Question: What Are The Building Blocks of Financial Capability?

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Sep 12, 2016
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Financial Literacy, Behavioral Finance, Policy, Question of the Day, Research, Budgeting, Teaching Strategies, Current Events, Case Study, Parent Conversations

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Consumer Financial Protection Bureau (CFPB) out with a new report “Building Blocks to Help Youth Achieve Financial Capability.”

Skimming through it quickly to bring you the highlights. Here are their three building blocks they identify as critical to financial capability:

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Here are some links to a few NGPF resources that map to the examples that they provide in the table above:

It was great to see the CFPF recommendations that align well with the approach we use at Next Gen Personal Finance and what we have observed in the classroom:

  • Develop executive function skills in young people
    • Our curriculum focuses on decision-making and problem solving which gives students practice before they have to make these decisions in the real world
  • Help parents and caregivers to more actively influence their child’s financial socialization
    • We also find that students in financial education courses (especially in families with limited experience with financial services) can have an impact on their parents as they question various financial behaviors
  • Provide children and youth with experiential learning opportunities
    • We have Activities and Projects that provide these learning opportunities because we know that students “learn by doing.”
  • Teach youth financial research skills

I also love their recommendation about case studies (check out our Case Studies here and a podcast explaining how to use Case Studies in the classroom):

One strategy to help youth build these mental “guideposts” for financial decision-making is using case studies to illustrate common situations or decisions, especially ones that would lead many people to make mistakes. For example, a case study might teach youth that it is important to check their budget and comparison shop before purchasing an expensive item. In this case, expensive items serve as the mental “guidepost” to trigger youth to do more research and consult their own budget. Most people are unable to constantly monitor their own behavior but instead rely on cognitive heuristics85 (also known as decision-making shortcuts, or rules of thumb) to recognize situations in which they are likely to make a mistake.86 It can be easier to recognize other people’s mistakes than our own, especially if we lack a foundation of experience to draw upon. Thus, case studies can be especially useful, as they prompt youth to recognize when they are likely to need more help.

 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.