NWX-CFPB HQ CFPB FinEx Webinar: Helping Youth Build Financial Capability November 17, 2016 1:00 pm CT Coordinator: …thank you for standing by. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. All participants are in a listen only mode until the question and answer session of the presentation. During that time, to ask a question, press Star 1 and clearly record your name for question introduction. I would now like to turn the call over to your host, Ms. (Dubis Correal). You may begin. Thank you again. (Dubis Correal): Thanks. Good afternoon everyone. Thank you for joining today’s Webinar and sorry for starting late. We were having some technical difficulties. So my name is (Dubis Correal) and I’m with the Office of Financial Education within the CFPB. And I have with me today two colleagues - (Sunaena Lehil) and (Leslie Jones) are going to talk to you about our latest research on how to help youth build financial capability. So before we start the presentation, I’m going to go through a couple of slides about our office. And before I get started, we have to read our disclaimer that this presentation is being made by CFPB representatives and does not constitute legal interpretation, guidance or advice of the CFPB. And any opinions or views stated by the presenter are the presenter’s views. And we always present a little bit about what they Bureau is because we know that we always get new members. The CFPB was created by Congress in 2010 and we write rules, supervise companies and enforce federal consumer financial protection laws. We take consumer complaints and we promote financial education. Financial education is an integral part of the Bureau and that’s where we’re going to talk to you today. My colleagues and I are with the Office of Financial Education within the Consumer Education and Engagement Division. We have other offices that focus on specific populations but today we are going to present a research that the Office of Financial Education has conducted. Our mission here is to educate and empower consumers to make better informed financial decisions and promote effective financial education for consumers through trusted sources. That’s why we have our platform - the Financial Education Exchange which is an online and in-person information exchange for financial educators such as yourself. e currently have about 2000 members which is very exciting. And through FinEx, you can get the latest news and research on financial education from the CFPB. We share what is working well for financial education and it’s also a way for you to connect with your peers. If you look at the bottom of the slide, we have an email address if you’re interested in getting our newsletters, our information or just signing up for FinEx. Please email us at CFPB_FinEx@CFPB.gov and you’ll see it right at the bottom of this slide. And this is just to show you some of the activities that we have done. We have conducted 18 Webinars so far and we do it on a monthly basis, the third Thursday of every month. And as I mentioned to you, we have more than 2000 members at this point. And we also conduct regional convening and you can see on this slide, places where we have been. The idea of those convenings is to exchange information with financial educators across the country. This slide shows some of the tools that we have and we also have research about understanding consumers. We have tools for financial educators and we also have tools for consumers. And you can access those tools by going to consumerFinance.gov/adult-financial-education. This is our Webpage which you can access from our main page which is Consumerfinance.gov and you go to resources for educators and you get to the FinEx page. You can also join us on LinkedIn. If you search for CFPB financial education discussion group, you can find us there and you can use that as a platform to exchange information. My colleague, (Irene Skricki) who’s the lead of FinEx, moderates our LinkedIn group. So we invite you to join us if you can. And also we have resources for you on the topic for today -- on this page(www.consumerfinance.gov/youth-financial-education) we house information on this state and national policymakers and local and state practitioners of financial education for youth. What we are going to hear about today, you can find it on this page. We also have a tool targeted to young people who are getting ready to go to college or parents of young people who are getting ready. It helps evaluate options when financing higher education. It also helps compare costs and financial aid offers. And you can shop for a loan or look at options to repay student loan debt. So we invite you to visit our paying for college tool. Today’s topic is evidence informed approaches to help youth gain financial capability. So now I’m going to turn it over to my colleague, (Sunaena Lehil). (Sunaena Lehil): Great. Thank you, (Dubis). Hi everyone. I’m (Sunaena Lehil). Thank you so much for joining us today. Before I jump into talking about some of the new research that we have on youth financial capability, let me tell you a little bit about who we are in the Office of Financial Education. We have a small team focused on children and youth and we work on sort of three areas in the youth portfolio. We’re looking at how we can support financial education efforts in the sort of state and local level, so we’ve engaged community leaders who are maybe interested in advancing financial education and policy. In the second area of work, there’s the best practices portfolio which is focused on what tools, resources and insights we can share to educators to help them to effectively teach financial education. And we also have the area of work focused on parents and caregivers just recognizing what an influential role they have in supporting their children's financial capabilities. These are the three areas that we work in. I particularly focus on the oolicy leaders. (Leslie Jones), who I will later be handing it off to, works in the practitioner sort of side of the work. To give you sort of a sense of the type of the work that we’re doing here, I want to tell you a little bit about some work that we’ve done onlooking at how