developing sophisticated financial consumers karen murrell senior research fellow, asset building...
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Developing Sophisticated Financial Consumers
Karen MurrellSenior Research Fellow, Asset Building Program
National League of Cities Bank on and Beyond: A Roundtable for City Leaders
September 10, 2008
New America Foundation ♦ Asset Building Program 2
Session Overview
• The Case for Financial Education
• Financial Education Challenges
• Developing Sophisticated Consumers by Addressing Financial Life Stages
• Examples: Cities Addressing Financial Life Stages
The Case for Financial Education
• Complex, Consumer-Driven Financial Marketplace
• Changing Demographics
• Market Innovation
• The Subsequent Impact on Consumers
Financial Education Challenges
• Low demand from consumers
• Lack of evidence about best practices and effectiveness
• No national infrastructure to coordinate and ensure effective practices
• Weak financial education distribution system for children and adults
New America Foundation ♦ Asset Building Program 4
Financial Life Stages
• Youth—Under 18, still in school, may have a job
• Student—Attending college/university
• Starting Out—Entering the workforce
• Builder—Getting married, starting a family, building a career
New America Foundation ♦ Asset Building Program 5
Financial Life Stages
• Starting Again—Divorced, widowed
• Retired—Living on a fixed income
• Care Giver—Caring for an elder
New America Foundation ♦ Asset Building Program 6
Youth
New America Foundation ♦ Asset Building Program 7
Objective/ Motivation
Financial Education Needs
Motivation:
Maximizing spending money
Basic money management/goal setting
Banking basics/cost of alternative financial services
Establishing savings habits
Student
New America Foundation ♦ Asset Building Program 8
Objective/Motivation Financial Education Needs
Motivation:
Paying for education; maximizing spending money
All goals listed previously, plus:Financing educationCredit and debt managementEstablishing an emergency savings fund, if earning money
Starting Out
New America Foundation ♦ Asset Building Program 9
Objective/Motivation Financial Education Needs
Motivation:
Financial stability; buying a car or home
All goals listed previously, plus: Understanding the impact of
public benefits Tax preparation/management Car financing Homeownership counseling Insurance (life, disability,
health, auto, home, etc) Retirement planning
Builder
New America Foundation ♦ Asset Building Program 10
Objective/Motivation Financial Education NeedsMotivation:
Financial freedom; buying a car; buying a home; saving for children’s education
All goals listed previously, plus: Saving for college Update insurance (life, disability,
health, auto, home, etc) Establish legal documents (trust,
living will, durable power of attorney, health care proxy)
Investment planning
Starting Again
New America Foundation ♦ Asset Building Program 11
Objective/Motivation Financial Education Needs
Motivation:
Financial freedom;buying a home;saving for children’s education
Review income (including alimony/child support), asset and credit status
Review housing needs Revise insurance needs Review tax
consequences
Retired
New America Foundation ♦ Asset Building Program 12
Objective/Motivation Financial Education Needs
Motivation:
Maximizing retirement income; passing assets to heirs
Managing money on a fixed income
Medical expenses/insurance Long-term care insurance Estate planning Review legal documents
(trust, living will, durable power of attorney, health care proxy)
Care Giver
New America Foundation ♦ Asset Building Program 13
Objective/Motivation Financial Education Needs
Motivation:
Manage expenses of providing quality care to aging parents or loved
Financing medical and other expenses/budgeting
Insurance (medical, long term care, etc)
Social security benefits Housing options (nursing
home, assisted living) Review legal documents
(trust, living will, durable power of attorney, health care proxy)
Examples
• Youth—Baby bank accounts/Youth savings accounts (San Francisco)
• Student—Matched 529 college savings fund (San Antonio)
• Starting Out—Coordinated access to benefits and services (San Francisco)
• Builder—Saving incentives at tax time (New York)
• Starting Again—Alternative RAL product (San Antonio)
• Retired—Assist seniors to avoid predatory and wealth stripping services (San Antonio)
• Care Giver—Financial Education Network Directory and 311 (New York)
New America Foundation ♦ Asset Building Program 14
Developing Sophisticated Financial Consumers
Karen MurrellSenior Research Fellow, Asset Building Program
National League of Cities Bank on and Beyond: A Roundtable for City Leaders
September 10, 2008