financial literacy: key to retention and default prevention fall 2012 ncasfaa conference

Financial Literacy: Key to Retention and Default Prevention

Fall 2012NCASFAA Conference

What Is Financial Literacy? Why Is It Important?

• The ability of individuals to make appropriate decisions in managing their personal finances effectively

• Financial Literacy is critical for a healthy, sustainable economy and culture

• Understanding financial responsibilities and managing money can have a positive impact on repaying education loans!!

Financial Literacy – or Illiteracy Statistics

• High School students’ survey administered to 6,856 12th graders (Jump$tart Coalition for Personal Financial Literacy, 2008)

•The majority of high school students were unable to answer basic financial questions regarding credit, savings, interest, and insurance.

– Correctly answered 48.3% of the questions– Lowest score since 1997– Highest score ever was 57% - still considered failing - in

1997

Financial Literacy – or Illiteracy Statistics

• College students’ survey administered to 1,030 full-time students (Jump$tart Coalition for Personal Financial Literacy, 2008)

– Correctly answered 62% of the questions– College freshman correctly answered 59% of

the questions– College seniors correctly answered 65% of the

questions

Sample survey question – Jump$tart Coalition

Sara and Josh just had a baby. They received money as baby gifts and want to put it away for the baby’s education. Which of the following tends to have the highest growth over periods of time as long as 18 years?

A)A checking accountB)StocksC)A U.S. Government savings bondD)A savings account

B. Only 16.8% of high school students and 19.2% of college students feel stocks are likely to have a higher return than all other choices…over an 18 year period.

Sample survey question – Jump$tart Coalition

Many young people receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage?

A)You are covered by your parents’ plan until you marry

B)If your parents become unemployed, your insurance coverage may stop

C)Young people don’t need insurance b/c they are healthy

D)You continue to be covered by your parents’ plan as long as you live at home, no matter your age

B. Only about 40% of high school students got it right. What’s scarier is that 33% answered “D”. 70% of college students answered correctly.

2012 Financial Literacy Statistics – North Carolina

Financial Literacy Statistics – Postsecondary

• The top five stressors for currently enrolled college students are:- the need to repay loans- the cost of education- borrowing money for college- the need to find a job after school- the academic challenge of course work

• (Inceptia - Financial Stress: An Everyday Reality for College Students 2012)

More Statistics...

• 1st year students more stressed than the average college student when it came to Cost of Education and Cost of Living

• Overall, one third (34 percent) of respondents said financial stressors have had a negative impact on their academic performance or progress

• Another 20 percent report they have had to reduce their course load due to these same stressors

• (Inceptia - Financial Stress: An Everyday Reality for College Students 2012)

Financial Literacy Resources And Tools

• NEFE Tools • America’s Promise Alliance• Federal Government Resources• Mapping Your Future Tools• Cash Course• Other Resources• Get Financially Fit!• CFNC Resources

National Endowment for Financial Education (NEFE)

• Educate high school students about money management and financial planning

• Help teens develop positive behaviors• Curriculum materials• Sponsors Include

– Cooperative State Research, Education & Extension Service

– USDA– Credit Union National Association, Inc.– America’s Credit Unions

• Nefe.org

America’s Promise Alliance

• Teach middle school and high school students about financial responsibility

• Set of curriculum materials• Founded in 1997

– General Colin Powell is the Chairman– Partnership of over 400 organizations

• Americaspromise.org

Federal Government Resources

• U. S. Treasury– National Financial Capability Challenge

(annual)– Educator’s Toolkit

• mymoney.gov

Mapping Your Future

• Budget Tools• Calculators• Show Me the Future Game

- geared for younger students

• Entrance and Exit Counseling • Mappingyourfuture.org

Cash Course

• Financial education resources for colleges• Sponsored by NEFE• Cashcourse.org

Other Financial Literacy Resources

• practicalmoneyskills.com• financiallit.org• nslp.org• tgslc.org• usafunds.org• mygreatlakes.org

Get Financially Fit!

