Profitwise News and Views

Spring 2003 Issue

• High Profile Predatory Lending Cases
• Research Methodologies Identify Deal Flow Finding the Intersection Between Compliance and New Markets
• FLLIP's "Your Money & Your Life" Financial Education Program Reports High Marks after First Year
• CEDA Community Development Fund ATM Demonstration Project
• Financial Institutions and Participation in Individual Development Account Programs
• From the Editor
• Around the District
• Calendar of Events

FLLIP's "Your Money & Your Life" Financial Education Program Reports High Marks after First Year
By Steven G. Anderson and Dory Rand

Participants in the Financial Links for Low-Income People (FLLIP) coalition's Your Money & Your Life financial education program achieved significant knowledge gains and gave the FLLIP curriculum and instructors high marks, according to a new report.

Professor Steven G. Anderson, Professor Min Zhan, and Jeff Scott of the School of Social Work, University of Illinois at Urbana-Champaign, issued the report as part of an ongoing two-year evaluation of FLLIP's Financial Education Program (FEP) and Individual Development Account (IDA) program.

FLLIP is a statewide coalition of banks, credit unions, advocates, government agencies, bank regulators, adult educators, private industry and sponsors of IDA programs dedicated to expanding financial education and asset-building opportunities for low-income people in Illinois.

While government agencies, bankers, employers, community and consumer groups, nonprofit leaders and others recognize the need for financial education, and many have begun to implement programs, program evaluation is rare.¹ Federal Reserve researchers note that "demonstration of program effectiveness is critical to maintaining the current level of interest in and resources devoted to financial literacy education."²

FLLIP's financial education program and its ongoing evaluation are unique.

• FLLIP includes sites that combine IDAs with financial education, as well as sites that solely provide financial education.³ Both IDA and FEP participants receive training in the same core curriculum that allows for comparison of the IDA and FEP sites.
• The Your Money & Your Life curriculum, developed by University of Illinois Extension and the FLLIP coalition, stresses the active engagement of participants in learning activities. It is written at a fifth-grade level and in a manner that takes into account the often limited educational attainment of program participants.⁴
• FLLIP employs a decentralized strategy of program development and training delivery. Instructors in FLLIP's nonprofit partner organizations receive four days of curriculum training as well as guidance on how to administer the evaluation.

During the first year of the program, FLLIP instructors gathered demographic and financial information from participants and administered pre- and post-training knowledge surveys.⁵ In addition, participants who completed training were asked 12 questions designed to assess their satisfaction. The FLLIP evaluation also analyzed the marketing and implementation of the FLLIP programs.

The report documents that participants in both the FEP and IDA programs have significant financial knowledge deficiencies.⁶On average, only 63.4 percent of the pre-training survey items were answered correctly. Given that nearly all survey questions are true-or-false, this ratio is slightly better than might be expected by chance. IDA participants (who were more likely to be employed, have higher income, be more highly educated, have checking and savings accounts, be married, and be older) scored higher than FEP participants before and after completing the course.

Questions on the pre-training survey were grouped to provide indices of participant understanding across several financial education dimensions:

• Predatory lending and poor financial practices
• Public⁷ and work-related benefits
• Saving and investing
• Basic banking practices
• Credit use and interest rates

Knowledge deficiencies were found on each of these financial management dimensions. The lowest knowledge levels were found for public and work-related benefits and for savings and investing.

FLLIP graduates demonstrated significant knowledge gains.⁸ The average number of correct responses for all FLLIP graduates increased almost 15 percent to 78.3 percent on the post-training survey. Significant gains were found in each of the five knowledge areas included in the surveys, with the largest gains occurring in knowledge about public and work-related benefits.

FLLIP FEP sites experienced challenges recruiting and retaining participants. The FEP dropout rate was approximately 40 percent. Dropouts in the IDA sites, where participants have strong incentives to remain, were lower. As a result of lessons learned from the evaluation, FLLIP produced a recruitment and retention toolkit, provided additional guidance to instructors on evaluation, developed new marketing tools, and changed the way it contracts with partner organizations. (FLLIP now uses performance-based contracts.)

