Here are the annotated bibliographies I prepared from 2016-01-14 to 2016-02-22 for my incomplete online course, Introduction to American Personal Financial Literacy. This course will not be completed.
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All Annotated Bibliographies by Richard Thripp [6 Credit Hours]
EDP 6936 Section 0M01: Spring 2016 – UCF, Dr. Michele Gill
Completed February 22, 2016
a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 1]
Mandell, L., & Klein, L. S. (2007). Motivation and financial literacy. Financial Services Review, 16(2), 105–116.
b) Abstract:
This paper examines the hypothesis that low financial literacy scores among young adults, even after they have taken a course in personal finance, is related to a lack of motivation to learn or retain these skills. The research is based upon the latest national Jump$tart survey of high school seniors and uses financial literacy scores after controlling for socioeconomic, demographic, and aspirational characteristics that have historically predicted these scores. We analyze the relation of financial literacy scores to responses to three questions designed to measure motivation to be financially literate. We found that the motivational variables significantly increased our ability to explain differences in financial literacy.
c) Relation to Capstone Project # 1, Financial Literacy Course:
This paper reviews and interprets the results of financial literacy surveys developed by the Jump$tart Coalition for Personal Financial Literacy and administered to high school seniors 1997–2006. Lucey (2005) has established, with reservations, that these surveys have reliability and validity that is adequate for many purposes. However, the Jump$tart surveys remain among the best self-report instruments we have to measure personal financial literacy, which is unfortunate because there is much room for improvement.
Importantly, Mandell and Klein (2007) conclude that motivation is a key factor in explaining levels of financial literacy. The authors reflect on the fact that high school classes do not measurably improve financial literacy (pp. 113–114), relating this to results from the Jump$tart surveys indicating that students who talk about finances with their parents, have stocks in their name, or possess credit cards are not more financially literate than their peers (pp. 108–109). The authors lament that high school students might be more motivated if they fully understood the many social safety nets that have been removed from American life (pp. 109), such as the consumer protections that were dissolved under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Moreover, the authors cite research indicating that “targeted financial education” is efficacious, such as pre-purchase or credit counseling given to people before borrowing for a mortgage, student loan, auto loan, etc. (pp. 112–113). The implication here is that these consumers are motivated to apply what they have learned, rather than seeing it as something nebulous that does not apply to them. This is very important for my course; capturing students’ interest and conveying personal relevance will be essential to my course design, which will incorporate motivational theories from the ALIMA program.
d) Key Insights:
See above for key insights (combined with Relation to Capstone Project # 1 section).
e) Further Reading:
Hilgert, M. A., Hogarth, J. M., & Beverly, S. G. (2003). Household financial management: The connection between knowledge and behavior. Federal Reserve Bulletin, 89, 309–322.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 2]
Lucey, T. A., & Maxwell, S. A. (2011). Teaching mathematical connections to financial literacy in grades K–8: Clarifying the issues. Investigations in Mathematics Learning, 3(3), 46–65.
b) Abstract:
Most teacher education programs do not incorporate financial education preparations into courses required for early childhood, elementary education, and middle level candidates. The authors of this manuscript explore the reasons for this omission, particularly the mathematics education component, and clarify the issues surrounding this decision. They argue that financial education represents a valid curriculum concern and that inadequate personal finance literacy and mathematics standards exist. In addition, they discuss that elementary and middle schoolteachers generally lack understandings of the content, that teacher preparations inadequately educate teachers to teach about this content, and that a pedagogical shift is needed to affect meaningful change. They call for revisions of traditional mathematics pedagogies to address this challenge so that K–8 students may begin to exercise the responsibility for prudent financial decision-making that they will need in future years.
c) Relation to Capstone Project # 1, Financial Literacy Course:
Lucey and Maxwell (2011) contend that the methods American teachers use for teaching personal finance to elementary and middle school children are pathetic. For example, teachers tend to include decimalized dollar amounts such as $1.45 in their lessons to K–2 students, even though the requisite mathematical skills are not introduced until grade 4 at earliest (pp. 48)! According to the authors, this is both an issue of curriculum development and teacher education. Many textbooks “tack on” dollar figures to mathematical problems without any financial context (pp. 51–52). Elementary teachers are especially likely to lack the education and confidence to effectively teach financial skills to their students.
