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Personal financial education, once primarily the concern of individual households and the organizations committed to assisting and educating them, now plays a prominent role in the work of many financial institutions, community and faith-based groups, nonprofit organizations, and local and federal government agencies. Growing concern about the level of knowledge needed to manage personal finances has resulted from the confluence of many factors, including an expansion of credit availability and changes in pension funding mechanisms that have made consumers more responsible for their long-term financial security. Also contributing to the rise of interest has been a marked increase in the number of providers and the complexity of the consumer products offered by the financial services industry. (1)

These trends underscore both the promises and the pitfalls of financial services and draw attention to the importance of deliberate financial planning and savings to achieving such life goals as buying a home, funding higher education, starting a business, and securing a comfortable retirement. In addition to affecting the quality of life of individual households, the attainment of these goals, when taken in the aggregate, has important macroeconomic implications, as a more financially educated population contributes to market efficiency and thereby helps promote the general economic welfare.

The Federal Reserve has for many years worked with educators and community groups to promote economic and financial education and consumer awareness. More recently, Federal Reserve Board Chairman Alan Greenspan, other Board members, and Federal Reserve Bank presidents have stepped up their advocacy of financial education, noting that technological advances and a changing financial marketplace require informed financial decisionmaking.

In recognition of the growing importance of successful personal financial management to individuals and the broader economy, the Federal Reserve System--from the Board of Governors at its central office in Washington, D.C., to the twelve regional Federal Reserve Banks and their Branches--has intensified its efforts, focusing on three strategic areas:

* increasing awareness of the importance of personal financial education

* participating in and facilitating collaborations to improve efficiency in the delivery of financial education

* studying the effectiveness of financial education programs

RAISING AWARENESS

National Awareness Campaign

In May 2003, the Federal Reserve System launched "There's a Lot to Learn about Money," a multifaceted, nationwide financial education campaign with two purposes: to highlight the importance of sound financial decisionmaking among American families and to raise awareness of the financial education resources available through the Federal Reserve and other providers. The campaign reached out to individuals, community groups, and consumer advocates through a variety of media. A website rich in information on borrowing, homebuying, wealth building, and other topics of interest to consumers was developed. A brochure full of tips for consumers on ways to take charge of their financial future was prepared. Public service announcements (PSAs) featuring Chairman Greenspan were recorded for radio and television, in English and Spanish. The System hosted a toll-free telephone number, advertised in the PSAs, through which callers could request copies of the brochure. And both the Board and the Reserve Banks hosted national, regional, and local events and education activities for the public throughout the months following launch of the initiative. (2)

The campaign's reach was broad. The 30-second PSAs were broadcast in many media markets across the country; the radio version was aired more than 37,000 times, and the television version 12,500 times, during the first twelve months of the campaign. The website averaged more than 9,700 visits a month over the period. And more than 141,000 brochures in English and 6,700 in Spanish were distributed.

Members of the Board were actively involved in the effort, beginning with a press conference in May 2003 at which Governor Edward M. Gramlich announced the campaign. In June, Chairman Greenspan, together with then-Richmond Reserve Bank President J. Alfred Broaddus, Jr., and Operation Hope CEO John Bryant, spoke to eighth grade students at a Washington, D.C., middle school about the importance of learning good money management skills. In September, Chairman Greenspan also appeared before the annual legislative conference of the Congressional Black Caucus to discuss the importance of financial education. (3)

Three days after launching the nationwide campaign, the Board, together with the U.S. Department of the Treasury, co-sponsored a roundtable on credit management for representatives of financial services organizations and community and consumer groups. (4) The participants identified the practices most important to effective management of personal credit: building savings to avoid high-cost debt and improve payment options; paying bills on time; paying more than the minimum payment; comparison shopping for credit and obtaining only the credit you need; and understanding your credit history and how it affects you. Those top practices were publicized in a press release issued jointly by the Board and the Treasury the following August. (5)

Federal Reserve Bank Activities

Activities undertaken by the Federal Reserve Banks were an important part of the awareness campaign and are an ongoing element of the Federal Reserve's efforts to promote financial education. The Reserve Banks have used creative programming, teacher training, sponsorship of public events, and development of new print and web resources to reach people of all ages in the twelve Federal Reserve Districts. For example,

* The Chicago Reserve Bank's 2003 edition of its annual "Money $mart Week" featured nearly ninety free educational events tailored for a wide range of groups--educators and students; children, parents, and seniors; public housing residents and first-time homeowners; small-business owners; and the general public--all promoting effective management of personal finances in one way or another. The events, many sponsored by local community organizations and financial institutions, were held in schools, community centers, libraries, and banks throughout the city. In 2004, Chicago's Money $mart Week grew to more than 100 events, and a similar week of activities was held in Detroit by the Chicago Reserve Bank's Detroit Branch.

* The New York Reserve Bank collaborated with local financial institutions, community organizations, the FDIC, and the local Operation Hope affiliate to launch the "Banking on Youth" program for innercity 16- to 18-year-olds who participated in the city's summer youth employment program. The program had both classroom and practical elements: A five-week course focused on management of personal credit, with an emphasis on savings; local banks opened savings accounts for the participants; and orientation sessions for the participants were used as opportunities to reach out to participants' families with information about banking and banking opportunities. Some of the young people saved as much as $2,500 over the summer. The Banking on Youth program is now being replicated in Buffalo, N.Y.

* The Cleveland Reserve Bank takes its "Great Minds Think!" education road show to cities throughout the District. At these free, day-long work shops, students and teachers learn about using economics and personal finance basics to make educated decisions. Workshop attendees discover economic principles portrayed in the world around them--in great literature, art, and contemporary movies. Teachers learn about economic policymaking and get tips on teaching economics and personal finance. Students take part in interactive activities, including an "inflation auction" that allows them to experience rapid deterioration in play money's purchasing power and "A Million or One?" which illustrates the power of compound interest and exponential growth.

* The Philadelphia Reserve Bank has established a faith-based initiative to make personal financial education available to low- and moderate-income individuals. Educational programs are presented by designated volunteers at participating places of worship; the Bank conducts train-the-trainer workshops for the volunteers.