How to give students and families the keys to a better financial future
Published in Fortune Magazine September 21, 2021
Technology has brought convenience and speed to our lives. In recent years technology has transformed the world of personal finance for consumers, and especially for our youth. Imagine a teenager using a smartphone to make a stock trade or to transfer funds between accounts. Consider how many students leverage peer-to-peer platforms to exchange money. These transactions are common for young people to conduct with ease and without guidance. While the technology is groundbreaking, knowledge of new financial tools and financial literacy education lags far behind the sophisticated programs that underpin our financial systems.
We are fortunate if once in a generation we can make a seismic change that betters society. This moment has arrived for our generation with a strong movement to build an equitable financial foundation for all. Our nation has reached an inflection point where macro factors are finally aligned on how we tackle this weighty issue. For the first time, there is a commitment coming from multiple fronts to ensure that every child, adult, and community has the financial infrastructure and resources for financial inclusion and stability. There is also the certainty that for true equality to exist, individuals must be empowered to make good financial decisions.
Private sector partnerships are leading the charge and moving at an incredible pace to deliver greater access to financial education. Companies like Citizens Bank, Comerica, Edward Jones, Fifth Third, Intuit, the MassMutual Foundation, Truist, and Zelle are just some of the organizations at the forefront of building greater financial capability for society as a whole. They are taking an innovative approach by integrating financial education into the fabric of communities nationwide and reaching learners through multiple touchpoints. These organizations work with my company, EVERFI, to leverage scalable software that deploys financial interventions for all stages of life, starting with K-12 students in the classroom and reaching adults with customized digital programs in their communities.
Through the software platform, these social impact programs capture key metrics that measure the outcomes of educational interventions on an individual, community, and national level. These metrics facilitate reporting on societal progress to stakeholders and help to advance the important dialogue on topics that, left unaddressed, lead to multi-generational cycles of inequality.
There are other organizations also mobilizing to provide greater access to the tools and resources necessary to build financial stability. Operation Hope’s Financial Literacy for All initiative, co-chaired by Walmart CEO Doug McMillon, partners with global brands to embed financial literacy into communities by engaging individuals where they live, work, and seek entertainment. This is an innovative approach that meets the community where they are and in a way that is familiar with how they live and interact with one another.
A shift in how we see ourselves
This commitment by global companies and nonprofits to help members of a community attain financial wellness reflects a catalytic shift in how organizations see themselves as part of the societal solution. It also reflects the reality of stakeholder capitalism hard at work.
In this new world order, there are increasing federal requirements for corporations to disclose their progress on important social issues including ESG, workplace diversity, and equal pay. We are seeing mounting regulations requiring interventions that lead to the financial health of a population. Already there is increasing pressure on financial institutions to impact their broader communities, through the modernization of the Community Reinvestment Act (CRA). These organizations now need to take a transformative, actionable approach in educating customers and the communities they serve on important financial and banking best practices.
At the school level, there are a growing number of unfunded mandates to educate students on the ever-changing financial system and to actively engage young learners on topics related to personal finance. In 2021 alone, 25 states have introduced legislation to add personal finance education to the curriculum. None of this legislation includes additional funding for school districts to provide this education, and students in all 50 states need access to this education. This is where these private partnerships are essential and creating a seachange in our academic curriculum. By taking part in these mission-critical programs, which are wholly funded through the private sector, students for the first time will learn personal financial skills throughout their K-12 educational journey, during the school day.
Our youth, largely untrained in financial decision-making, today have unprecedented access to electronic capabilities and buying power that present the potential for serious, long-term financial mistakes. Mounting debt, an inability to build savings, and a lack of understanding of how the financial markets work are a few of the foundational pieces that over time leave some individuals and communities behind, while others grow and prosper.
EVERFI is working with national organizations to provide education on modern banking and newer financial innovations like cryptocurrency, peer-to-peer payments, and mobile banking, while also helping students understand topics that can have long-term financial implications like healthcare literacy and college preparedness. And it doesn’t end there. There is a responsibility to expose students to global careers in the area of finance, and even to offer upskilling, to prepare them for careers with significant demand, like data science. The elements of this financial capability ecosystem all work together like a perfectly conducted orchestra. When executed properly, it provides students with an advantage that can be passed along to the next generation.
These programs, led by the private sector, will prove to be very powerful collaborations that drive change by delivering access, scale, and data.
However, there is work to do. Consider that 26 million Americans are credit-invisible in this country. Combine this with 71% of households reporting they have difficulty saving and a quarter of Americans being financially fragile. When we measure the disparity of wealth and the financial insecurity that exists in low-to-moderate-income communities, the results have significant long-term implications.
Tools that make a difference
Growing up in the rural community of Spencer, Mass., in a multiracial Latinx family, I was fortunate: I had the support and encouragement to pursue a college education. My teachers, coaches, and family were all part of my support structure, and that support included dinner-table conversations that introduced me to the basics about money and banking. I worked with my father to navigate the complex FAFSA form in the hopes that we could pursue the American Dream. I was the first in my nuclear family to graduate from college. At the time, I had no idea how I would repay my college debt. I took a chance, and graduating from Bowdoin College changed my life.
I have dedicated my career to helping communities build financial capability, particularly those communities that are most at risk. I have been an advocate for students and families, helping them to understand how student loans work and that earning a college education can be a reality. I have followed the data and research on the financial illiteracy crisis closely, and built a company to tackle change on this issue and measure it. Year after year it’s clear that personal finance education interventions work and hold promise for leveling the playing field and helping close the chasm of financial inequality. Having crisscrossed the country speaking with school districts, educators, students, families, and community leaders, I’ve learned that success in building financial capability is the direct result of a three-pronged approach: quality education regardless of where you live; the ability to collect data that measures societal change; and access to financial services tools that support good financial decision making,
The positive impact of financial education is beyond reproach. The National Bureau of Economic Research released a working paper discussing 76 randomized experiments it conducted with more than 160,000 individuals, and it reported that financial education programs have positive effects on financial knowledge and downstream financial behaviors. EVERFI joined the MassMutual Foundation and the University of Massachusetts Donahue Institute in conducting a multi-year efficacy study of FutureSmartSM, the Foundation’s financial literacy program for middle school students. The study found that students taking the course saw significant and consistent gains in their financial knowledge, across all types of students and schools. We must look to expand these programs further by supporting families and communities in an effort to drive even more change across the country.
This fall EVERFI is launching a first-of-its-kind four-year longitudinal study of 350 families located in geographically dispersed and diverse communities. We will provide ongoing developmentally appropriate financial education to their K-12 students in the classroom environment, while also offering engaging financial capability-building content to parents. We will measure the impact of this intervention by examining the financial attitudes and behaviors of the family over time. For example: Are families discussing financial topics more frequently? Do they understand financial vocabulary? Have they established a budget or savings account? This study will yield data on the power of arming a community with solid financial education and measuring the impact this has over a four-year period.
Research and data reveal that incredible opportunities exist when a community has access to the infrastructure, education, and skills to make good financial decisions. A few years ago we were unsure whether financial education worked. Now we know that it does, and the results are powerful. It is our responsibility to forge the path to financial equality for society.
It is our responsibility to equip every student, adult, and community with an education that enables them to be successful when they pick up their smartphone to access the new frontier of financial technology. A middle school student summed up their experience with financial literacy education at school quite simply: “I liked learning about money and how to take care of myself in the future.” The moment is now, and this generation, with the help of the private sector, is poised to reap the rewards that financial security holds and live financially healthy and secure lives.
Ray Martinez is the president and co-founder of EVERFI. He serves on the board of The JumpStart Coalition for Personal Financial Literacy.
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