Usually, when money experts talk about “financial literacy,” they’re harping on ways to make kids more knowledgeable about personal finances. U.S. Secretary of Education Arne Duncan recently said: “If our young people aren’t financially literate, we are part of the problem, not part of the solution. And as a nation, we have a huge problem.”
I’m all in favor of teaching youngsters and young adults about money. And I heartily recommend they (and their parents) check out the Money As You Grow site spearheaded by my former Money colleague Beth Kobliner as an initiative of the President’s Advisory Council on Financial Capability — the site just topped 1 million visitors.
Needed: More Efforts to Boost Financial Literacy After 50
But I think not enough attention is given to improving the financial literacy of people 50+, particularly ones who are low- and moderate-income and stand to gain the most by managing their money better.
As I recently wrote on Next Avenue, one in three Americans 60 or older is economically insecure, according to the National Council on Aging. The AARP Foundation estimates that nearly 20 million people over 50 are struggling to make ends meet. For many, the recession meant lost savings, lost jobs and increased debt.
The AARP/Schwab Program
That’s why I was delighted to see that the AARP Foundation and the Charles Schwab Foundation joined forces to create workshops specifically designed to help financially-challenged 50+ Americans. “There’s a lot of financial education out there, but not a lot is focused on older adults,” said Emily Allen, Vice President of Impact Areas for the AARP Foundation.
Carrie Schwab-Pomerantz, President of the Charles Schwab Foundation and author of The Charles Schwab Guide to Finances After 50 told me: “Being a boomer myself, I see the dire need for financial literacy for people 50-plus. Time is ticking for them to prepare for their financial security.”
I was even happier to see that the AARP/Schwab program, called AARP Foundation Finances 50+, showed dramatic improvements in the financial lives of participants six months after the end of its three 90-minute workshops offered by AARP Foundation community-based partner groups in 2012 and 2013.
Financial literacy programs aimed at kids teach things like how to write a check. But people 50+ don’t need to learn that sort of thing. Instead, the participants in AARP Foundation Finances 50+ got lessons in “how to develop their financial capabilities and make better decisions around their money and own those decisions,” said Allen.
7 Impressive Results for Participants
According to a survey of 427 of the 2,775 enrollees, six months after the workshop ended…
- They became less worried about their finances. Before the workshops, 22 percent were very worried about their financial situation. Six months afterward, just 14 percent were.
- They reduced their spending and/or increased earnings to try to keep their budget in balance. At the start, 51 percent had done this; six months after completion, 62 percent had. Only 36 percent spent less than their income before the program; 46 percent did six months after.
- They cut back on bad money behaviors. The percentage who were overdrawn on a bank account fell from 18 to 12 percent and who had been contacted by a creditor or debt collector about unpaid bills dropped from 23 to 17 percent.
- They became more likely to have a financial goal and a written action plan. At the start, 42 percent had at least one financial goal. After six months, 63 percent did. The percentage of participants with written action plans spiked from 33 percent to 46 percent. “An action plan is the foundation to improve your financial behaviors,” said Schwab-Pomerantz.
- They became more likely to reduce their financial services fees. Six months after the program, 49 percent had done this, up from 38 percent at the start.
- They lowered their debt loads. More than a third (35 percent) owed less in debt six months after the workshops.
- They became more likely to review their credit card, loan and other financial account statements for accuracy. The percent who do this rose from 61 percent to 71 percent.
Most participants surveyed, however, weren’t saving more six months following the workshop. (AARP suspects that’s because they were focused on using any spare cash to reduce debt.)
“You hear that people who don’t have money can’t save, but this study shows it doesn’t matter how much money you have. Anyone can find ways of cutting spending and saving more,” said Schwab-Pomerantz.
3 Keys to Success
So what made these workshops work? And better yet, what can you learn from them to improve your own finances?
I think there were three keys:
1. People learned together in small groups. Generally, there were no more than 15 people. This way, participants received more personal attention than you can get by going to a massive lecture or by reading a personal finance book. In addition, as the AARP Foundation wrote in a report about the program, classmates and instructors could “dissect” their financial behaviors.
2. The program was hands-on. Training sessions included not just “knowing,” but “doing” — with practice exercises. “We wanted the program to be practical and relevant for this audience,” said Schwab-Pomerantz.
3. There was personalized follow-up. After the workshops ended, participants were often able to talk with the volunteer instructors (AARP called them Money Mentors) one-on-one to help stay on track and remain motivated.
To me, the workshops sound like the equivalent of financial Weight Watchers. You and a few others meet regularly; work together and independently to achieve your goals; get cheered on by your groupmates and instructor and are held accountable to help raise the odds you’ll succeed.
What You Can Do to Manage Money Better
Although the pilot workshops are over, AARP has the instruction manual and curriculum on its site in hopes that organizations around the country will offer the program locally. You can also find a list of organizations using its curriculum.
“We do the training to the facilitators and let them implement the program in the way it makes the most sense for them,” said Allen.
The federal Consumer Financial Protection Bureau (CFPB) and Federal Deposit Insurance Corporation (FDIC) have a somewhat similar curriculum, called Money Smart for Older Adults. It’s offered by community organizations around the country. Participant guides can be downloaded at the CFPB’s site and community groups can order instructional materials from the FDIC.
Alternatively, you could set up on your own what my Next Avenue colleague Kerry Hannon calls a “money-circle discussion group.” In a post she wrote, Hannon mentioned that Directions for Women, a financial education and consulting firm in McClean, Va., offers a $39 webinar on how to organize a money circle.
And if you’d rather just go solo on your mission to manage your money better, Allen said, “set your own financial goals.” They needn’t be grandiose.
“It doesn’t have to be about how much you’ll save for retirement. It could be a goal of saving $500 so you can travel to see your grandkids next year. Sometimes, starting with a small goal is the best thing,” said Allen.