School Graduate
Earnings
12-14 years
Associates Degree
Two Year Program
$452,408 Additional Earned
11-13 years
Bachelors Degree
Four Year Program
$904,815 Additional Earned
11-13 years
Masters Degree
Five Year Program
$2,035,833 Additional Earned
(Calculation based on 2007 full-time worker statistics and a 4 year prorated college graduation debt of $28,000)
Education and Literacy
22% of adults lack even basic quantitative literacy
skills.
33% of adults have only basic quantitative literacy
skill levels.
120 million American adults may be vulnerable to
predatory lending practices or make seemingly
small mistakes with major financial
consequences.
(National Center for Education Statistics)
Unemployment Rates
As of January 2010
College Degree
5%
Some College
9%
High School Diploma
10%
No High School Diploma 15%
(Wells Fargo)
Center for Labor Market Studies
Northeastern University
Income Decile
Lowest
Second
Third
Fourth
Fifth
Sixth
Seventh
Eighth
Ninth
Top
Range of Incomes
$12,499 or less
$12,500 to 20,000
$20,000 to 29,999
$30,000 to 39,999
$40,000 to 49,999
$50,000 to 59,999
$60,000 to 75,000
$75,000 to $99,999
$100,000 to 149,999
$150,000 or more
Classification of Unemployment and
Underemployment Statistics February 2010
Decile
Lowest
Second
Third
Fourth
Fifth
Sixth
Seventh
Eighth
Ninth
Top
Unemployment
Rate
30.8
19.1
15.3
12.2
9.0
7.8
6.4
5.0
4.0
3.2
Underemployment
Rate
20.7
17.2
12.7
8.3
6.1
5.4
4.4
3.6
2.5
1.6
Building Assets Through
Homeownership
Income: $30,000 to $49,999
Owners' average net worth: $126,500
Renters' average net worth: $10,600
Income: $16,000 to $29,999
Owners' average net worth: $112,600
Renters' average net worth: $4,240
Income: Under $16,000
Owners' average net worth: $73,000
Renters' average net worth: $500
(Federal Reserve’s Survey of Consumer Finances)
Homeownership Rates
United States Average 2009 67.4%
White
Black
Hispanic
All Other Races
74.9%
46.5%
48.1%
57.6%
82.2% Homeownership rate above the median
family income and 51.5% below the median
family income
(United States Census Bureau 2009)
Bankruptcies and the Housing Market
• Bankruptcies have increased 29% from 2008
and Equifax reports that as of March 2010,
10% of mortgage loans are in default.
• A projected 3 million homes will be lost to
foreclosure in 2010, up from 2.8 million in
2009.
(Reality Track)
Bankruptcies
10%
9.5%
9.1%
Delinquencies
Delinquencies
1st Quarter 2010
4th Quarter 2009
Delinquencies
1st Quarter 2009
4.6% Foreclosure Rate 1st Quarter 2010
(Mortgage Bankers Association)
America’s Savings
1978-1984 Savings Rate 8 to 10%
2005-2006 Savings Rate 0 to -0.7%
2009 Savings Rate 4%
Total Personal Debt
Total U.S. Household Debt – Mortgages and Credit
Card Debt
$13.5 Trillion Dollars
$43,874 per U.S. Resident
(UMB)
Who are the 17 Million
Unbanked?
Unbanked Percentage of Total Race
African Americans
21.7%
Hispanic
19.3%
American Indian/
15.6%
Alaskans
Asian
3.5%
White
3.3%
Who are the 43 Million
Underbanked?
Underbanked Percentage of Total Race
African Americans
31.6%
American Indian/
28.9%
Alaskans
Hispanics
24%
White
14.9%
Asian
7.2%
Total Percentage of Banked and
Unbanked Households
• 54% of African American households are
unbanked or underbanked.
• 44.5% of American Indian/Alaskan
households are unbanked or underbanked.
• 43.3% of Hispanic households are
unbanked or underbanked.
Unbanked Statistics
• Households earning below $30,000 per
year account for 71% of unbanked
households.
