evaluating financial education programmes - oecd · australia - the lack of financial education...

Evaluating Financial Education Programmes

Improving Financial LiteracyInternational Conference hosted by the Russian G8 Presidency in Cooperation with the OECD30 November 2006, Moscow

Christina TanDeputy Director & Head, Consumer Issues DivisionMonetary Authority of Singapore

Outline

Financial Education – Common Goals

Financial Literacy – Evaluating Progress

Evaluating Financial Education Programmes- Sharing examples based on Singapore’s experience

Common Goals

To enable consumers to achieve fair dealing

To enable consumer make more informed and effective financial decisions

To enable consumers to take responsibility for their financial decisions

Benefits of Financial Education

Empower consumers to make more informed investment decisions

More sophisticated investors help the market grow in depth and liquidity

Less reliance on the state

But does financial education really work?

Studies Show That Financial Education Makes A Difference

USA - 1.5%1 increase in average savings rates among adults who attended high schools in states with financial education requirements in public schools.

USA - Availability of retirement-focused financial education in the workplace increased average savings rates by 1.65%2.

Australia - The lack of financial education costs the average wage earner $790,0003 over their lifetime.

Source: 1) Bernham D., Garret D., and Maki, D “Education and Saving: The Long Term Effects of High School Curriculum Mandates”, National Bureau of Economic Research, USA, July 1997; 2) Bernham, D. and Garret, D. “The Determinants and Consequences of Financial Education in the Workplace: Evidence from a Survey of Households”, National Bureau of Economic Research, USA, June 1996; 3) Study by government taskforce on financial literacy, Australia October 2005

Outline




Conducting A Financial Literacy Survey

First National Financial Literacy Survey (2005)

Objectives

Measure current levels of “financial literacy” among different segments of Singaporeans.

Gauge Singaporeans’ attitudes towards financial matters.

Identify gaps in financial knowledge and actions.

Identify areas where more consumer education is needed & the most effective channels for delivery.

Defining Financial Literacy“the ability of individuals to make informed judgements and take effective decisions in

managing their finances”

Actions

Key attributes:• What steps Singaporeans have

taken to manage their money.• What active plans Singaporeans

have made to plan for their future / retirement.

• For Singaporeans who invest, what steps they have taken to understand what they invest and monitor investment performance.

Knowledge

Key attributes:• What level of understanding do

Singaporeans have of the risks and implications of common financial products:

• - Loans.• - Life insurance policies.• - Investment products.

Three Tiers of Financial Literacy

Tier II : Financial Planning

Tier III : Investment Know-How

Tier I : Basic Money Management

Survey Findings are Encouraging

AC

TION

S

Generally good money management habits.

Singaporeans recognise the importance of planning for their finances and have taken some basic steps in financial planning.

Singaporeans who invested take a considered approach in their investment decisions.

KN

OW

LEDG

E

Generally knowledgeable about their loans.

Understand risks inherent in investments & importance of diversification.

Areas for Improvement

Inadequate Savings for EmergenciesOnly 32% of Singaporeans have cash savings of at least 3 times their monthly income.

Inadequate Retirement PlanningOnly 24% have actually calculated how much they would need when they retire.

Inadequate Understanding of Common Financial ProductsSingaporeans are not aware of basic features of common financial products such as life insurance, unit trusts and structured deposits.

Developed a Financial Literacy Score

Financial Literacy Score

X 100

(Adjusted aggregated score for Action + Adjusted aggregated score for Knowledge)

(Score range value for Action + Score range value for Knowledge)

=

Scored questions which test Singaporeans’ financial actions and knowledge.Weighted score assigned for each response.Scores were aggregated and normalised across a 0 – 100 scale to derive a Financial Literacy Score.

