Consumer Trends in the Public,
Private, and Nonprofit Sector
Ray Boshara
John Gannon
Lewis Mandell
John Phillips
Steve Sass
August 3, 2010
Implications of a Quarter Century of Research in Personal Finance
National Endowment for Financial Education® (NEFE®)
Key Findings
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Financial Education alone is not enough
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Financial problems are too severe
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Won’t solve problems in near term
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May not be best use of scarce educational resources
Economy is working against consumer
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Full recovery may be years away
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Structural changes may limit economic growth
•
Aging population
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Budget and trade deficits
National Endowment for Financial Education
Key Findings
3
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Debt-laden consumer can no longer drive U.S.
financial engine; savings will become a necessity for
consumers and the economy
•
Consumers are overleveraged
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Underwriting standards
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Foreign nations unwilling to fund debt
National Endowment for Financial Education
Key Findings
4
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Burden of choice is increasingly on the consumer
and financial products are becoming more complex,
more available, and increasingly riskier
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Trend away from Defined Benefit Plans
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Proliferation of mortgage products
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Credit increasingly available to those who can’t afford
it
National Endowment for Financial Education
Key Findings
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Willingness of government to intervene has been
limited
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Historically free-choice with financial education
pushed as solution
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Stronger protections could be realized through
CFPB, but …
•
Dodd-Frank refused to incorporate plain vanilla
products and other safe product choices
National Endowment for Financial Education
Key Findings
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Beneficial policies can utilize principles of economic behavior
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Power of defaults, loss aversion, restricting choices…
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Combining financial education with financial product design
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Consumers and industry have mutual interests in savings
product design, such as opt-out
•
Consumers and industry may have divergent interests in
debt product design
National Endowment for Financial Education
6
Key Conclusions
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Policy conclusions
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Many consumer need help today!
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Due to lack of resources and proven effectiveness, this is
not the time to mandate school-based financial education
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Financial education needs to be more timely and targeted
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Need structured default products
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Auto-IRA
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Child savings accounts
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Unrestricted savings
National Endowment for Financial Education