Building blocks to help youth achieve financial capability

1. Background
2. Research question and aims
3. Methods
4. Findings
5. Recommendations
6. Points to consider

Background

This report is concerned with understanding how children grow up to become financially capable adults, in order to identify the factors that financial educators, communities and policy makers can influence. Structural and environmental factors such as employment opportunities and family income were not within the scope of this review.

Research question and aims

The review has two aims. First, it sets out to develop a skills-based developmental model of financial capability that can be used to refine existing financial education programmes and resources, develop new programmes, and support financial education funding and policy decisions. Second, it aims to develop recommendations as to how organisations and policy makers can apply the model. The review was commissioned by the Consumer Financial Protection Bureau (CFPB).

Methods

The methodology used to develop the model involved three stages:

• Analysis of consumer and practitioner transcripts of previous CFPB research into adults’ financial wellbeing
• Extensive review of published research
• Consultation with 18 academic subject experts

The methodology for developing the recommendations for using the model likewise incorporated three stages:

• A review of over 200 existing youth financial education and youth development programs
• Interviews and consultation with 24 experts in youth financial education and related fields
• Gap analysis – were there any elements of the model that were not present in existing programmes and practices?

Findings

The review proposes a model that comprises three ‘youth building blocks’ for financial capability, namely:

• Executive function – the mental processes by which we manage the information in our lives and are in control of our behaviours such as prioritizing tasks, setting goals, controlling impulses.
• Financial habits and norms – the practices we use to manage our day-to-day financial lives including rules of thumb.
• Financial knowledge and decision-making skills – factual knowledge, the ability to plan, set financial goals and conduct financial research.

These building blocks are accumulated throughout childhood into young adulthood. The review details a set of competencies for each of the building blocks for developmental stages of childhood, from age three through to the teenage years and young adulthood.

Recommendations

The authors go on to make four recommendations about how to apply the model:

• Focus on developing executive function, for children in early childhood
• Help parents and caregivers to more actively influence their child’s financial socialisation by involving them in appropriate financial activities.
• Provide children and youth with financial hands-on experiential learning opportunities.
• Teach young people financial research skills.

Each recommendation is accompanied by a detailed explanation, examples from the field and strategies for putting the recommendation in place.

Points to consider

• Relevance: The review is highly relevant as it covers issues of financial inclusion, financial capability and financial education.
• Generalisability/transferability: This is a US based study, but whilst the details of the education system will be specific to the US, the insights about how children and young people learn about money are likely to apply in other societies.
• Applicability: The research is applicable to anyone with an interest in financial capability, financial inclusion and financial education.
• Methodological strengths or limitations: The review does not give details of how sources were selected for the literature review or the review of youth programmes. Full details of the experts that were interviewed are not given, other than to say that they included academic experts in financial capability and educational and developmental psychology. However, it is likely that, as a government agency, the CFPB was able to access individuals with a high level of experience and expertise.

Full report

Building blocks to help youth achieve financial capability - full report