Total Singapore Population

Action Knowledge Financial Literacy Score

Tier I Basic Money Management

72 76 74

Tier II Financial Planning/Retirement Planning

64 61 62

Tier III Investment Know-How

67 59 58

TOTAL 70 65 67

Financial Literacy Scores By Tiers

Financial Literacy Score by Education(Total Financial Literacy Score)

73

72

70

70

73

64

56

76

70

71

63

59

51

41

0 20 40 60 80 100 120 140 160

UniversityDegree/Postgraduate

(75)

Polytechnic/Diploma(71)

JC/Pre-U/A-Levels(71)

Secondary (66)

ITE (65)

Primary (56)

No formal education(47)

ActionKnowledge

Financial Literacy Score by Monthly Household Income(Total Financial Literacy Score)

72

72

70

70

71

70

69

62

80

77

74

70

66

62

56

52

0 20 40 60 80 100 120 140 160

> $10k (77)

$6k - $9,999 (75)

$5k - $5,999 (72)

$4k - $4,999 (70)

$3k - $3,999 (68)

$2k - $2,999 (65)

$1k - $1,999 (61)

<$1k (56)ActionKnowledge

Main Survey Findings by Segments

807267

Mean

55

Moderately Low

Average Moderately High

High financial literacy

Low financial literacy

27% of Students25% of Housewives33% of Unemployed

40% of Retirees

34% of Working Marrieds

All other segments:•Students

•Working Singles•Working Marrieds•Working Parents

•Pre-retirees•Housewives•Unemployed

•Retirees

Financial Literacy Scores by SegmentsTier 1

(Basic money management)

Tier 2 (Financial planning)

Tier 3 (Investment know-how)

Overall Mean Score

Retirees 65 55 50 59

Unemployed 68 53 58 61

Students 71 51 57 62

Housewives 72 60 51 64

Pre-retirees 73 63 58 67

Working Singles 77 64 62 70

Working Parents 77 68 63 71

Working Marrieds 80 71 65 74

Total Population 74 62 58 67

Interest in Financial Education

• 50% of Singaporeans indicated that they were interested in learning more about how to manage their money.

• Students, working marrieds and working parents were more likely to be interested in financial education programmes compared to retirees and low-income.

• Among those not interested in financial education, 40% cited insufficient money as the main reason while 32% said they have no time or it is not their priority.

Financial Literacy Scores for Those Interested in Financial Education

Action Knowledge Total

Interested (n=1006) 73 69 70

Not Interested(n=1017)

67 61 63

Preferred Means of Receiving Financial Education

9%

19%

20%

21%

54%

0%

10 20 30 40 50 60

Courses

Online learning tools

Talks / seminars /workshops

Consum er guides

Newspaper colum ns,radio / TV

programmes

Base: Total Respondents (n=2,023)

Outline




What Do We Evaluate?

REACH RETENTION REACTION

MoneySENSE Industry Working Group (MIWG)

Financial Industry Assocns Consumers Assocn

Context: Structure of MoneySENSE Rests on Partnerships

MAS MCYS MOM CPF BoardMOE People’s Assocn

Financial Education Steering Committee (FESC)

- Feedback- Conduct activities- Report on industry

initiatives

Funding, Endorsement, Overall Policy

Direction

Variety of Channels & Yardsticks

Target Audience YardsticksChannels

Roadshows

Seminars / Talks

Games/ Workshops

Mass Media

Consumer Guides / Website

Families

Low-Income / Financial Assistance

School-children

Retirees / Pre-retirees

Working Adults

Housewives

Outreach Numbers

Feedback Forms

Webpolls / Survey

Contest Participation

Website Hit Rates

Cost Effectiveness Of Different Programmes

Roadshows

Seminars / Talks

Games/ Workshops

Mass Media

Website

Total Cost

Cost Per Person Reached

• How much do participants learn?

• Do they take steps to better manage their expenses?

• How much do participants learn?

• Do they take steps to better manage their expenses?

Outline



Evaluating Financial Education Programmes- Example 1: Workshops / Games- Example 2: Mass Media- Example 3: Roadshows

REACH:Small groupsHigher cost per attendee as compared to seminars

Workshops / Games

RETENTION:High degree of interaction between participants and trainerGood participation in quiz questions to test understandingGood recall of key messages

REACTION:Overall positive feedback

Participants more likely to implement what they learn when there is follow-up action

Workshops / Games

Examples of Follow-Up Action:

Volunteers follow up with individuals who attended basic money management workshops

Students who attend financial education game workshops are encouraged to draw up their own pocket money budgets

Outline




Mass Media Initiatives

• Newsletters & educational articles

• Radio: Recorded capsules, interviews, DJ chats

• TV Game Shows

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

Surge in website hit rates when there are media activities.

