June 04, 2010 02:06 PM
By Brandee McHale, Director of Programs, Citi Foundation
A recent major study by the FINRA Investor Education Foundation showed most Americans lack the knowledge and skills they need to make the right financial decisions for themselves and their families. These findings from the National Financial Capability Study are a cause of great concern at Citi because they showed, among other things, that most Americans aren't adequately saving for emergencies, college or retirement, and just 46 percent correctly answered two basic questions about interest rates and inflation. The study also found that more than one in five respondents use high-cost alternative borrowing methods such as a payday loans and pawn shops.
As millions of Americans struggle to recover from the economic crisis, financial educators and financial services providers like Citi are searching for new ways to improve the financial skills of consumers. The traditional approach has been classroom-based, emphasizing accumulation of knowledge in a group setting. But there's a consensus building about shifting the focus to building financial capability and giving consumers the knowledge to help them make better-informed financial decisions.
As part of our 10-year, $200 million commitment to support global financial education, Citi Foundation recently sponsored research by the Center for Financial Services Innovation (CFSI) to assess the current financial education landscape and determine what's been the most impactful. CFSI's analysis found that the most effective interventions are those that are immediately relevant to consumers' lives, coincide with key life events or moments of a financial decision, allow them to execute newly gained knowledge into action immediately to improve their financial situation, and help consumers acquire and preserve assets over the course of their lives.
One way we are putting these ideas to work is through a commitment to NeighborWorks America, a national nonprofit organization created by Congress in 1978 that provides training, technical assistance and financial support to its network of 235 community development organizations on effective neighborhood preservation and revitalization techniques. Citi Foundation is contributing $5 million to train 475 community development professionals to deliver high-quality, one-on-one financial counseling and planning services to low-income individuals and families. Through their improved financial skills, people will learn how to prepare and manage during a financial crisis and learn how to make smarter choices about the financial products and services that meet their needs going forward.
Citi is pleased to provide financial support that is catalyzing this type of work. In the downturn, we're seeing many more people wanting to make substantive changes to the way they manage their money in an increasingly complex economy. There has never been a greater need -- or a greater opportunity -- to help people develop financial capability.