children and youth develop financial capability. In September, we published a report titled, “Building blocks to help youth achieve financial capability.” You’ll find that report on our Web site. To give you a little bit of a background about what this is, we wanted to understand what are the developmental origins of financial capability and well-being and also how and when do these fundamentals of financial capability develop? There’s a general sort of understanding that it’s important to start young and many of these abilities, characteristics, qualities and skills are starting to form early. But I think little is widely known about what exactly that is and what that looks like. So the developmental framework that I will be presenting to you today takes an important step in doing that. You’ll learn about a new developmental framework which deepens our understanding about how people develop financial capability and then I’ll also talk about some recommendations for those who are interested in implementing the framework into your work. I should mention that the underlying research that I’ll be discussing was led by CFED under contract to us - and CFED's team included academic experts including the University of Madison, University of Maryland Baltimore County and ICF International. With this great team of subject matter experts, we created the developmental framework and recommendations which I’ll be describing in the next few slides. When I’m done, I will hand it off to (Leslie) to talk about some tools that are available to practitioners and teachers who might be wanting to implement this in their classroom setting. Let me tell you about sort of the methodology behind the research. So the developmental model consisted of three stages of investigation - first, looking at CFPB’s previous adult financial well-being research to understand what experiences in youth contributed to their financial identity and values. The second area of work was an extensive review of published research to uncover what is known and not yet understood in academic research in the fields of consumer science, developmental psychology and education. And then we also consulted with national experts representing perspectives from a variety of disciplines to gain insights about the insights that are not yet reflected in published literature. We talked to experts in child and adolescent development, education, financial capability and consumer sciences. And really what we were trying to do is, trying to identify what is well-known, what are some things where there is consensus and to identify the plan bring it all together because there’s a lot of sort of great work and research being done in these different disciplines. And so we wanted to bring it all together because financial capability really is an interdisciplinary issue. As I mentioned before, this led to the creation of a developmental framework which includes three building blocks and information about when and how they develop. Okay, so what you’re looking at on the slide is that three building blocks of financial capability. The three building blocks are executive function, financial habits and norms, and financial knowledge and decision-making. For each building block, we identify what it is, what it supports and examples of it in financial applications. So executive function as a cognitive process used to plan, focus attention, remember information and juggle multiple tasks successfully. Financial habits and norms, the second building block, refers to the values, the standards, routine practices and rules of thumb that we use to routinely navigate our day-to-day financial life. It is developed through a process called financial socialization which I’ll talk more about on later slides. But just an example here: maybe the system that you use to make sure that you’re paying bills on time may be something that you’ve developed by watching what your parents or your siblings did -- basically learning what have other people done and then figuring out what works for you. And then the third building block is financial knowledge and decision-making skills. This refers to familiarity with financial facts and concepts, the ability to do financial research and make conscious and intentional financial decisions. An example here might be doing comparison shopping on an auto loan or making decisions around paying for retirement. For young people, it might be deciding what college to go to and how to pay for it. So those are the three building blocks. The distinction between habits and norms and knowledge and decision-making is that habits and norms are referring to things that we do on a day-to-day basis and these are decisions that we make automatically without really having to stop and think. Knowledge and decision-making, on the other hand, is the harder decisions that we make that require us to weigh our options, consider sort of different pieces of information in order to sort of arrive at the right decision. One is sort of the fast easy thing, and the decisions that we make in the other one are the more deliberate ones. On the next slide, you’ll see how these building blocks develop across keWe took the three building blocks which I just described and we mapped it across three developmental stages. The three developmental stages are early childhood, which is generally speaking, ages three through five, middle childhood; which is ages 6 to 12 and adolescence; and young adulthood which is 13 through 21. I refer to this age group as teens to be more distinct so that I don’t have to say adolescence and young adulthood in every sentence. These three age ranges are based on what is most commonly used in education and child psychology. So we are really modeling what we saw were the common practices. And now looking at the table with the arrows pointing out -- the building blocks develop over time and they develop across developmental stages. It is a continuous process. And the check marks with the circle represent important windows of opportunity when youth typically and most readily are able to acquire that particular building block. During these windows, cognitive and environmental factors combined to make this an