• “How-to” Financial Education Toolkit – to develop a financial literacy program on college campuses

• newyorkfed.org/regional/projects.html• Funding for this project provided by:

– American Council on Consumer Interests– Federal Reserve Bank of New York– Association for Financial Counseling and Planning

Education– Direct Selling Education Foundation

Did You Know…

•Americans are more in debt today than any other time in history•Average college graduate has nearly $25,000 in student loan debt•The average student graduates with a credit card debt of around $4,000•1 in 3 students graduate with $10,000 or more in credit card debt

Top 5 things HS Students spend their money on

How did you do?

If you chose mostly:

oA answers – You put off making money decisions.

oB answers –You like to see your money make money.

oC answers – You enjoy spending and think little about how to pay for your purchases

How did you do?

o D answers – You care about others who have less than you do, and you often feel guilty about having more than they do.

o E answers –You like to save every penny. You do not enjoy spending money.

Financial Literacy Education Components

• What is financial health?• Budget tools• Calculators – savings, credit card debt, loan

repayment• Using credit responsibly• Borrowing to finance an education• Setting financial goals• Information about financial institutions, identity

theft, etc.• Assessment tool

An Example: CFNC.org Financial Literacy Tools

Financial Literacy Scholarship – Decision Partners

A $500 scholarship awarded randomly to two students per year who complete the Financial Literacy 101 or AMM course at CFNC.org. Eligibility Requirements:•Contest begins on July 1st of each year•Deadline is June 30th of each year•Be a NC resident•Be accepted for enrollment or currently be a student at accredited college or university •Complete FL 101 or AMM course at CFNC.org with a 80% or higher score

Financial Literacy – Elementary Students

• Videos– Goals– Money Grows– Spend or Save

Financial Literacy

• Online, interactive course• Multi-media or text • Tools to help you make wise money management

decisions• Calculators • Fact sheets

Financial Literacy 101 and AMM Course Topics

Building Blocks Of Financial Health

Budgeting 101

• Identify income• Identify expenses• Remember the different types of expenses

– Fixed– Variable– Periodic

• Pay Yourself First!– Funds transfer to a savings account– Payroll deduction– Internet transfer– Envelope method

Budget Calculation Tool

Real World Calculator

Credit Cards - The Good, The Bad, And The Ugly

• When it is appropriate to use credit (for example, an emergency)

• What happens if you only make the minimum payment or run up the balance

• What happens if you fail to make payments• Credit Card Calculator

Credit Report Basics

• Know what’s on your credit report!• You should check it at least ONCE per year!• What creditors are looking for:

-On time payments-Your mortgage payments -Available credit on your credit cards-Total debt outstanding

• Missing even one credit card payment can knock your score down 50-100 points.

Credit Card Repayment Calculator

Investing in Your Education

Education Loan Repayment Calculator

Smart Borrower Calculator

Set Your Financial Goals

Write your goals down!

Additional Resources - Text

Assessment

• Online quiz• Questions asked after certain topics• Certificate of completion

Additional Resources - Fact Sheets

Financial Literacy Games on CFNC.org

Financial Aid Administrator Access – Master Control Panel Homepage

View Student-Level Detail

• Student name• Login date• Year in school• Percent of material covered• Percent of correct answers• Completion code

Financial Literacy Reports

• Pre-Course Survey• Post-Course Survey• Quiz Reports • Export Usage Data

On Your Campus

• Consider using a combination of several programs– Some students respond best “in person”– Some prefer working at their own pace on-line

• Integrate financial literacy education into your debt management plan

• Your current financial literacy education activities?

• Your future financial literacy education plans?

Questions About CFNC Services and Tools

Area Code Name Email Phone

252 Amy Denton adenton@cfi.org 252-402-6157

910 April Morey amorey@cfi.org 910-280-1883

919 Sarita Broadway sbroadwa@cfi.org 919-264-3686

336 Takeila Hall thall@cfi.org 336-402-5622

704/980 Timeka Ruffin truffin@cfi.org 704-281-3437

828 West Laura Misner lmisner@cfi.org 828-712-9840

828 East Skip Watts swatts@cfi.org 828-337-7939

Questions?