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
“…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.”