Teaching behavior strategies using Budget Challenge

Over the past few months I've dedicated much of my time outside of school to sharing financial literacy instructional strategies on the H&R Block Budget Challenge and Budget Challenge websites. 

If you hadn't heard, H&R Block is giving away $3 million in classroom grants and scholarships using H&R Block Budget Challenge.

Educators may find today's post particularly helpful...

"As shared in an earlier post… “Money management decisions are often simple tasks requiring timely and consistent choices. Students must learn early on the value of establishing a system that works for them to manage day-to-day money management tasks.” Consider using our decision-making matrix as a resource to help your students connect with a strategy that will lead to positive financial behavior throughout our simulation."

Strategies to help with H&R Block Budget Challenge	I’m comfortable with…
I struggle with…	My computer	My phone	Paper / pencil
Budgeting	Use the H&R Block Budget Challenge interactive Budget and Cash Flow spreadsheet to establish your budget. Save it in an electronic folder.	Use the H&R Block Budget Challenge interactive Budget and Cash Flow spreadsheet [Google Spreadsheet version] to establish your budget. You can access Google sheets on a smart phone.	Print and use the H&R Block Budget Challenge Budget and Cash Flow spreadsheet to establish your budget.
Saving / retirement	Make it automatic! Identify a savings / retirement goal and direct deposit into your Budget Challenge 401k. Take full advantage of the employers match.	Make it automatic! Identify a savings / retirement goal and direct deposit into your Budget Challenge 401k. Take full advantage of the employers match.	Make it automatic! Identify a savings / retirement goal and direct deposit into your Budget Challenge 401k. Take full advantage of the employers match.
Paying bills	Automate what bills you can for future payments by setting payment dates on due dates. Make sure you’re not paying unnecessary fees. Set calendar alerts for uninterrupted time 3-4 times a week to pay bills.	Use the Budget Challenge App to automate bills for the due date when they’re received. Make sure you’re not paying unnecessary fees. Set phone alerts for uninterrupted time 3-4 times a week to pay bills.	Establish a regular routine that includes a go-to place for bills and uninterrupted time; Establish self motivating “If-Then” goals (ie IF I pay my bills THEN I can watch TV)

Seeking Input: Draft Decision Making Grid

I created in this hyperlinked GoogleDoc a draft decision making matrix for my high school students. My aim is to provide them with strategies suitable for their own challenges and strengths to make it easier to put to practice the concepts they're learning in class.

I created three columns:

• "I have a tough time with..." This column is full of common challenges teenagers face making everyday financial decisions. 
• "Im good with / enjoy..." This column is full of three types of comfort points: technology/mobile phones; using paper and pencil to stay organized; encouragement from peers. 
• "How to manage your money..." This column provides suggested strategies specific to the common challenges and identified comfort points.

Students select the collective trio of columns suitable for their challenges and strengths to put to action what they're learning in class. 

I haven't integrated this into a lesson with my students yet -- it's a work in progress. Feedback is welcome!

Thanks to Bill Dwight [FamZoo] for already providing great feedback!

Digging Deeper: PISA Financial Literacy Results

"09/07/14 - Around one in seven students in the 13 OECD countries and economies that took part in the first OECD PISA international assessment of financial literacy are unable to make even simple decisions about everyday spending, and only one in ten can solve complex financial tasks.

Some 29,000 15 year-olds in 18 countries and economies took part in the test, which assessed the knowledge and skills of teenagers in dealing with financial issues, such as understanding a bank statement, the long-term cost of a loan or knowing how insurance works." - OECD

The United States ranked 8th out of 17 countries [9th out of 18 if you include the province of Shanghai], just behind Latvia. So what does that really mean?

The PISA Financial Literacy Assessment Framework was released some time ago. A matter of fact, we used it as a resource when finalizing the Ohio Department of Education Financial Literacy Standards. Standards in Ohio exist and are required to be implemented, as they are in 34 additional states. However, Ohio's financial education policy reflects a complex challenge in the United States... standards may exist and are required to be taught, but per Jump$tart, at least 45 states do not mandate a personal finance class to graduate high school. Further, I have yet to find any states who require and pay for teachers to receive financial education content certification.