FLLIP FEP partners have experimented with improving incentives available to FEP participants. For example, offering participants calculators, notepads, pens, and folders for materials was seen by some community partners as worthwhile. One FEP site's graduates received incentives ($5 deposit and waiver of minimum balance fees) to open savings accounts with a local bank. However, a clear understanding of how these and other incentives affect retention is a challenge for those interested in the continuing development of financial education programs.

The training content, style of delivery, trainer preparation, and trainer presentation received high marks from FLLIP participants who completed training.⁹ Almost all participants rated both the quality of the training and the performance of the trainer as 'excellent' or 'good.' Excellent ratings were high with 85.7 percent of participants rating trainer performance and 78.1 percent rating the quality of training as 'excellent.'

The second year of the evaluation will measure the effectiveness of FLLIP's efforts to help participants make long-term changes in their financial behavior. It will also evaluate FLLIP's efforts to increase recruitment and retention.

Researchers will conduct telephone interviews with a random sample of participants six to twelve months after completion of the FLLIP course to determine its longer-term effects. The telephone interviews will cover some of the subject matter taught in the course (to gauge long-term learning), as well as questions such as whether participants have paid down debts, opened bank accounts, started saving, or changed other financial behaviors.

The second year of the evaluation will also include additional pre- and post-training knowledge surveys, more extensive analysis of the learning that may be attributable to the training, and analysis of knowledge levels according to selected participant characteristics, such as educational level. FLLIP also plans to increase incentives and opportunities for FEP graduates to open savings or checking accounts with mainstream financial institutions.

It is our hope that the evaluation results will contribute to the identification of best practices and policies that connect families and individuals with the tools they need to survive and, perhaps, to thrive, in Illinois's vibrant and complex financial marketplace.¹⁰

FLLIP launched the two-year pilot program in partnership with the Illinois Department of Human Services. The National Center on Poverty Law, a nonprofit organization based in Chicago, coordinates the coalition and administers the pilot program.¹¹

Notes
¹S. Braunstein and C. Welch, Financial Literacy: An Overview of Practice, Research and Policy, Federal Reserve Bulletin (PDF)(November 2002), p.449.

²Ibid., 456.

³Participants at IDA and FEP sites face dramatically different incentives for program involvement. Those participating at the IDA sites receive $2 in match from the program for each $1 they save for identified savings purposes, up to a maximum of $2,000 in matched funds. In contrast, participants at sites not offering IDAs generally receive few, if any, tangible incentives. One exception is that Temporary Assistance for Needy Families (TANF) recipients who attend training at the FEP sites receive child care and transportation assistance and can count class hours toward their "work activity" requirement.

⁴Program eligibility rules require that all FLLIP participants have incomes at or below 200 percent of the poverty level. Data from FLLIP applications indicates that 35.4 percent of participants receive TANF benefits. Just under half of all program participants have checking accounts, and only 40 percent have savings accounts. Nearly half of program participants have not attended college, and one-fourth have not completed high school or received a GED.

⁵The application, survey questions, executive summary, and full report are posted on the FLLIP Web site.

⁶Overall, 30 FLLIP sessions were completed during the first year of the program, with 300 participants beginning and 179 completing the FEP core curriculum.

⁷Unlike most financial education curricula, Your Money & Your Life includes a chapter on public benefits that can help low-income people make ends meet as well as information about asset limits for program eligibility and direct deposit options available to recipients of public assistance.

⁸While complete pre- and post-training knowledge survey data only were available for 86 FLLIP participants at the time of this report, knowledge gains for this group are encouraging.

⁹All participants who completed training were asked 12 questions designed to assess participant satisfaction. First year satisfaction data are available for 105 participants.

¹⁰Braunstein at 457.

¹¹See Economic Development News & Views, Fall 2001

For more information on FLLIP or for a complete list of FLLIP's funders, supporters and nonprofit partner agencies, please visit www.povertylaw.org.

Steven G. Anderson is assistant professor, School of Social Work, University of Illinois at Urbana-Champaign and lead researcher on the FLLIP evaluation. For more information, contact him at sandersn@uiuc.edu or (217) 244-5242.

Dory Rand is a staff attorney and FLLIP Coordinator at the National Center on Poverty Law. For more information, contact her at doryrand@povertylaw.org or (312) 368-2007.