Designing and Evaluating a National Strategy for Financial Literacy

1. Designing and Evaluating a National Strategy for Financial Literacy Annamaria LusardiJoel Z. and Susan Hyatt Professor of Economics Director, Financial Literacy Center

2. Relevance Why a national strategy? • Increase in individual responsibility • Demographic changes: aging • Labor market changes: more mobility • Pension changes • Financial markets more complex • Globalization of financial markets • Cost and consequences of financial mistakes at the aggregate level • Welfare system will be affected • Well informed citizens lead to more stable markets and better use of resources

3. Road map What is a national strategy? The institutional framework Identifying the issues Defining financial capability National survey Preliminary assessment Objectives: Long-term vs. short-term Designing interventions Targeted population sub-groups Evaluation Take-away

4. What is a national strategy Defining a national strategy • A vision for financially capable citizenry • Aggregate stakeholders • Identify the gaps • Define a framework of action • Identify targets to be achieved in a specific time frame • Plan initiatives • Evaluation of initiatives

5. Benefits of a national strategy Benefits • Guidance and coordination • Public and private initiatives • Avoid duplication of effort • Share expertise • Promote best practices • Cost effectiveness

6. Institutional framework Some structure • Identify all stakeholders involved • Identify a national agency/institution to coordinate • Useful to create a Financial Capability Steering Committee sponsored by the coordinating agencies, involving all the stakeholders (examples, UK and Ireland)

7. Identifying the issues What are the problems? Some examples: • Pensions or changes in pensions • Low saving rates • High default rates on loans • Fraud and scams • Others

8. Defining financial capability Financial capability/competency • Broad definition • What does it mean to be financially capable? • Knowledge versus behavior • Country-specific elements of the definition

9. Measurement: A national survey Benefits of a national survey - Picture of current levels of capability • Identification of areas of intervention • Identification of at-risk population categories • Establishing a baseline for evaluation • Useful for both public and private sector • Building a base for longitudinal evaluation: a new survey every 3-5 years

10. Case study: U.S. National Financial Capability Study Four key components: • Making ends meet • Planning ahead • Managing Financial Products • Financial Knowledge and Decision-Making

11. Preliminary assessment Assessment of what exists • Existing initiatives • Identify gaps in the provision of resources and avoid duplication of initiatives • Agencies and organizations already involved with financial capability

12. Long term and short term objectives Objectives Long-Term vs. Short-Term Objectives • Long-Term = Improvement of financial literacy/capability for the entire population • Short-Term = specific problems to solve. Focus on specific subgroups (those more at risk)

13. Designing intervention What to consider Every objective (long term or short term) requires an intervention. For every intervention, these points should be considered: • Target/beneficiary—who is it? • Current situation • Reasons for changes • Providers • Delivery methods • Budget • Design of evaluation • Pilot program • Evaluation

14. Intervention: Some examples UK experience • School: Learning money matters • Young adult: Helping young adults make sense of money • Workplace: Make the most of your money • Consumer communication • Online tools • New parents: Money box • Money advice

15. Targeted population Different programs for different needs • Different population sub-groups have different needs and would benefit from targeted programs • Example: Maori people in New Zealand, Native Americans in the United States. But also the elderly and women may benefits from targeted programs

16. Evaluation The importance of evaluation • Must evaluate • Accountability • Efficient allocation of resources • Standardized framework for evaluation • Use scientific methods • Many biases • Measurement of success • Indicators of knowledge/behavior • Disseminate results widely and share experience

17. Longitudinal evaluation In the long run • Can evaluate the national strategy itself • Redo a national survey • Re-adjust objectives • Focus on areas in need • Tailoring interventions • Allocate resources efficiently over time

18. Some issues about evaluation Evaluation is part of the program design • Have to design evaluation at the beginning of program not at the end • It needs resources and expertise • Independence • It is a requirement: we need to know what works and what does not work OECD can provide guidelines on evaluation

19. Take-away Importance of a strategy and its evaluation • Need for direction • Importance of coordination • Many stakeholders • Different targets • Importance of evaluation at every stage • Efficient use of resources • Share experience across countries

20. The cost of ignorance “An ignorant people is the blind instrument of its own destruction” Simon Bolivar, 1819