The PISA financial literacy assessment was administered to a nationally representative sample of students in schools across the United States. Financial education efforts mandated in the United States are broad ranging, if they exist at all. Take for example the financial literacy requirements in Connecticut, Massachusetts, and Florida per the Council for Economic Education Survey of the States.

• Connecticut - Personal finance standards are not required to be taught; Personal finance is not required to be offered; Personal finance is not required to be taken to graduate; Personal finance testing not required
• Massachusetts - Personal finance standards are not required to be taught; Personal finance is not required to be offered; Personal finance is not required to be taken to graduate; Personal finance testing not required
• Florida - Personal finance are standards required to be taught; Personal finance is not required to be offered; Personal finance is not required to be taken to graduate; Personal finance testing not required

The preparation the students received from these three states fell well short of the CFPB financial education recommendations. 

At the time of testing, Florida, like Ohio, required personal finance standards be taught. However, if standards are not taught by a trained teacher, are not taught as a semester course, and are not tested while other subjects are tested... the commitment schools make to teaching the coursework varies and is usually minimal. 

Sadly, students who needed a helping hand the most appear to be our most underserved. As with other PISA assessed subjects, socioeconomics seemed to be one of the key contributing factors. Further, the questions used in the financial literacy assessment are practical and financially consequential. Problems were presented in real life context. PISA assessed students’ ability to apply their knowledge and skills to real-life situations involving financial issues and decisions. For example, students were asked to respond to questions about billing invoices and debt products.

Try sample questions yourself.

At a time when high stakes standardizing testing is at the forefront of education policymaking, we have to ask ourselves what could be more high stakes for our students than making bad choices that could lead to losing thousands of dollars.

Much is to be considered... How can we adopt legislation that ensures every student receives sufficient financial education instruction? How do we better train our teachers and provide evidence based results? How do we bring parents into the circle? How do we fully utilize synergies between the public and private sectors? How do we look at our standards through the eyes of a behavioral economist and build strong bridges between what students are learning, and how students are behaving? How can we better focus on concepts that yield evidence based results? How can we bring to scale successful in-school banking programs?

One thing is certain, the implementation of financial literacy in our schools is in its infancy stages and there are a lot of passionate educators and leaders who want to do more. 

Clearly the expert to follow to learn much more is Annamaria Lusardi (Twitter: @A_Lusardi). 

Personal Finance for Recent H.S. Grads / Current College Students

Earlier this year I created a LiveBinder for recent high school graduates and college students. My goal was to give students a financial resource they could rely on as they transitioned into the adult world. 

I carefully selected resources that students could trust, primarily from government and non-profit organizations. I did not want to overwhelm students with too many resources, while also covering the financial decisions they are making at that stage in their lives. 

I was honored LiveBinders named my resource a 2014 Top10 LiveBinder. Please feel free to share my LiveBinder Personal Finance for Recent HS Grads / Current College Students with young adults. 

By the way, if you're an educator, you may find this LiveBinder I created specifically for colleagues particularly helpful.

Why students should open checking and savings accounts, and how to help

Why students should open checking and savings accounts...

According to the St. Louis Federal Reserve... "Having a checking and savings account is an important first step in establishing that the consumer has the financial acumen to apply for credit for a car or home. It also permits a consumer’s payroll check to be automatically deposited into a checking account, and lets the consumer arrange to have a specified amount automatically transferred to the savings account each pay period.

But, the key advantage to consumers having bank accounts is avoiding costly alternative financial services and enabling families to build and protect their wealth. Unbanked consumers spend approximately 2.5 to 3 percent of a government benefits check and between 4 percent and 5 percent of payroll check just to cash them."

Surprisingly, fringe banking services are widely used. Using my home state as an example...
•      19.3% of Ohio households are underbanked
•      8.8% of Ohio households are unbanked

How to help...