Being that my course under development is titled Introduction to American Personal Financial Literacy, I will not be assuming my students have extensive background knowledge. Therefore, much of the course materials and strategies used in my course will be of remedial level. It is thus appropriate to incorporate empirically supported suggestions for middle and high school education, and perhaps even elementary school. This article provides many useful ideas and several tables with topical suggestions (pp. 56) and suggested complexity–grade-level interactions (pp. 57–58).
d) Key Insights:
• Matching the needs of the learners is important and is perpetually difficult when developing “one-size-fits-all curricula” (p. 55).
• Current teachers learned mathematics in the 1980s and 1990s, when mathematical instruction was more basic, according to the authors (p. 49). Therefore, the authors allege these teachers did not learn the requisite background information to teach personal finance, at least during their primary and secondary educations.
• The authors say that “a pedagogical shift is needed to affect meaningful change” (p. 46). I love how the authors have attacked this issue from many sides, particularly with their focuses on better textbooks and improved teacher education.
e) Further Reading:
Way, W. L., & Holden, K. C., (2009). Teachers’ background and capacity to teach personal finance: A national study. Journal of Financial Counseling and Planning, 20(2), 64–78.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 3]
Seyedian, M., & Yi, T. D. (2011). Improving financial literacy of college students: A cross-sectional analysis. College Student Journal, 45(1), 177–189.
b) Abstract:
Financial literacy has become more important than ever as an increasing number of college students are relying on credit cards to finance their education. We examine whether college students are knowledgeable about finance, whether they improve upon that knowledge, and whether their demographic profile, financial backgrounds, and engagement/motivation level affect their financial knowledge and learning. Recruiting students who voluntarily participated in the pre- and post-tests of personal finance and managerial finance, and using multiple regression and the results of student course evaluations, we find that using finance courses positively affect the students’ financial literacy. Moreover, we find that gender difference is found only in the pre-test of managerial finance, that female students significantly improved learning, and that students in the upper level of finance courses overall outperformed those in the lower level in both tests of personal finance and managerial finance. We also find that students’ job experiences, financial background, attitude and behavior, and class participation and motivation determine the amount of their learning.
c) Relation to Capstone Project # 1, Financial Literacy Course:
Sevedian and Yi (2011) administered the entire Jump$tart Coalition financial literacy survey (30 questions) to about 50 undergraduate students, as well as eight questions relating to managerial finance. This was done at the beginning and end of the semester in managerial finance or portfolio management college courses. The sample was primarily Caucasian (80%) at SUNY Fredonia, a campus in the New York University system.
In my opinion, there are quite a few issues with the authors’ methods, such as the loss of 15 students between pre- and post-test (64 to 49), their conflation of results from three separate undergraduate courses, the use of a volunteer sample, and a tendency to cherry-pick data. Nevertheless, several results emerged which I believe will be valuable to my course development, which will be explored in the Key Insights section (below).
d) Key Insights:
• One question in the Jump$tart survey asks whether an elderly person with only Social Security income and little savings will have a hard time getting by, or will have it fairly easy by simply reducing expenses. Sevedian and Yi found that students who said such an elderly person would have a hard time performed much better on other questions relating to personal finance (p. 186). Therefore, developing realistic financial beliefs may be correlated with improved financial literacy.
• Owning a savings account was correlated with better performance on the authors’ pre-test of managerial finance (p. 186). Perhaps opening the savings account was an educating experience for these students? Did the banker advise them of the benefits of a savings account, or did they open the account online and read bank webpages first? Who knows? It is important to note the current climate of very low interest rates on savings accounts. Basically, savings accounts in the post-2008 era function basically as psychological devices; very little money is earned versus keeping your money in a checking account. How does this factor in?