ideal agent for learning particular skills, behaviors and attitudes. Developing the building blocks may be much more difficult when that window of opportunity is missed. In other words, the best thing that we can do in early childhood is to engage children in activities that build an executive function. In , middle childhood, because habits and norms are developing quite rapidly, financial education programs should engage youth in activities that help them to acquire healthy values, habits and norms. And lastly, and teen years, financial education efforts can focus on teaching and providing safe opportunities to practice applying their financial knowledge, skills and decision-making. This developmental framework illustrates what happens typically and it’s important to keep in mind that there can be individual differences. We recognize that to ensure that all youth have ample opportunities to develop each of these building blocks just because of the wide sort of age ranges that we are talking about, it’s important to recognize that it needs to be supported in a variety of settings, including homes, schools, afterschool programs and also in workplaces. For those interested in implementing the developmental model into their work, the report also provides for recommendations for supporting financial capability and I’ll talk about those on the next slide. The four recommendations are, first, teach youth financial research skills. This is particularly true for those of you who might be working with teens and adolescents. The second is, provide children and youth with experiential learning opportunities. The third is helping parents and caregivers to more actively shape their children’s financial socialization particularly in the middle childhood range. And then in early childhood, focus on developing executive function. So if you think about it like peeling back the layers of an onion, at the core of this is executive function which is recommendation four which really begins to develop most rapidly in early childhood but the development continues all the way into their teen years and young adulthood. So if they did not get the sort of executive function development opportunities in the early years, there is an opportunity to continue to support that as they grow older. Similarly, financial habits and norms are developing early in life in much earlier than I think maybe was typically thought of. And this is really happening through a process called financial socialization. We really encourage financial educators to consider approaches that engage and help parents and caregivers to get involved. Other potential influencers in terms of financial socialization could also be peers. When kids reach middle and high school years, they need more opportunities to practice and experience safely the kinds of financial decisions that they will likely encounter. Recommendation two emphasizes how important experiential learning is to building financial capabilities. And finally, recommendation one is really about teaching young people financial research skills. Because most financial decision - major decisions that we make require us to gather information through research, determining the reliability of that information, using that information to consider trade-offs and then to act on that information, doing this requires critical thinking and analytical skills and financial capability cannot be fully achieved without it. That’s, on the whole, the four recommendations. On the next few slides, I wsa going to drill down a little bit more into each one of them but probably in the interest of time, I’m going to go through them pretty quickly so if you have any questions, I’m happy to talk more about them. Starting with early childhood, focus on executive function. As I’ve mentioned before, research suggests that executive function is critical to achieving financial capability and well-being later in life. During this time, children - by this I mean, particularly in early childhood, children start by learning basic financial concepts. For example, people work in exchange for pay or the idea of sharing money or other resources like Halloween candy. Therefore, executive function training can be done in a variety of contexts and including financial contexts. An example here might be make-believe play activities where kids get to set a goal, whether that’s maybe like creating a grocery list and then they get to act out going grocery shopping to see how well they stick to their grocery list. There are also opportunities to support executive function practices at home with support from parents and caregivers. And in the report, we talked and great deal about ways that you can support executive function in the financial contexts and also executive function practices at home. We also direct readers to existing resources where you can find high-quality executive function sort of related activities. On the next slide, we’re talking about helping parents and caregivers to support children’s financial socialization. Financial socialization is the ongoing process by which children and youth are developing the financial attitudes, habits, norms that guide their financial behaviors. This is the automatic, day-to-day behaviors, decisions that we make without having to stop and think. Children are developing values, norms and habits by observing the choices and behaviors of their peers and their adults in their lives. Because financial socialization is happening whether we realize it or not, children are watching what their parents are doing - children are watching their parents and those adults around them and drawing conclusions about what that means. It’s an important window of opportunity for parents and caregivers to more explicitly teach and model healthy financial values and behaviors. And examples of ways of doing this might be involving children and routine financial activities such as setting a budget and helping them to make small spending decisions. In the report we also talk about some other themes,like using strength-based approaches. I know when we talk about this recommendation a lot of the questions that we get are about how parents might not feel confident