Goodbye to Complacency:
Financial Literacy Education in the United States 2000-2005

Lois A. Vitt, Project Director
Gwen Reichbach, Jamie L. Kent, Jurg Siegenthaler

E X E C U T I V E   S U M M A R Y

Since 2000, public and private sector organizations intensified and escalated their commitment to help Americans learn to manage, save, and invest their money. Personal finance education programs multiplied and spread even as consumer debt deepened, stocks tanked in the 3 rd quarter of 2000, terrorist attacks stunned the World on 9/11/2001 , and the War on Terrorism commenced on two fronts. During the same period, corporate and other Wall Street scandals surfaced, policymakers clashed over Social Security reform, and to stay competitive, employers outsourced jobs and continued to transform pension and health benefits into models that require more money from, and more decision-making, by workers.

In 2005, nearly everyone understands that times have changed. Americans also are becoming increasingly aware that they must become more responsible for their own future financial well being. This report updates a study commissioned and published by the Fannie Mae Foundation in 2000, Personal Finance and the Rush to Competence: Financial Literacy Education in the United States . It is an overview of the proliferation and effectiveness of the financial literacy education efforts undertaken during the past five years to help Americans achieve competence in personal finance.


The AARP commissioned this study of the current state of financial literacy education to update our prior research. We designed this analysis to learn what progress has been made since 2000 by both public and private organizations committed to personal financial education. We sought to understand the challenges program managers and educators face today, and to learn whether financial education is making a difference in the lives of program participants. In addition, we examined the influence of campaigns to "save, invest and learn" on financial education, noted the characteristics of more recent initiatives, and chronicled the legislative efforts--both federal and state--that have been introduced or have become new law.

The information contained in this study came from the following sources: (1) literature; (2) telephone and in-person interviews with program directors, educators, and researchers; (3) program site visits; (4) focus group interviews with participants who attended courses or seminars at the sites we visited; (5) interviews with industry leaders from both the public and private sectors, (6) Internet research of 250 active websites and (7) an analysis of the materials that were submitted by benefits educators competing for Pensions & Investments coveted "Eddy Awards." To the extent possible, given the time constraints required to produce this research, we followed the methods and benchmarking process used in our prior study to learn the scope and effectiveness of financial literacy education activity nationwide.

As in our previous study, the program managers, educators and consultants we interviewed represent a remarkably diverse population. They include: (1) workplace financial educators and consultants; (2) Cooperative Extension Service (CES) Education Directors; (3) college program directors; (4) the United States Army; (5) youth program directors and teachers; (6) faith-based program administrators; (7) community program directors; and (8) nationwide programs for the general public.


In the mid-to-late 1990s, a financial literacy education "movement" exploded onto the contemporary scene in the United States. Changes in individual and family finances had been influenced by various macroeconomic events and long-term trends. Despite a period of sustained economic expansion, the future sufficiency of Social Security, Medicare, and traditional employee benefits were increasingly being called into question. Concerns in both the public and private sectors were fueled by forecasts about the great numbers of baby boomers that would soon begin to retire and by mounting competitive pressures on employers to stem rapidly rising employee benefit costs.

Campaigns to Save, Invest, and Learn

The American Savings Education Council (ASEC) was organized in July 1995 to raise public awareness about the need for increased personal savings. The Jump$tart Coalition for Personal Financial Literacy also began in 1995 to promote personal finance education in schools and improve the financial knowledge and abilities of children and young adults. The National Endowment for Financial Education (NEFE), in 1998, committed its resources to provide the public with effective education in basic personal financial management. Numerous federal departments, agencies, and commissions joined these efforts and became active, or expanded prior activities, in widespread efforts to raise public awareness and to make personal financial education more available to Americans.

In May, 2002, the Department of the Treasury established the Office of Financial Education (OFE) to coordinate the efforts of the Financial Literacy and Education Commission, a group chaired by the Secretary of Treasury and composed of representatives from 20 federal departments, agencies and commissions. Its purpose is to coordinate federal efforts to improve financial literacy and highlight education that helps Americans make wiser choices, especially with regard to saving, credit management, home ownership and retirement planning.

During the past five years, these initiatives and efforts have expanded. Older organizations, active in economic and personal finance education even before the 1990s, came forward and joined coalitions, commissions, partnerships, and other active organizations to provide nationwide networks of resources, research, staff, innovation, and educational materials to teach financial education to Americans at every age and socio-economic level.

An almost mirror-image of these efforts has occurred in cyberspace, as Internet offerings have become widely available, and largely free of cost, to anyone interested in tapping into this astonishingly vast and for the most part, excellent, financial information and education network.


