Are you a spender or saver?

by Anne Berrigan

credit card 01It turns out that it may not matter to your financial well-being whether you spend or save. But in either case, to manage money well you need to create financial goals intentionally–and track them consistently. And start early. All three strategies are part of a new focus on financial capability in youth employment programs across the country.

The term financial capability is often used now instead of ‘financial literacy’ in an effort to promote practices that combine education and asset building behaviors. Financial capability is defined as the knowledge, skills, and access to resources needed to manage financial responsibilities effectively. With the help of the Consumer Financial Protection Bureau, the U.S. Department of Health and Human Services has outlined examples of how youth employment programs can help participants build financial capability:

  1. Encourage youth to identify saving goals and work with adult mentors and staff to learn and use budgeting skills. Goals can include emergency funds; funds to invest in education or a car to get to training or a future; or money to purchase items on your wish list—a video game or a new phone.
  2. Give a lot of information on using credit as well as practice in figuring out the costs of credit when purchasing large-ticket items or taking out loans for school or cars. Creating or repairing credit history should also be addressed. There are many instances when a young person’s credit history may need to be repaired due to prior activities on the part of the individual or the person’s family.
  3. Provide youth with an introduction and access to a range of youth-relevant financial products and services such as the use of savings accounts linked to ATM cards; pay cards for those who can’t get a bank account; and direct deposit.

We’ve been working on incorporating these promising practices into the financial education section of the Signal Success curriculum as well as into our Massachusetts statewide youth employment program called YouthWorks. Here’s some of our lessons learned as we’ve refined our approach:

  • Give young people information that’s relevant to their needs now. We start off by getting youth to do peer education presentations on pay check basics, the abc’s of banking, borrowing, and spending. It’s also a good time to invite financial literacy specialists as speakers—but keep the content relevant to teens. They are not taking out mortgages, but may need information on how to purchase and pay for a car.
  • Use case scenarios to introduce the idea of budgeting. Budgeting can often seem to be a far off, abstract idea. For young people in low-income communities in their first jobs, the idea of creating a budget may seem unreasonable or even unattainable. As part of Signal Success, participants read short scenarios about young adults in entry-level jobs ($17K-$32K). Small groups work together to develop a budget to help the person in the scenario pay their bills and reach a savings goal—a trip, a car, a college course. In another activity, groups work out the monthly budgets for new professionals in criminal justice, education, and other fields that require post-secondary education ($45K-65K salary level). This information gives participants a lens for understanding the benefits of furthering their education and for thinking about the income levels needed to support a family. And these activities keep budget making seem less mysterious.

For more information:

Consumer Financial Protection Bureau report on financial capability in youth programs

The Cities for Financial Empowerment Fund sponsored by Citi Foundation have piloted ‘real time’ innovations in youth summer jobs programs. As part of this project they have built in key “financial empowerment touchpoints” for summer youth employment programs.

Budget Case Study from Signal Success

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