or comfortable about talking about money with their children. Or they may not feel like an expert. We think that there is some promising strategies for using a strength-based approach that helps parents to use the things that they do feel confident about. It might not be money but they might be really good managers of time or other resources in their lives and they can use those as examples also to sort of teach healthy money habits and values. In addition to strength-based approaches, we also explore ways that you can leverage every day activities to support financial socialization so doesn’t have to be this one more, one-off thing that parents have to do. Then there are some programs that use a two generation approach where the programs are focusing on improving the parent’s financial capability while also supporting their children’s, so those are some of the themes that we explore on that recommendation. Moving on to recommendation number three is providing experiential learning opportunities throughout childhood and youth. Experiential learning opportunities support financial capabilities by encouraging children and youth to take an initiative so that they’re in the driver’s seat, make independent decisions, experience a result of their choices in a safe environment and learn through reflection. Children and youth in all ages of development can benefit from experiential learning whether it’s a simulation that’s mobile-based or one where they sort of act out like in reality fare or it could be getting the opportunity to save and a savings account, at school or with their parents. There’s a range of sort of ways to support experiential learning opportunities. And in this report, we talk about key elements of experiential learning, and suggest some of them are supporting independent decision-making with some guidance, encouraging young people to reflect on their experience, taking advantage of teachable moments, giving them opportunities for repeated practice and encouraging them to engage in activities like planning and goal setting around that experiential learning activity. Moving on to the next slide, teaches financial research skills - most major financial decisions that us adults make require us to gather information through research, use that information to consider trade-offs and act on that information in ways that serve our life goals. It also allows us to be able to carry out purposeful financial research. Some qualities are really essential - being able to decide what sources of information is reliable and trustworthy, being able to think critically,is this person telling me information that is in my best interest? And then also being able to sort of have some analytical skills so that you can really carry - do the cost-benefit analysis. And we think that you can start to teach financial research skills in middle childhood, adolescence and young adulthood. In the earlier years, it might be using sort of case studies and then as they get older, you could perhaps do this with paying for college. That’s the final recommendation. Bringing it all together, what is this research mean for financial educators? This research provides evidence-based insights and promising strategies as well as a more nuanced framework for understanding the path to financial capability for young people. When thinking about what children and youth need to learn to reach financial capability and well-being later in life, our research suggests that we should be thinking about it much more broadly to include things like executive function, financial habits and norms in addition to teaching of financial facts. And given the sort of different dimensions involved, supporting it in the home and schools and afterschool programs and also in an employment programs, where are a lot of the financial decisions get made, we see a role for a range of actors and supporting children’s financial capability including schools, parents, youth programs, policymakers and financial institutions. In addition to sort of developing the framework that I just described to you and the recommendations, we also have a number of resources that we’ve created. Some of them, along with some partners, put this framework into practice. So I’ll tell you about what they are and then (Leslie) can talk in a little bit more detail about them. The resources are Money as you Grow, Money as you Grow book club and the youth personal finance pedagogy. So with that, I will hand it off to (Leslie) to talk about our youth personal-finance pedagogy tool. Thank you. (Leslie Jones): Good afternoon everyone. I am happy to be with you today and to tell you a little bit about our personal finance pedagogy that we developed after digging into the building blocks research and seeing what it could do for parents and kids and trying to figure out how we can translate that into what educators can do to help kids in their classrooms. We know how children learn concepts. They learn informally and indirectly at home, through interaction with family and friends. We know that a parent is a child’s first teacher. But once a child enters formal education in school, subjects like math have a framework for, as we say in education, a pedagogy of how you teach children a specific topic. So this personal-finance pedagogy connects our building block research of what students need to learn in order to have financial well-being as adults to the classroom. CFPB released this youth personal-finance pedagogy and teaching tools back in September. The pedagogy is a guide to teach personal-finance skills to children. We - and you’ll see the building blocks throughout this whole thing - we want teachers to improve executive functioning skills such as planning and problem solving. We hope that they will create and encourage positive financial habits and effective money management. We want them to build financial research skills so that children can compare and contrast options and we want to make sure that, as they do this, they’re making sure that students are working safely so that, as they practice, they will not hurt their financial futures - and I’ll explain that in just a moment. The pedagogy supports all standards, all