From Financial Education to Financial Capability

While the private and public sectors have focused on financial education for well over a decade, the current economic environment has left many wondering if education is enough and if consumers need more resources to ensure they’re not just educated, but also financially capable. In a white paper titled, “From Financial Education to Financial Capability,” the Center for Financial Services Innovation (CFSI) outlines the need for a new approach to financial education that focuses on igniting behavior change as a critical step to ensuring long-term financial success, particularly for the underserved.

While no standard definition of financial capability exists, CFSI has found most definitions include:

– Being able to cover monthly expenses with income
– Tracking spending
– Planning ahead and saving for the future
– Selecting and managing financial products and services
– Gaining and exercising financial knowledge

This means there’s a need to engage consumers on a deeper level. CFSI says communications must be relevant, timely, actionable and ongoing. They must include a mix of low- and high-touch strategies that lead the consumer from financial communication to financial engagement.While there are a variety of ways to engage consumers, CFSI also says new media may play a key role.

“…some innovators have turned to social media as a means of leveraging peer networks to encourage behavior change. By informing a person’s social network of the individual’s progress toward a goal, such resources use social pressure to help the person meet the goal. Social media can also be used to create a virtual support network for individuals to share information about their progress and offer advice.”

For communicators, the moral of the story is that with crisis comes opportunity. The economic meltdown has brought to light the need for a deeper level of financial capability, particularly for the underserved. The opportunity lies in innovation and finding the right way to successfully engage consumers in an ongoing dialogue about budgeting and planning, while simultaneously raising awareness of an organization’s product or service.

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