From Financial Education to Financial Capability

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12 July 2011

Opportunities for Innovation


Report originally published by the Center for Financial Services Innovation (CFSI).

The recent financial crisis has made it clear that Americans from all income levels have a hard time managing their finances and are generally ill-prepared to handle unforeseen financial stress. In the National Foundation for Credit Counseling’s 2009 Consumer Financial Literacy Survey, 41% of respondents gave themselves a C,D, or F on their knowledge of personal finance, 57% did not use a budget to direct their spending, 32% reported having no discretionary or emergency savings, and 26% confessed to not paying all of their bills on time. Throughout the financial services industry, the need to plot a new course for financial education has never been more pressing.

In the report From Financial Education to Financial Capability: Opportunities for Innovation (originally released in March 2010), the Center for Financial Services Innovation (CFSI) proposes that financial capability should become the primary focus in moving toward the future of financial management. The report emphasizes the need to shift from financial education, which is a set of provider outputs, to financial capability, which encourages behavioral changes working in tandem with knowledge gains.

Financial institutions are becoming increasingly aware of the important role they play in making sure their customers fully comprehend the products and services they offer. Yet the field for financial education is fairly young. In 2000, the Fannie Mae Foundation conducted a study of 90 financial education programs and found that over 70% had been created after 1990. As financial education continues to evolve, innovators and practitioners are becoming more aware of the need to leverage behavior economics in promoting financial capability as a driver for financial security.

This report first examines the shift from financial education, then provides a framework for financial capability innovation by outlining some potential interventions such as financial communication, financial knowledge, and financial engagement. Finally, the report explores the evaluation of the programs’ impact.

This report was written by the Center for Financial Services Innovation and released by Celent through a partnership for select distribution.

About CFSI

The Center for Financial Services Innovation is the nation’s leading authority on financial services for underbanked consumers. Since 2004, its programs have focused on informing, connecting, and investing - gathering enhanced intelligence, brokering and supporting productive industry relationships, and fostering best-in-class products and strategies. CFSI works with leaders and innovators in the business, government and nonprofit sectors to transform the financial services landscape. For more on CFSI, go to