• Number #1 reason why household
members don’t open a bank account –
Not having enough money to feel they
need an account.
Costs of being
Low to Moderate Income
• The Center for Financial Services
Innovation estimates that underbanked
individuals make 324 million transactions
annually at alternative financial services
providers totaling 11 billion dollars.
• It is estimated that 25% of the Earned
Income Tax Credit payments went
unclaimed (More then 9 Billion dollars).
Alternative Financing Services
Utilized by the Underbanked
• 81.1% use money orders
(34,873,000)
• 30% use check cashing
(12,900,000)
• 16.2% use pay day loans
(6,966,000)
• 15.8% use Pawn Shops
(6,794,000)
• 13.2% use Refund Anticipation Loans
(5,676,000)
• 13% use rent-to-own services
(5,590,000)
The number one reason for utilizing AFS
products was convenience.
Fair Isaac Corporation (FICO)
Three Companies Reporting Credit Score:
• Equifax
• Experian
• TransUnion
50-70 Million have no or “Thin” traditional
credit history
(Political & Economic Research Council)
Receive a free credit report at:
www.annualcreditreport.com
How is Your Credit Report
Calculated???
• 10% Types of Credit in Use
Is it a “healthy” mix?
• 10% New Credit
Are you taking on more debt?
• 15% Length of Credit History
How established is yours?
• 30% Amount Owed
How Much is too much?
• 35% Payment History
What is your track record?
(www.myfico.com)
Credit Reports – FICO Scores
A total of 59.5 million Americans have a credit
score of 649 or below. Subprime is generally
defined as scores 640 or below.
25.5 percent of consumers -- nearly 43.4 million
people - now have a credit score of 599 or
below.
The typical consumer has access to
approximately $19,000 on all credit cards and
1 in 7 are using 80% or more of their credit
card limit.
(www.myfico.com and Newsweek)
Why Have A Good Credit Score
•Finance a car
•Rent an apartment
•Get a home mortgage
•Set up utility accounts
•Obtain employment
•Purchase Insurance
Retirement
• Less than half of workers (46 percent) report
they and/or their spouse have tried to calculate
how much money they will need to have saved
for a comfortable retirement by the time they
retire.
• 45% of workers elect to cash-out 401(k)’s upon
leaving.
• Nearly a third of working people aged 55 or older
have less than $10,000 saved for retirement.
Lottery Retirement Plan
• State lotteries posted more than $53 billion in ticket sales
in 2006.
• Very low income households earning less than $13,000
spend approximately 9% ($1,000 annually) of their
earnings per year on the lottery.
• 20 percent of lottery players are low income, minority men,
with a high school education or less and their dollars are
funding 80 percent of the money going into the lottery.
• If you start to invest $85 per month at age 18 and you
retire at age 67 with a 6.5% investment rate you would
have approximately $360,000.
(MSN Money and Carnegie Mellon University)
Average Lifespan and
Average Retirement
FEMALE
80.4 year lifespan
MALE
75.3 year lifespan
27% of workers report $1,000 or less in retirement.
66% of all workers have less then $50,000 in
retirement.
Only 11% of workers report $250,000 or more in
retirement (Only 18% of those between the ages
of 45 and over).
(2010 Retirement Confidence Survey)
Social Security/Retirement
• Social Security was not created to supplement
an individuals entire living standard.
Pre Retirement
Income
$15,000
$25,000
$35,000
$50,000
$100,000
Percentage of Social
Security Benefits
60.4%
46.6%
40.7%
36.2%
24.2%
Will They Retire???
• 31.9 million individuals will reach retirement
age in the next 20 years.
• 1,595,000 individuals per year will reach
retirement age.
• Only 11% of workers report $250,000 or more
in retirement (Only 18% of those between the
ages of 45 and over).
Remember, 1,300,000 students drop out of high
school per year!
Why Don’t We Save For Retirement
LACK OF HOPE!
INSTANT GRATIFICATION!