competencies. For example, memorizing the Rule of 72 is incredibly helpful but how many of us actually have it memorized? This pedagogy guides the teachers by suggesting that, along with teaching the Rule of 72, they should reinforce the general message of the rule - start early for maximum savings. We feel that that message is a positive financial habit for effective money management. Now, educators should also make sure that students remain safe while going online, as I mentioned earlier. For example, some Web sites have great information and you’d love to have your students working on that Web site because you know that they’d really benefit. But as the students are logging on to the website, it asks the students to provide too much personally identifiable information. So participating is probably not as safe as we would like. We want you to be careful out there and so we need to remember to balance giving students the opportunity to practice decision-making skills with making sure that they are safe online. Now let me show you how a teacher can use this model to identify teaching techniques. This wheel helps teachers quickly identify the best teaching techniques and learning strategies to implement the personal-finance pedagogy. Let’s look at the financial habits and norms section. A teacher wanting to enhance a student’s financial habits and norms who’s using this model would then look to see that a simulation or a blended learning activity would probably be ideal for their student. Maybe they might think about using a reality fair or an online product or try to establish a bank in school program for their students. And that information that I’m talking about right now is in the blue section of this tool. You start from the inner part of the wheel and you work yourself out to see your teaching techniques and learning strategies. In the far right corner of this slide, you also see some government programs that we’ve identified. There are examples of simulations that are available for teachers to use in the classroom. And a couple that I like to mention are (On Guard) Online. It’s wonderful. And I think that is produced by the FTC. And if you’ve ever had to teach taxes, then understanding taxes at IRS.gov and that is another wonderful site and they can both help you reinforce financial habits and norms as well as, to some degree, their - student’s financial skills and decision-making. All right, that is the end of the personal-finance pedagogy and I would like to wrap up with Money as You Grow. That is for parents and caregivers. So even if you don’t work with the age 3 to 12 crowd, if you are a parent or grandparent, you will probably find the Money as you Grow resources beneficial to explore. Money as you Grow is an online resource for parents and caregivers. Here, parents, grandparents, caregivers can find activities, games and discussion guides that help children acquire the building blocks of financial capability outside of the classroom. CFPB took a previously existing resource, updated and made sure that it was aligned with our developmental framework as we described in the building blocks report and that (Sunaena) went over with us. And I also want to let you know that there is a new piece to this resource. It’s called the Money as you Grow book club and it has recommendations for children’s books that children can read to help learn key money concepts. So that’s a wonderful site for just about any of us to visit. And I think that wraps up what I have to say and I'll pass this back on to (Dubis) and (Sunaena). (Dubis Correal): Thank you, (Leslie), and thank you, (Sunaena), for such a great presentation. Now we would like to open it up for questions. Can you provide instructions to how they can ask questions, please? Coordinator: Yes, thank you. At this time, will begin the question-and-answer session of the conference. To ask a question, please press Star 1 and recording clearly for question introduction. Again, to ask a question, Star 1 and clearly record your name for question introduction. One moment, please, to see if we have questions. (Dubis Correal):Okay, while we get questions, I got a question for (Sunaena). Can you provide examples of how the framework has been used in evaluation? (Sunaena): Yes, that’s a great question. And so, you know, this framework is really new and we just published the report in September but it was a project that was many years in the making. One example that I can give you is that in the My Classroom Economy evaluation that the University of Madison, Center for Financial Security did, they developed evaluation questions for each of the building blocks - or for at least two of the three building blocks - the financial habits and norms and financial knowledge and decision-making. And so those evaluation questions were used in the evaluation research that they did for My Classroom Economy. So that’s one example of something that’s already out there and we’re really excited and pleased to see, you know, variety of different stakeholders using this developmental framework to guide their thinking. If I may just make another addition - for those of you who might be sort of taking in all the information that we have thrown at you, particularly the three building blocks, if you’re trying to sort of think through what does that actually look like and what could be potential sort of capability milestones for each of the sort of different stages, developmental stages that we talked about, we have this handy table that we’ve created on Page 57 of the building blocks report that walks you through what does this look like for each of the building blocks across the different development stages. And that’s a very - a really nice sort of place to go to if you’re trying to think through what this means for potentially the work that you’re doing. (Dubis Correal): Great. I think we will adjourn. Thank you so much, (Sunaena) and (Leslie), for the presentation. I have on the screen the Web site address in case you’re interested to access the tools. And thank you so much for your participation today and we will send out information about our next Webinar in the next couple of weeks. Have a great day. END