Answer: CFPB out with a report that defines the goal of financial education to provide “financial well-being.” So, how to define financial well-being?
- Have control over day-to-day, month-to-month finances
- Have capacity to absorb a financial shock
- Are on track to meet your financial goals
- Have the financial freedom to make the choices that allow you to enjoy life.
As I think about the approach that Next Gen Personal Finance has taken to personal finance education, I find it matches well with the skills required to gain financial ability:
- Knowing when and how to find reliable information to make a financial decision;
- Knowing how to process financial information to make sound financial decisions; and
- Knowing how to execute financial decisions, adapting as necessary to stay on track.
By putting the student in the driver seat for WebQuests, activities and performance tasks, we teach them how to find reliable information, what methods to use to compare alternatives and finally how to execute on their decisions.
I found the final two paragraphs also useful in showing the various forces at work in the decision-making process:
Based on our framework of factors that influence financial well-being, to make it likely that a person will accomplish something, a person needs to:
- Know how to do it (knowledge and skills);
- Feel confident in knowing how to do it effectively (attitude);
- Believe that doing it is valuable (attitude);
- Have the opportunity to do it (opportunity);
- Encounter a decision context that is conducive to doing it (decision context).
The CFPB also puts a pitch in for “experiential learning” and just-in-time learning too:
All ways of gaining knowledge are not equally powerful. Experiential learning and just-in-time learning, in the sense of being immediately decision-relevant, are likely to be far more powerful ways for people to gain functional skills than financial learning encountered without any immediate applicability. Finally, informal influences are tremendously important to most people’s financial lives. With or without a financial practitioner to use as a resource, people overwhelmingly get most of both their factual and their normative knowledge about financial topics from their family, their friends, and their community.