In the spring semester of 2013, I established behavioral goals for my students. Throughout the course, I sent 3-5 nudging text messages per week using remind101 to encourage students to:
• Establish a savings goal
• Establish a savings account at a bank or credit union
• Contribute regularly to the savings account to meet that goal, ideally with a direct deposit

The results were compelling, so I approached America Saves and Budget Challenge with a proposal; broaden the practice and surveys to more students in districts across the country, use the America Saves text-messaging platform and resources to deliver the service, and pinpoint teachers to use for the experiment using Budget Challenge who are already integrating financial education technology in their classrooms.

America Saves, a campaign managed by the nonprofit Consumer Federation of America, seeks to motivate, encourage, and support low- to moderate-income households to save money, reduce debt, and build wealth. The research-based campaign uses the principles of behavioral economics and social marketing to change behavior.

Budget Challenge is a simulation seeking to teach the financial behavior, knowledge, and skill needed for young people to be Real-World Ready. They combine a ‘learning by doing’ approach with modern technology to create a positive educational experience that will foster life-long financial habits and relevant skills.

Students in the control and experimental group all received some form of formal financial education instruction in the classroom, and participated in Budget Challenge. Across the control and experimental groups, teachers represented a range of content knowledge, course delivery, and district mandates.

Teachers whose students participated in the experimental group either exhibited the grit necessary to work through the administrative obstacles presented for integrating texting into a class, or taught in districts who provided the freedom to do so. For a number of reasons, the effort of control group teachers to participate varied.

Students in the experimental group received up to 4 text messages per week for 6 weeks, were required to complete the America Saves Pledge, and encouraged in class and through text messages to…
• Establish a savings goal
• Establish a savings account at a bank or credit union
• Contribute regularly to the savings account to meet that goal, ideally with a direct deposit.

Once again, the results were strong. Students who received financial education in the control group exhibited a variance of positive behavior change toward the stated goals. However, students who received nudging messages in addition to instruction received a much greater degree of behavior change.

As my friend Dan Kadlec of TIME reported in our project...

"Other organizations including the Consumer Federation of America through its America Saves campaign are also experimenting with texted advice for young people to save or budget. A growing body of research suggests such texted tips really work, and a yet-to-be-released small-scale study out of Ohio will bolster the case. This study will show that financial education leads to positive behavior change, and that when reinforced with regular text nudges teens up their money game substantially.

In the study by Brian Page, an Ohio schoolteacher and advocate for financial education, teens taking a financial literacy course raised the rate at which they identified a savings goal, opened a savings account, and deposited money in their account. The improvement accelerated among those who also got text reminders.

For example, the percentage of students who said they have a savings goal went from 64% before a money course to 69% after. In a group that also got text messages the rate went from 79% to 94%. 'In every case, financial education led to behavior change,' Page says. 'The nudging led to even more change.' Page hopes to do a more formal study on a national level."

With all of that said, what is most effective is to have a student run credit union or bank, as is the case in schools across the country.

Utilize Direct Deposits

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.

Note - this post was originally written and posted on the America Saves website. 

H&R Block Student Contest: How Big is a Billion?

Americans leave more than $1 billion on the table every year by doing their own taxes. So H&R Block asked teachers to turn the idea of illustrating the $1 billion as a math assignment and submitting real-life examples to illustrate the concept. 

Here are just a couple of examples...

...did you know you can wrap $1 billion in dollars around the world 4 times!

Classroom grants of $3,000, $2,000 and $1,000 were awarded across three grade tiers: grades 4th-6th, 7th-9th and 10th-12th. So although the previous examples were very good, they were not the winning entries. You can see the winners of the FaceBook contest here.

Encouraging teens to complete their taxes is of particular importance. A new finding by H&R Block found that teens stress about money, and one of the main causes is the complexity of tax forms. A matter of fact, only 3 out of 100 teens reported filling out an income tax form.

Note - this is a sponsored post I agreed to write because of my support for the content area, the reputation of H&R Block, and the nature of the contest held by H&R Block.

New Finding: Teens stressed about money

Teens are stressed about money, according to a recent H&R Block survey.

Why?

1. The cost of college
"...nearly all (97 percent) of survey respondents still plan on attending college, viewing it as a necessary step for future employment. In fact, 86 percent of teens believe it is more important than ever to choose a major that leads to a well-paying job. But, a vast majority of teens – 78 percent – worry about borrowing too much in student loans, fearing crippling debt after leaving college."

