cartagena, colombia, 11 march 2010 designing and evaluating a national strategy for financial...
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Cartagena, Colombia, 11 March 2010
Designing and Evaluating a National Strategy for Financial Literacy
Annamaria LusardiJoel Z. and Susan Hyatt Professor of Economics
Director, Financial Literacy Center
Relevance
• Increase in individual responsibilityDemographic changes: agingLabor market changes: more mobilityPension changes
• Financial markets more complexGlobalization of financial markets
• Cost and consequences of financial mistakes at the aggregate levelWelfare system will be affected
• Well informed citizens lead to more stable markets and better use of resources
Why a national strategy?
Road map What is a national strategy? The institutional framework Identifying the issues Defining financial capability National survey Preliminary assessment Objectives: Long-term vs. short-term Designing interventions Targeted population sub-groups Evaluation Take-away
What is a national strategy
- A vision for financially capable citizenry
- Aggregate stakeholders
- Identify the gaps
- Define a framework of action- Identify targets to be achieved in a specific time
frame
- Plan initiatives
- Evaluation of initiatives
Defining a national strategy
Benefits of a national strategy
- Guidance and coordination- Public and private initiatives
- Avoid duplication of effort
- Share expertise
- Promote best practices
- Cost effectiveness
Benefits
Institutional framework
Identify all stakeholders involved Identify a national agency/institution to
coordinate Useful to create a Financial Capability Steering
Committee sponsored by the coordinating agencies, involving all the stakeholders
(examples, UK and Ireland)
Some structure
Identifying the issues
Some examples: Pensions or changes in pensions Low saving rates High default rates on loans Fraud and scams Others
What are the problems?
Defining financial capability
Broad definition• What does it mean to be financially capable?
Knowledge versus behavior
Country-specific elements of the definition
Financial capability/competency
Measurement: A national survey
- Picture of current levels of capability
- Identification of areas of intervention
- Identification of at-risk population categories
- Establishing a baseline for evaluation- Useful for both public and private sector
- Building a base for longitudinal evaluation: a new survey every 3-5 years
Benefits of a national survey
Case study: U.S. National Financial Capability Study
1. Making ends meet
2. Planning ahead
3. Managing Financial Products
4. Financial Knowledge and Decision-Making
Four key components:
Preliminary assessment
Existing initiatives Identify gaps in the provision of resources and
avoid duplication of initiatives Agencies and organizations already involved
with financial capability
Assessment of what exists
Long term and short term objectives
Long-Term vs. Short-Term Objectives• Long-Term = Improvement of financial
literacy/capability for the entire population
• Short-Term = specific problems to solve. Focus on specific subgroups (those more at risk)
Objectives
Designing intervention
Every objective (long term or short term) requires an intervention. For every intervention, these points should be considered:
- Target/beneficiary—who is it?- Current situation- Reasons for changes- Providers- Delivery methods- Budget- Design of evaluation- Pilot program- Evaluation
What to consider
Intervention: Some examples
School: Learning money matters Young adult: Helping young adults make sense
of money Workplace: Make the most of your money Consumer communication Online tools New parents: Money box Money advice
UK experience
Targeted population
Different population sub-groups have different needs and would benefit from targeted programs
Example: Maori people in New Zealand, Native Americans in the United States. But also the elderly and women may benefits from targeted programs
Different programs for different needs
Evaluation
Must evaluate• Accountability
• Efficient allocation of resources
Standardized framework for evaluation• Use scientific methods
- Many biases
• Measurement of success- Indicators of knowledge/behavior
Disseminate results widely and share experience
The importance of evaluation
Longitudinal evaluation
Can evaluate the national strategy itself Redo a national survey
• Re-adjust objectives
• Focus on areas in need
• Tailoring interventions
Allocate resources efficiently
over time
In the long run
Some issues about evaluation
Have to design evaluation at the beginning of program not at the end
It needs resources and expertise Independence It is a requirement: we need to know what
works and what does not work
OECD can provide guidelines on evaluation
Evaluation is part of the program design
Take-away
Need for direction Importance of coordination Many stakeholders Different targets Importance of evaluation at every stage Efficient use of resources Share experience across countries
Importance of a strategy and its evaluation
The cost of ignorance
“An ignorant people is the blind instrument of its own destruction”
Simon Bolivar, 1819