New Frontiers in Financial Capability

Financial education is not the same as it was 10 years ago, and it won’t be the same 10 years from now. As Digest’s yearlong examination of technology concludes, we at NEFE want to share some of what we’ve learned and some points to ponder going forward.

Although many imbue technology with almost-mythic abilities, educators and practitioners know firsthand that technology is not a silver bullet. Technology does work— for some people, in some situations, sometimes. It can deliver customized, continually updated experiences and attract learners with its cutting-edge approaches. It’s not necessarily better than old-school methods, just different.

NEFE's Financial Capability Model graphic

We may not be any closer to a widely-accepted definition of “technology,” but we can be more precise when weighing the pros and cons of specific types of tools. We also can agree that, rather than throwing money at “technology solutions” just because they’re trendy, we should continue to choose the best tools available to achieve our learning outcomes, and recognize that they won’t always contain a circuit board.

In recent years, bitter economic swings have created more demand for financial education — and greater expectations for how it should improve consumer behavior. Personal finance chatter has exploded online, but more talk does not necessarily translate to better education and not all conversations are helpful. Unfortunately, many reinforce misconceptions — including that financial education doesn’t work.

As part of our work with the President’s Advisory Council on Financial Capability, NEFE proffered the financial capability tripod model, which is supported by three “legs”:

  • Education;
  • Consumer protection and regulation; and
  • Choice architecture/behavioral economics.

Just as technology solutions will not magically transform financial education on their own, financial education itself is not a silver bullet either. In fact, consumers benefit from an appropriate combination of all three legs, depending on the situation.

Looking forward, one of the big questions facing us is whether “product” belongs in the model. All legs lead to product decisions: educating consumers to choose appropriate products for themselves; ensuring products are designed fairly and encouraging cost-efficient product breakthroughs through consumer protection; and using products to steer consumers to helpful decisions through choice architecture. How should we define the “product” leg, when we are both giving people the tools to capably assess products and impelling innovative product design at reasonable cost?

Another big question is the role of counseling and coaching. Does it belong with education, or does it merit its own leg? Counselors and coaches educate, yes, but they also provide high-touch human encouragement, leading clients through a very personal discovery process to improve their knowledge, confidence and understanding of how to navigate their financial lives to achieve their specific goals.

In 2016, we will broaden our discussion from the role of technology in our field to findings from recent financial capability research and other relevant topics. What else do you think we should be talking about in 2016?

See the full Nov/Dec 2015 Digest or download the PDF.

Contacts

  • Paul Golden

    Media Relations Director

    Direct: 303-224-3514
    Cell: 303-918-3620
    pdg@nefe.org

  • Patricia (Pat) Seaman

    Senior Director of Marketing and Communications

    Direct: 303-224-3538
    pas@nefe.org

Contacts

  • Paul Golden

    Media Relations Director

    Direct: 303-224-3514
    Cell: 303-918-3620
    pdg@nefe.org

  • Patricia (Pat) Seaman

    Senior Director of Marketing and Communications

    Direct: 303-224-3538
    pas@nefe.org