• A comparison of post-test results reveals that students who were in BUAD 320(B), Managerial Finance II, performed better than students in BUAD 320(A), Managerial Finance I (pp. 187–188). Students in the second course also participated more and expected higher grades, according to the authors. They believe that participation and effort is positively correlated with financial literacy, at least with respect to financial courses.
e) Further Reading:
Roberts, J. A., & Jones, E. (2001). Money attitudes, credit card use, and compulsive buying among American college students. Journal of Consumer Affairs, 35, 213–240.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 1]
Lucey, T. A. (2005). Assessing the reliability and validity of the Jump$tart survey of financial literacy. Journal of Family and Economic Issues, 26(2), 283–294. http://dx.doi.org/10.1007/s10834-005-3526-8
b) Abstract:
Financial education represents an area of popular interest, owing largely to the Jump$tart surveys of financial literacy. However, while the surveys represent indicators of financial knowledge among high school seniors, these measures have not been statistically validated. This article describes an assessment of the surveys’ reliability (internal consistency), and validity. It reports a moderately high degree of consistency overall, however, discloses low to moderate internal consistencies among subscales. It also finds significant response differences to one quarter of comparable items between surveys. The researcher observes challenges to affirming the surveys’ validity and offers statistics suggesting social bias among survey items. He calls for further research into measures of financial literacy.
c) Relation to Capstone Project # 2, Companion Paper:
From my initial readings, the Jump$tart survey kept coming up again and again in financial literacy research—it is obviously considered an important instrument for measuring personal financial knowledge. I looked for articles lending credibility to the survey, and while there were distressingly few, this article is strong and refreshingly skeptical. The Jump$tart survey is revised approximately biennially, and while its empirical support is somewhat tenuous, it appears to be the “state of the art,” so to speak, among survey instruments for personal financial literacy. Lucey (2005) finds that the survey overall is too short, having only 30 items when the Jump$tart Coalition itself recognizes 49 financial benchmarks, and has low internal subscale consistency, but adequate internal consistency and inter-correlation consistency. As for validity, only face and content validity is apparent. While the coalition’s benchmarks might be more useful for curriculum development in my course, I will also be using this survey, or at least some aspects of it.
d) Key Insights:
• Lucey laments that congruent validity is impossible to determine; older financial literacy instruments have not been evaluated for reliability or validity, so there is nothing to compare the Jump$tart survey to (p. 290). Obviously, this field is sorely underdeveloped compared to others, such as motivational and personality instruments.
• Relating survey items to practical life may improve predictive validity (p. 290). This reminds me of a discussion from the graduate course, DEP 5057: Developmental Psychology, at UCF in spring 2015 with Prof. Valerie Sims. This discussion involved the Heinz dilemma, where Sims spoke of research indicating that when high school students were presented with a more realistic dilemma about having casual sex, a majority of the students who displayed high levels of moral reasoning with the Heinz dilemma regressed with regard to the more realistic scenario (e.g., they advocated having casual sex without telling parents). Could a similar phenomenon exist with respect to personal finance? Perhaps if a survey instrument included realistic questions, it may be more predictive? One possible question could be whether you should go to Disney World because your friends want you to go with them, but you have to charge it to your credit card because you have no money in your checking account. This could be set up as a story, which might aid readers in rationalizing and justifying the bad financial decision. Realistic questions may have greater predictive validity for participants who engage in such rationalization in real life.
e) Further Reading:
Jump$tart Coalition (2000, April 9). Financial literacy declining among 12th graders, coalition urges states to include personal finance in curriculum standards. Retrieved March 9, 2002, from http://www.Jumpstart.org/upload/news.cfm?recordid=60.
NOTE: Relate to Mandell & Klein (2007): Including personal finance in curriculum standards might not work if students remain unmotivated! Suggesting that education is a panacea may not be accurate.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 2]
Lindsey-Taliefero, D., Kelly, L., Brent, W., & Price, R. (2011). A review of Howard University’s financial literacy curriculum. American Journal of Business Education, 4(10), 73–84.
b) Abstract:
This article evaluates a financial literacy curriculum at the Howard University (HU) School of Business, by measuring the financial knowledge acquired after participating in a variety of programs. To evaluate the HU curriculum, the National Jump$tart Coalition (NJC) survey was administered to collect data on financial knowledge and demographic characteristics. Descriptive statistics and regression analysis were used to study the data. The results show that HU-Business students performance was comparable to Jump$tart’s national average for college students and Business/Economics students. HU Business students scored higher than the Jump$tart’s African American student sample. The regression analysis helped identity key factors that influence financial awareness for HU students including having checking account, electronic tax preparation, taking a course in personal finance or money management, GPA, and frequently balancing check book.
c) Relation to Capstone Project # 2, Companion Paper:
This article gives useful insights from the development of Howard University’s curriculum, based on the CreditSmart curriculum. In particular, the authors found that students with student loans performed 6.17% better on the Jump$tart tests, perhaps because of the required financial training prior to receiving the loan (p. 81). I believe this is an important point, because it shows that targeted financial education is efficacious, providing support for the conjectures of Mandell and Klein (2007). Why, then, are we not mandating education prior to applying for credit cards?