"Financial literacy" and "financial literacy education" were not common topics in the U.S. literature before the late 1990s, but a surge of research has taken place since 2000. Behavioral economists, economic psychologists, finance sociologists, personal finance educators, financial counselors, social workers, and financial professionals, educators and advisors are contributing important research to the literature. In addition, corporate and other formerly proprietary research is being made available to the personal finance research community.

Like the spread of financial education itself, this is an important development. Rarely has the promise of so much knowledge converged that can inform policymakers, employers, program managers and educators about the socio-economic status, and the diverse characteristics, customs, needs, abilities, attitudes, motivations and behaviors of consumers who seek (and those who do not take advantage of) financial education opportunities as they become available.

Increasing research attention and resources have been devoted to the effectiveness of education programs through evaluation research. Newer research is being trained on questions concerning motivation and behavior modification in connection with consumer financial habits. Research questions include: (1) how can people be motivated to save and invest?; (2) why do workers refuse saving options where matching amounts are deposited by employers into accounts in their name?; (3) how can poor credit and spending habits be effectively changed so that more people become responsible for their financial well being?

Research results are mixed to date and the data are inconclusive, but the enormous attention being devoted by the public and private sectors to questions about how fast and how well the nation is (or is not) becoming financially knowledgeable is impressive.


We noted in 2000 that the pervasive public-private partnership that supports widespread financial literacy education is probably unprecedented. We predicted that the tipping point had been reached and that major societal changes would occur as a result of widespread efforts to educate the public about their need to become more competent in managing, saving and investing their money. The following is a summary of the current state of financial literacy education in the United States from the data we analyzed.

National Financial Education Organizations and Coalitions

Since 2000, leaders, administrators, corporate (and other business and nonprofit partners) of the American Savings Education Council (ASEC), the Jump$tart Coalition, the National Endowment for Financial Education (NEFE), National Council on Economic Education (NCEE), the U.S. Department of the Treasury and many departments, agencies and commissions of the federal government, the U.S. Congress and State legislative bodies, the AARP, community and faith-based organizations and networks, and the financial services industry itself have expanded and/or created new initiatives across the Nation. These organizations have been responsible for a national societal movement that has:

  • Introduced and/or passed legislation at both the national and state levels to increase personal financial literacy of all Americans.
  • Publicized changes and controversies that impact the future of traditional and proposed employee and retiree benefits, and Social Security, Medicare, and Medicaid.
  • Trained instructors to teach financial literacy to targeted groups and populations.
  • Drawn special attention to the need to start youth on the path to personal financial competence by including financial education in schools K-12.
  • Crafted educational materials for communities, schools, and other organizations to use in fostering financial literacy education.
  • Lifted public awareness of the need to budget and manage money, and to save and invest more for the future.
  • Shared research results and research-based information and materials with communities, organizations, financial educators, researchers and others.
  • Provided a clearinghouse for educational materials for organizations seeking to start financial education programs.
  • Promoted networking opportunities to avoid duplication of effort and encourage dynamic partnering among organizations with diverse needs.

Reluctant Savers

Despite the spread of financial education initiatives nationwide during the past five years, some industry leaders we interviewed expressed disappointment in results to date. Personal saving rates have risen only slightly, 401(k) take up rates are sluggish, a large percentage of Americans remain "unbanked," and some Americans still exhibit fear, confusion about, or reckless disregard for the need to become more responsible for their own financial well-being. From the available data, it is possible to view the glass as either half full or half empty.

First, a brief sociological study of the past 50-60 years reveals that generations were encouraged to be financially dependent--on government, on their employers, on financial institutions and advisors. As more Americans are helped to become financially self-reliant, it is well to remember how far many have already come in learning to resist the entrenched culture of easy credit, instant gratification, and overspending.

Second, in every social sector, people are more engaged in teaching, mentoring, learning, and praying about budgeting, saving, investing, buying homes and starting businesses than they were five years ago. Even if many Americans are only now becoming aware of the need to save and invest for their future, this is a sea change from the complacency that existed in the year 2000.

Third, there is some noteworthy, if modest, progress. The 2001 and 2005 Retirement Confidence Surveys (RCS) relating to 401(k) participation can be compared. Each survey asked:

Does your current employer offer you a retirement savings plan that allows you to make before-tax contributions from your salary to an individual account, set up in your name, such as a 401(k), 403(b), or 457 plan?

Answered "Yes"

  • 2001 -- 66%
  • 2005 -- 78%

The same RCS survey asked: -- Do you contribute money to the plan?