Response Rate (%)

(Average No. of Responses / Circulation of Paper)

Run 1 Run 2

0.14%

0.12%

Response of Similar

Contests in Paper

Paper 1

0.09%

0.03% - 0.15%0.32%

0.13% 0.05% - 0.15%

0.27% 0.13% - 0.54%

Paper 2

Paper 3

REACH & RETENTION: Example of

Contest Response Rates for Print Media Initiatives

TV Game Show: Dollar & Sense (神机妙算)

TV Game Show: Dollar & Sense (神机妙算)

REACH• Over 1.3 million viewers

• About 60% aged between 18 and 45; 36% above age 45

• Mix of professionals, executives, business persons, blue collar workers and housewives

• Incremental increase in viewership throughout entire series

RETENTION• Tested recall of key messages via SMS contests

Outline




MoneySENSE Roadshows

MoneySENSE Roadshows

REACH• Over 89,000 visitors at 3-day roadshow at a mall

• Over 33,000 students at roadshows at 5 polytechnics

RETENTION• Overall positive feedback from attendees

• Good recall of key messages

• Encouraging mini financial literacy survey findings among polytechnic students

High awareness of the amount one should set aside to provide for emergencies

28%

40%

68%

0%

10%

20%

30%

40%

50%

60%

70%

Aware of the need tohave 3-6 mths' savings

Do not have at least 3mths savings

National Financial LiteracySurveyPolytechnic Survey

Challenge is for students to act on what they know and set aside savings to provide for emergencies

Key Findings Among Polytechnic Students

Tier 1: Basic Money Management

34% are already recording or monitoring their expenditures (compared to 30% of respondents in the National Survey)

40% have already drawn up a budget

78% are aware that interest is charged on outstanding credit card balance if one pays only the minimum sum

60% are aware that their monthly long term debt commitments should not exceed 35% of their gross monthly income


56%

33%

1%

17%

54%

13%7%2%

5%

0%

3%2%0%

10%20%30%40%50%60%

School daysStart work

Work for a few years

Get marriedFirst c

hild

Spare cash

Polytechnics National Survey

Students recognise the need to start financial planning early


Tier 2: Financial Planning

Students are aware of retirement planningAbout half (47%) recognise that investments will be an important source for their retirement fundAbout one third (32%) recognise that insurance could be an important source for their retirement fundAbout half (51%) know that they will need two thirds of their last drawn income when they retireThree quarters (78%) know that their Central Provident Fund savings will not provide them their last drawn income compared with 58% for the National Survey


Tier 3: Investment Know-howStudents generally have more investment knowledge

Risk-Return trade-offs (93% vs 75%) Diversification strategy (83% vs 66%)

Students are generally more aware of terms and conditions for common investment productsAll bonuses in insurance products are not guaranteed (93% vs 42%)14-day free look period for life insurance policies (74% vs 52%)7-day cancellation period for unit trusts (64% vs 34%)Fees and charges affect investment returns (83% vs 56%)Penalties may apply for early withdrawal of structured deposits (75% vs 57%)


Going Forward

Challenge: Encourage polytechnic students to translate knowledge to action

In Progress: MoneySENSible Youth Awards

. . . Summing Up

Variety of Yardsticks

REACH RETENTION REACTION• Outreach

statistics and profile of audience

• Total cost vs cost per person

• Feedback forms, surveys, quizzes to test recall of key messages

• Commitments by participants

• Follow-up actions• Enhance financial

literacy in the longer term

Key Challenges in Measuring Effectiveness

Experience & circumstances

Knowledge & understanding Skills

Personality

Confidence & attitudes

BEHAVIOUR

Many Factors Influence Consumers’ Behaviour

Source: Adult financial capability framework developed by UK FSA and Basic Skills Agency, 2004

No One Perfect Tool

Key challenges:Understanding consumer attitudes and behaviour in making financial decisionsIdentifying cause-effect relationships between financial education and making of financial decisionsMonitoring long term effect of consumers’ financial decisions

~ Thank You~

evaluating financial education programmes - oecd · australia - the lack of financial education...

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