The authors also include a table with summaries of eight prior financial literacy studies in their literature review (p. 74). Among the papers I have read so far, this is depressingly rare. I may consider or use some of this information for my companion paper.
Important note: The Jump$tart survey was expanded in 2008 to include college students, at which time the high school version contained 31 items, and the college version contained the same 31 items plus 25 additional items for a total of 56 items. Articles from before 2008 do not account for this.
d) Key Insights:
• Overall, the authors’ literature review led them to the conclusion that American adults simply are not prepared to make financial decisions (pp. 74–75). This is a theme that appears again and again from reading the literature. While it can be demoralizing, it also shows us that a lot of “low-hanging fruit,” or easy gains relating to the financial literacy of the public, are yet to be picked.
• The authors statistical analyses led them to the conclusion that simply owning a checking account was correlated with an 18.9% increase in performance on the Jump$tart 56-item survey (p. 79). This is astounding at first glance. From anecdotal personal experience, I have noticed that many high school dropouts never attain checking accounts, or are barred from opening accounts due to accumulated debts relating to overdraft fees on past checking accounts. They are on the ChexSystems blacklist, the Early Warning Services blacklist, and may also have passed credit delinquencies, particularly relating to medical bills which are surprisingly easy to expunge, and yet they lack the knowledge, education, and even computer access that make such processes easier. It is difficult to dispute items on your Experience, Equifax, and TransUnion credit reports from your cell phone! While calling in is an option, many do not even know about the problem, nor how to request their free annual credit report, to begin with. We should not confuse correlation with causation here—individuals who have checking accounts are likely be financially advantaged in unrelated ways.
e) Further Reading:
McCormick, M. H. (2009). The effectiveness of youth financial education: A review of the literature. Retrieved from http://files.eric.ed.gov/fulltext/EJ859566.pdf
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 3]
Bosshardt, W., & Walstad, W. B. (2014). National standards for financial literacy: Rationale and content. Journal of Economic Education, 45(1), 63–70.
b) Abstract:
The National Standards for Financial Literacy describe the knowledge, understanding, and skills that are important for students to learn about personal finance. They are designed to guide teachers, school administrators, and other educators in developing curriculum and educational materials for teaching financial literacy. In this article, the authors explain the reasons for the development of the Standards by the Council for Economic Education and the work of economists, economic educators, and teachers to prepare them. They describe each of the six content standards and how they are supported by associated benchmarks at the fourth, eighth, and twelfth grades. The authors also discuss several valuable Standards’ features, including a focus on economic content and decision-making skills as the foundation for financial literacy.
c) Relation to Capstone Project # 2, Companion Paper:
This article presents proposed national standards for financial literacy, which could serve to either standardize or provide a common framework for K–12 financial literacy education throughout the United States. The standards include items such as incomes, savings, and credit. I particularly like the categories and their purposely timeless nature (pp. 66–67); the authors are keen to note that benchmarks such as “writing a check” are not included in their 144 benchmarks. It also seems intuitively logical to me that the benchmarks are cumulative and presented for the 4th, 8th, and 12th grade levels, since the skills build on each other like any math skills, and since these are key ages where developmental or cultural shifts take place. I will surely consider using the standards and suggestions the authors have presented in guiding and justifying my course design choices.
d) Key Insights:
• The authors note that time and uncertainty are often too difficult for elementary students to understand (p. 66); thus, it makes pedagogical sense to focus on these topics in middle and high school rather than elementary school. Similarly in my course design, it is important I do not overwhelm beginners with concepts that require prerequisite knowledge, although developmental concerns will be negligible since my course is aimed at adults.