Answered "Yes"

  • 2001 -- 76%
  • 2005 -- 82%

Other Selected Results

  • The American Savings Education Council (ASEC), the Jump$tart Coalition, the National Endowment for Financial Education (NEFE), their leaders and their partners facilitated, influenced, supported, and accelerated the growth of financial literacy education and legislation across the nation during the past five years.
  • Workplace financial literacy education remains the best arena for reaching the most people, but it is not living up to its potential. Employees we interviewed both in 2000 and 2005 expressed gratitude to employers that do sponsor personal financial education. While dramatic changes have occurred on other fronts since 2000, most workplace programs have retreated from general financial education and offer more "limited benefits" education programs instead.
  • Some financial education consultants and researchers want employers to realize that a "business case" exists for employee financial education. One approach involves a tie-in of wellness with financial education basics and predicts that employers can reduce escalating health benefit costs by offering combined financial and health education to employees. Another approach endeavors to convince employers that the overall productivity of financially well employees increases.
  • Program leaders, managers, and educators reported in 2000 that they did not have adequate resources to design, evaluate, revise, or expand programs. Although inadequacy of resources is being felt from cutbacks in some sectors, as was reported to us by Cooperative Extension System representatives, relevant curricula, qualified instructors, and prospective partners are more readily available in 2005 than they were in 2000.
  • Some excellent college and university programs do exist to teach students about personal finances, but these programs do not begin to address the pressing need that still exists nationwide, particularly for non-business undergraduate students.
  • Youth programs have proliferated and according to the 2004 Jump$tart Coalition publication, Financial Literacy: Are We Improving, average scores measuring financial literacy of high school seniors have stopped falling and appear to have turned around. The youth programs we surveyed successfully engaged both students and teachers and elicited further learning for students and even their family members.
  • Faith-based and other community organizations are growing and continuing to provide comfortable (and safe) financial education settings for many people. More important, in under-served populations, these organizations offer hope, motivation and asset building programs that provide families with stability and some protection against an uncertain future.
  • Individual Development Account programs (IDAs) have grown to more than 500 in 2005. These and other asset-building strategies are tracking substantial changes in debt and savings levels over time. Moreover, asset-development initiatives follow a prescribed set of desirable achievements: debt elimination, saving and investment, homeownership rather than renting, starting a small business, asset protection, and continuing education.
  • The U.S. financial services sector, including national trade and professional associations as well as individual banks, credit unions, insurance companies, mortgage bankers, and the securities industry, are active, invested, and involved in sponsoring, partnering and volunteering at national and local levels.
  • Instructors of financial education programs recruited or drawn from financial services professions (e.g., financial planners, lawyers, accountants, estate planners, etc.) are less acceptable to some program planners than instructors from academic or counseling settings. We find, however, that while most participants strongly dislike being sold financial services or products by seminar or workshop instructors, they care most about the quality of the education and like being taught by financial experts.
  • In 2005, teaching materials are more abundant. They cover more financial topics, are more culturally sensitive and more linguistically diverse. In addition, topics include coping in periods of adversity, how to financially prepare for and recover from an emergency, and step by step guides to asset building.
  • Programs that help older adults avoid scams and financial fraud are increasing, but the need for basic financial education remains acute in this population. Programs are needed that help older adults and their caregivers identify resources and help them with money management.
  • Computer and Internet-based teaching methods have been widely employed to reduce the cost and increase the availability of financial education, but these must be combined with human contact in supportive learning environments to be more effective.
  • Although new and proposed legislation is improving the financial information landscape for American consumers, lawmakers should put document clarity high on their list of priorities to help consumers become financially better informed.
  • Problem areas still reported include: (1) funding to facilitate program sustainability, (2) the need for better program evaluation methods and the resources to gather post-program data to measure effectiveness and enhance the education process (3) improved ways of marketing education programs to target populations, (4) convincing more people to take advantage of saving and investment opportunities, particularly 401(k) participation, and (5) eliminating poor financial decision-making behaviors.

The nation's financial education advocates have made great progress during the past five years. Helping people transition from dependency to self-reliance, however, is not an easy task. Research to date and the experience of extant program managers and educators demonstrate that it is a worthwhile and achievable objective. The challenge for private interests, policymakers, and community organizers is to press on even in the face of seeming complacency. There is evidence that future individual and national well being depends upon the success of widespread financial education endeavors during the coming years.

Mathew Greenwald & Associates. 2001 and 2005 Retirement Confidence Survey, Employee Benefit Research Institute (EBRI) and the American Savings Education Council (ASEC). Washington , DC : EBRI, 2201, 2005.