Monday, March 25, 2013

President's Advisory Council on Financial Capability Report Released

I have the honor of serving on the Working Committee (Money As You Learn) for the President's Advisory Council on Financial Capability. The project provides optional resources that integrate important personal finance concepts into mathematics and English language arts classes. It is up to the classroom teachers to determine what text(s) from our list is best for their students, and I believe the classroom teacher is clearly the best positioned professional to make that determination.

Here is the first paragraph about Money As You Learn from the report on page 26.

"The President’s Advisory Council on Financial Capability calls for a new initiative – Money as You Learn -- to integrate important aspects personal finance into English language arts and mathematics teaching as well as into other classes and afterschool programs, in order to reach more students throughout their schooling. This approach can strengthen learning of those subjects as well as expose all students to knowledge and skills they need to become financially capable young adults. At the same time, the Council continues to urge states and school districts to also provide high quality personal finance classes for their students."

The particular information pertaining to the integration of personal finance concepts into English language arts and mathematics classes is on pages 13, and 26-31.

Click here to read the report. Click here to visit the President's Advisory Council on Financial Capability Resource Center.

Sunday, March 17, 2013

My 30 favorite financial education games

Andrew Miller and I worked together on the recent post for Edutopia "Games to Teach Financial Literacy".

The purpose of the post was to highlight 3 prized of my 30 favorite game and scenario based learning programs. These games were hyperlinked at the conclusion of the Edutopia post.

Click here to explore the different games and simulations.

There are four primary reasons I believe games and simulations are effective learning strategies to integrate into each unit of instruction.
  • Makes financial education engaging, fun, and interactive.*
  • Links education more directly to action-taking by embedding offers and opportunities for real-world actions in games.* 
  • Serves as ideal activities on days prior to holidays or breaks that are often more challenging to engage students in traditional lessons.
  • Kids play them on their own time, and on their own free will. 
*Click here for the research that supports my opinion. 

Saturday, March 9, 2013

Total compensation calculator

My students have a tough time wrapping their minds around the value of health care, vacation days, employer retirement contributions, etc. All of us know this is an important compensation consideration when comparing job opportunities. I just stumbled across a really good financial calculator I am going to incorporate in one of my lessons on careers and incomes.

Click here to explore the financial calculator.

Thursday, March 7, 2013

Utilize Direct Deposits

I was honored to write the post "Utilize Direct Deposits" for America Saves during America Saves Week. Here is the article...

Americans have a tough time saving. Nearly a third of Americans have zero savings, and around half have less than three months of emergency savings. Equally daunting is how little Americans contribute to 401(k)’s. Dr. Hensley of the National Foundation for Financial Education pointed out in this alarming video that only 11 percent of individuals with a 401(k) are putting enough money away to meet their retirement needs.

The goal of this article is to provide the content and behavioral tips necessary to save.

Understand yourself and how to overcome your own savings obstacles
Saving can be exhausting if you allow it to be. As John Tierney points out in Decision Fatigue, we draw from a chemical in our brain to feed our willpower each time we make a choice. The more frequently we surround ourselves with things we really want and choices we have to make, the more we draw from this chemical. Do not make saving another draining choice you have to make, make saving automatic.

The Marshmallow study best illustrated the challenges we innately face to delay gratification, and the latest Marshmallow study is digging into the particular challenges people face who have had previous experiences that punished them for waiting, complicating the problem even further. We have seen how hard it is for people to pass the test. Do not put yourself through the torture of delaying gratification, make saving automatic.

Become a member of a Bank, Credit Union, or Matched-Savings Program
Find a bank or credit union that offers the lowest fees, or better yet prize-linked savings programs. Do not concern yourself with the interest you are going to earn on your savings account. Rates are low and are likely to stay that way for a while. So, your interest won't add up to much if you do not have a lot of money. What can add up are fees - - so comparison-shop for financial institutions that offer the lowest possible fees.

Another option is matched savings programs such as Earn, who also provide additional support services designed to help low-wage families.

Make saving automatic with a Direct Deposit
A Direct Deposit electronically deposits funds directly into a bank account as a form of payment. This past Bankrate article explains how Direct Deposits work, and dives into further advantages. To be clear, only establishing a direct deposit into your checking account isn’t going to help you much. Work with your HR manager and your financial institution to setup a second and a third direct deposit into your savings account and retirement account. This is sometimes referred to as “split deposits”. Make sure there is no additional fee for setting up or using a Direct Deposit service.

In this research Mindy Hernandez of Innovation@cfed provides behavioral insight on the decision making process“…often the decision we make is not about the ‘optimal choice’ but the one that requires the least amount of effort – the one on the path of least resistance. Defaults are the option you get if you do nothing at all, and they are extremely ‘sticky,’ meaning you are not likely to change the decision (or lack thereof) once it is done…” In other words, by saving first with a direct deposit it would be harder not to save.

The positive results of setting a savings goal and reaching it by making saving automatic is confirmed with research over and over again. According to research reported here by the Electronic Payments Association, 93 percent of employed adults who use split deposit contribute to their savings every month. Conversely, of employed adults who do not use split deposit, 23 percent contribute nothing to their savings.

Make investing automatic with a Direct Deposit
This quality resource on the Department of Labor website empowers employees with useful information about retirement plans, and the power of compound interest. Here is the example the DOL used to illustrate the importance of beginning to invest for retirement at a young age:

“A 20 year old who saves $1,000 a year for 11 years in a row, then stops but leaves it there to earn 7% interest, will have $168,514 at age 65.

However, a 30 year old who starts saving $1,000 a year for 35 years, also earning 7% will have only $147,913 at age 65. Even though the 30 year old has put in more money for more years, it has less time to earn that compound interest.”

In other words, fully match your employer’s 401(k) or 403(b) contribution and do so electronically with a split deposit as soon as you get a job. Make sure there is no additional fee for setting up or using a Direct Deposit service.

America Saves Week is February 25-March 2nd. Now is a great time to pledge or repledge to save. By pledging to save you will commit to a simple savings plan and goal. Research tells us that regardless of income you are more likely to spend less than you earn, save for emergencies, and save for retirement if you have a savings plan.

Set a savings goal, take the pledge, and remember that Direct Deposits matter.