• I love that the standards include “human tendencies or factors” that are illogical (p. 68), such as being influenced by marketing tricks such as anchoring, tending to “stick with our gut” even when knowing of the first-instinct fallacy (Kruger, Wirtz, & Miller, 2005), and being unable to judge probabilities or time. While some sociologists may argue otherwise, humans are simply not rational maximizers! I can see why some financial figures such as Dave Ramsey will advise their followers to do things such as completely avoid credit cards and to pay the small debts first rather than the high-interest debts first (the “snowball” theory)—while mathematically suboptimal, these approaches have better results for people who are vulnerable to financial failure if they use credit cards or become discouraged by too great a number of debts.
Reference
Kruger, J., Wirtz, D., & Miller, D. T. (2005). Counterfactual thinking and the first instinct fallacy. Journal of Personality and Social Psychology, 88, 725–735.
e) Further Reading (citation copied from article—not APA format):
U.S. Department of the Treasury, Office of Financial Education. 2010. Financial education core competencies. Federal Register 75(165): 52596. Washington, DC: U.S. Department of the Treasury. http://www.gpo.gov/fdsys/pkg/FR-2010-08-26/pdf/2010-21305.pdf (accessed July 28, 2013).
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 4]
Hilgert, M. A., Hogarth, J. M., & Beverly, S. G. (2003). Household financial management: The connection between knowledge and behavior. Federal Reserve Bulletin, 89(7), 309–322.
b) Abstract:
Consumer financial literacy has become a growing concern to educators, community groups, businesses, government agencies, and policymakers. Correspondingly, there has been an increase in the number and types of financial education programs available to households. Many of these programs focus on providing information to consumers and operate under the implicit assumption that increases in information and knowledge will lead to changes in financial-management practices and behaviors. This article focuses on four financial-management activities—cash-flow management, credit management, saving, and investment. Data from the Surveys of Consumers are used to analyze some of the connections between knowledge and behavior—what consumers know and what they do. Overall, financial knowledge was statistically linked to financial practices: Those who knew more were more likely to engage in recommended financial practices. In addition, certain types of financial knowledge were statistically significant for particular financial practices–knowing about credit, saving, and investment was correlated with higher probabilities of engaging in recommended credit, saving, and investment practices respectively. Although the causality could flow in either direction, this finding indicates that increases in knowledge may lead to improvements in financial-management practices. Thus, financial education in combination with skill-building and audience-targeted motivational strategies may be one way to elicit the desired behavioral changes in financial-management practices.
c) Relation to Capstone Project # 1, Financial Literacy Course:
This article will help me tailor my course design to my audience. My goal is to invoke behavioral change that is financially beneficial. From survey data, the authors discern that for adults with low scores in categories such as credit management and savings are more likely to miss payment deadlines for their bills, which they deem a “behavioral hierarchy” (p. 312). Further, the authors found that investment is a difficult topic for which expertise is rare; adults are more likely to have advanced knowledge of saving, credit management, and cashflow management (p. 311). The authors propose something similar to Maslow’s hierarchy of needs, suggesting that these skills are pre-requisites to investment knowledge (p. 311). If efficacious, I should design my course to start with these skills, leaving the investment modules for the latter half of the course.
d) Key Insights:
I want to avoid tenuous questionnaire items and I saw at least three on the authors’ questionnaires (p. 313). For me, not many things are more annoying than questions that are technically incorrect. I take issue with the following true or false questions from page 313:
• “Your credit rating is not affected by how much you charge on your credit cards” is listed as false. However, technically, your credit rating is affected by the balance that is reported to the credit bureaus by your card issuer each month, which is almost invariably your statement balance. Therefore, you could continually max out your credit limits while not affecting your credit rating at all, as long as you paid the charges before the statement cuts. I am not sure if there is a way to adjust this question without making it pedantic, however.
• “If you buy certificates of deposit, savings bonds, or Treasury bills, you can earn higher returns than on a savings account, with little or no added risk” is listed as true. While this is true in one regard, in another, you are exposing yourself to risk by locking up your money (though this could also be psychologically beneficial depending on your propensity for poor spending decisions). Many banks charge penalties for early withdrawal from CDs that exceed the interest earned and actually cut into your principle. Savings accounts are marginally more liquid because you do not have to worry about early withdrawal penalties.