Since 1980, the cost of college has skyrocketed nearly 500% when adjusted for inflation. This trend cannot continue; something needs to change.

For now, most students can find an affordable path to earn a college degree. There are tools available to help students make an informed student debt choice. 

• CFPB's Paying for College
• FAFSA
• Federal Student Aid

2. Teenage households continue to face financial distress

"Median household income, as reported by the U.S. Census Bureau, fell for the fifth straight year in 2012. The current level of $51,017 is far below the $55,500 when the recession began and is the lowest mark, adjusted for inflation, since 1995 – before all but today’s oldest teenagers were even born.

Perhaps not surprisingly, 58 percent of teens now believe they will be less financially sound than their parents."

One of the most important lessons we can teach our students is the value of saving and investing at an early age. Both habits can cushion the blow of eroding wages everyday Americans are facing if they begin to save and invest when they're young.

We can help students by teaching them to take advantage of the power of compound interest, and introduce them to resources that nudge them into the habit of saving when they're younger and it's easier.

• America Saves Pledge and Texting Nudges 
• Council for Economic Education Compound Interest Calculator

3. Taxes are too complicated
"Taxes remain a duty for adulthood, as teens are either disengaged or uninformed – only three of every 100 have filled out an income tax form, while 26 percent feel the forms are too complex."

Most students will qualify for tax refunds. Yet with only 3% of teenagers filing, most will never see any of it. There are plenty of resources available to help students understand how to file and collect their refunds.

• IRS Understanding Taxes
• My Free Taxes

4. Teenagers are turning to their parents
"75 percent of teens still say their parents are their most important source of financial information. In fact, 62 percent of teens view their parents as good money management role models."

Unfortunately, research has found that on the aggregate, American parents are not financially literate. Our education system must train our teachers to provide students with a financial education. But in the mean time, there is an ideal resource to help parents teach their own children about money.

• Money As You Grow

5. Teenagers are making adult financial choices now
“Our survey shows 57 percent of teens use their own money on purchases, yet they often lack fundamental money management skills. The good news is, the research clearly illustrates a desire to learn, to grow and to become financially savvy..."

99% of U.S. adults support personal finance teaching in high schools. Yet, only 4 states require a semester long class be devoted entirely to teaching personal finance to graduate. This is a far cry from the CFPB’s recommendations of how personal finance should be taught in our schools. 

Most high school students are making financial choices now. Many shop; have jobs; pay bills; pay taxes, are eligible for refunds if they file; have accounts at financial institutions; make car payments; pay car insurance; and most importantly -- are preparing to make a student debt choice. So as our students shuffle from one class to the next learning lessons for their future, they’re missing out on the lessons that will help them manage the stresses they're facing right now.

#StudentsSave - A student Twitter chat to help create the habit of saving

This is America Saves Week, an opportunity to promote good savings behavior. Savings protects us from using high interest credit when we face emergencies. Setting a goal to save and spend money on experiences and things we value allow us to enjoy life without experiencing the consequences of paying for it later.

Friday's Twitter chat is an opportunity for students to learn and share resources to help them develop the habit of saving. Many of our students have jobs or an allowance; have financial responsibilities such as a cell phone payment; they are deciding what car to buy; and are looking forward to prom. Most importantly, many of our students can open a savings account at a local bank or credit union and start the habit of saving today.

Now is the time to begin to teach the habit of saving, and what better way then through a day long Twitter chat?

Have your students follow #StudentsSave throughout the day on Friday, 2/28/14. Have them share savings resources and tips they've learned in class or on Twitter. The chat is open-ended from 8-5 EST, giving you and your students the flexibility to participate.

For savings ideas, visit America Saves.

Many thanks to the following organizations and leaders for participating:

• @AmericaSaves
• @Bankrate
• @Council4EconEd
• @DanKadlec
• @Experian_US
• @FinLitTV
• @OhioJumpStart
• @OIIOrg
• @NatlJumpStart
• @NEFE_ORG
• @PracticalMoney
• @StudentHacks