Understanding The Millionaire Next Door
In 2009 there were 5,139,383 millionaire households in the
United States, or the equivalent of 4.46% of all the
households in the country.
80% accumulated their wealth in one generation
80% are college grads
97% are homeowners
95% are married (20-30 years)
66% work 45-55 hours per week
THE AVERAGE MILLIONAIRE SAVES 15% OF THEIR INCOME!
Millionaires are not workaholics and enjoy spending time
with family and friends.
(The Millionaire Mind
and The Millionaire Next Door)
Building Hope - The Millionaire Plan
The average family income is approximately
$50,000 in America. Saving 15% of the family
income per year equals $7,500 per year.
$7,500 divided by 26 pay periods equals $288.46
per pay period. ($6,475 per year or 245.11 per
paycheck after federal tax advantages)
$288.46 Per Paycheck (26 Paychecks)
35 years
6.5% Interest
$1,000,207.29
Where Are Adults Financially
Educated?
Work?
Church?
Life Experiences?
Parents?
Financial Advisor?
Friends?
Social Service Agencies?
Banks?
IT IS VERY IMPORTANT TO UDERSTAND HOW
A STUDENT HAS DEVELOPED THEIR
UNDERSTANDING OF FINANCIAL
EDUCATION.
Financial education: the foundation
Building wealth
Buying a home and/or
starting a small business
Developing a budget and
saving money
Trust between consumer and
financial institution
Creation of long-term
assets
Opening a Savings and/or
Checking Account
Establishing Relationship
with a Bank / Credit Union
Financial Education Can Be the Building Block to...
Individual Development Account
(IDA)
• An IDA is used for a specific purpose
such as education, purchasing a first
home, or starting a business. Savings
are matched by private or public funds.
– 240 FDIC Insured Institutions Participate
in an IDA Program
– 8,400 homes purchases
– 6,000 post-secondary educations
– 5,200 small business startups
Money Smart
• Money Smart is FDIC’s financial education
curriculum
– Over 907,000 Adult Curriculum copies have been
distributed
– 430,000 Computer Based Instruction (CBI) curricula
have been distributed
– Over 2.3 million consumers have been trained
– Over 1,400 organizations are members of the Money
Smart Alliance
– 20,678 trained instructor
• Money Smart has received recognition
Two Versions:
Instructor-Led & Self-Paced
Instructor-Led
Self-Paced
Instructor-Led Curriculum
• Each module is structured identically
• Comprehensive guide for instructors
• Take-home booklet for participants
• Overheads
• Duration of each module: 1-2 hours
• Available in: English, Spanish, Chinese,
Korean, Vietnamese, & Russian
• Version for the visually impaired available
• Revised as of August of 2006
Computer-Based Instruction (CBI)
(Self-Paced) Curriculum
• Online or CD-ROM
• 20-30 minutes per module
• Available in English and Spanish
• Revised in 2007
Money Smart modules
Module 1:
Module 4:
Bank on It
Money Matters
Module 2:
Module 5:
Borrowing
Basics
Pay Yourself
First
Module 3:
Module 6:
Check it Out
Keep it Safe
Money Smart modules (continued)
Module 7:
Module 9:
To Your Credit
Loan to Own
Module 8:
Module 10:
Charge it
Right
Your Own
Home
Train-the-Trainer
• Train-the-Trainer Video for potential
Money Smart instructors
– About half an hour overview of
teaching Money Smart
– English and Spanish
– Viewable online or order in VHS/DVD
format
• Train-the-Trainer workshops
Ten reasons Money Smart is unique
1.
2.
3.
4.
5.
Easy to teach
Easy to learn
Flexible
Targeted to cash consumer
Universal appeal
6. No copyrights
7. Multiple media
8. Multiple languages
9. FDIC seal of approval
10. Free!
Money Smart Survey Results
• A Longitudinal Evaluation of the Intermediateterm Impact of the Money Smart Financial
Education Curriculum upon Consumers’ Behavior
and Confidence (2007)
Findings include:
• Immediately after completing the course:
– 69 percent of respondents reported an increase in
their level of savings,
– 53 percent reported their debt decreased, and
– 58 percent stated they were more likely to comparison
shop.
Money Smart Survey Results (cont.)
• 6-12 months following the course:
– 61 percent of those not using a spending
plan/budget at the end of the course were using
one
– 95 percent of those who used a spending
plan/budget at the end of the course still used it
– 12 percentage point increase in those who
“always” pay bills on time compared to the
beginning of the course
What Can The FDIC Offer
Your Financial Education Staff?
• Teach Train-the-Trainer classes
• Adult Money Smart Curriculum
• Youth Money Smart Curriculum
• MP3 CD Portable Audio Version
• Computer Based CD and On-Line
Instruction
Money Smart Alliance
• Alliance members can assist by:
– teaching/delivering Money Smart
– hosting classes
– facilitating program implementation
– promoting Money Smart
– funding local efforts
– evaluating Money Smart efforts
– enhancing delivery and distribution
networks.
National partners
• Financial institutions
– Bank of America
– US Bank
– Wachovia
• Financial Institution Trade Groups
– American Bankers Association
– America’s Community Bankers
– Independent Community Bankers of Amer.
– National Bankers Association
– Association of Military Banks of America
National partners (continued)
• Federal Governmental Agencies
– Department of Agriculture/Rural Development
– Department of Defense
– Department of Housing & Urban Development
– Internal Revenue Service
– Department of Justice
– Department of Labor
– Office of the White House Initiative on Asian
American Pacific Islanders
National partners (continued)
• Non-Profits
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100 Black Men of America
American Institute of Certified Public Accountants
Bert Corona Leadership Institute
Blacks in Government
Goodwill Industries Int’l Inc.
MANA A National Latina Organization
Mission of Peace
National Coalition for Asian Pacific American Community Development
National Congress for Community Economic Development (NCCED)
National Disability Institute
National Image Inc.
NeighborWorks America
Operation Hope
Opportunities Industrialization Centers of America, Inc.
SER-Jobs For Progress National Inc.
The ASPIRA Association, Inc.
Urban Financial Services Coalition
Women In Housing & Finance Foundation
Money Smart News
• View online or subscribe to get via email
– www.fdic.gov Quick Links for Consumers
• Released quarterly
• Provides:
– Partner success stories
– Pictures
– Updates on the Money Smart program
• Submissions are welcome
Potential ideas for using
Money Smart
• Homebuyer education classes
• Post-homebuyer training
• Volunteer Income Tax Assistance clients
• Job and career training sites/ One Stops
• Social service Organizations
• Housing Agencies
Referenced Reports
Federal Deposit Insurance Corporation
A Longitudinal Evaluation of the
Intermediate-term Impact of the Money
Smart Financial Education Curriculum
upon Consumers’ Behavior and
Confidence (2007)
President’s Advisory Council on
Financial Literacy
2008 Annual Report to the President
(2008)
Referenced Reports Continued
Federal Deposit Insurance Corporation
National Survey of Unbanked and
Underbanked Households (2009)
Federal Reserve Bank of Kansas City
Weighing the Effects of Financial
Education in the Workplace (2009)
Referenced Reports Continued
Center for Labor Market Studies Northeastern University
Labor Underutilization Problems of U.S. Workers
Across Household Income Groups at the End of the
Great Recession: A Truly Great Depression Among the
Nation’s Low Income Workers Amidst Full Employment
Among the Most Affluent (2010)
Employee Benefit Research Institute
The 2010 Retirement Confidence Survey: Confidence
Stabilizing, But Preparations Continue to Erode (2010)
Thank you
Questions?
Gregory Housel
(816) 234-8047
[email protected]
POWER POINT PRESENTATAION
ADULT TRAIN-THE-TRAINER
CD REVIEW
Student Introductions
• Your name
• Your expectations, questions, and
concerns about banking.
Student Introductions
• Your name
• Your expectations, questions, and
concerns about banking.
Student Introductions
• Your name
• Your expectations, questions, and
concerns about banking.