• “The earlier you start saving for retirement, the more money you will have because the effects of compounding interest increase over time” is listed as true. However, this question does not consider the amount saved. Someone who starts saving $50 per month at age 18, and sticks with this amount, is still going to have less at retirement than someone who starts saving $500 per month at age 30. While the effects of compounding interest do increase your balance, they are not a panacea. That is to say, interest has no memory. For example, in any year, you could make up for past underinvestment by saving more new funds, and you would receive the same interest on that new money regardless of whether it came from previously compounded interest or new contributions. The preceding statements are true except with respect to retirement devices such as 401(k) plans and other tax shelters. This question may be better if it focused on the deferred tax benefits of maximizing your retirement contributions each year, because these benefits have annual caps, making them impossible to play “catch up” with.
e) Further Reading:
O’Neill, B. (2002). Twelve key components of financial wellness. Journal of Family and Consumer Sciences, 94(4), 53–58.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 5]
McCormick, M. H. (2009). The effectiveness of youth financial education: A review of the literature. Journal of Financial Counseling and Planning, 20(1), 70–83.
b) Abstract:
In the current financial crisis, children and youth are uniquely impacted by household finance complexities. Moments of financial trouble are teachable opportunities for children and youth to learn about personal finance and to improve their own money management skills. However, comprehensive strategies for educating them about personal finance have not yet emerged. This review of the literature explores the state of youth financial education and policy, including definitions and measures of effectiveness. Delineating a range of approaches to the delivery and assessment of youth financial education, this paper reports on impact data and best practices and highlights some controversies. It concludes with a discussion of the gaps in knowledge and suggestions for further research.
c) Relation to Capstone Project # 1, Financial Literacy Course:
McCormick presents beautiful insights regarding the state of financial education in secondary school, from several perspectives including student, teacher, researcher, commentator, and policymaker. There is an overwhelming amount of financial literacy research; McCormick distills quite a bit of it, which can expand the empirical support for my course without drastically increasing the amount of material I must read and digest.
d) Key Insights:
• McCormick speaks at length about the “lack of standards” regarding financial education (p. 75). This is a potent problem—I cannot simply select an off-the-shelf solution, with regard to course objectives, assessments, or even instruments. In other areas, there are often tools that have already been empirically validated, yet curriculum designers in financial literacy are still flying blind in many ways.
• The author states on the first page of the article: “Moreover, children, especially the majority who do not go directly on to postsecondary education, are quickly faced with adult financial tasks and responsibilities” (p. 70). This is not true at all! Many college students have adult financial responsibilities; look at how many must work as servers to pay their bills. In many ways, the ones who do not go to college have it easier, if we control for other detrimental correlations.
• There are at least two nice lists of what financial literacy education should do. One is to emphasize “goal setting, intertemporal choice, philanthropic giving, earning, saving, and spending” (Godsted & McCormick, 2006, pp. 3–4, as cited by McCormick, 2009, p. 75). This definition was surprising to me, with “intertemporal choice” and “philanthropic giving” being suggested for elementary school education. Another concerns implementing programs in general, with tiers of “preimplementation, accountability, program clarification, progress toward objectives, and program impact” (Jacobs, 1998, pp. 203–204 as cited by McCormick, 2009, p. 76). I feel that I am currently in the first two or three stages regarding my course. For me, accountability comes from using empirically supported ideas. Reading journal articles also helps me clarify the purposes of my program.
e) Further Reading:
Gross, K. (2005). Financial literacy education: Panacea, palliative, or something worse? St. Louis University Public Law Review, 24, 307–312.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 6]
Karger, H. (2015). Curbing the financial exploitation of the poor: Financial literacy and social work education. Journal of Social Work Education, 51(3), 425–438. http://dx.doi.org/10.1080/10437797.2015.1043194
Note: DOI is correct, but URL is non-functioning as of March 5, 2016.
b) Abstract:
The article investigates the importance of financial literacy content for social work students who at some point in their career will encounter financially-excluded clients. Financial literacy content can include understanding how fringe economy businesses operate, including their business model, knowledge of local and national nonpredatory financial services, understanding credit and the credit industry, and knowledge of state and national regulations governing high-cost financial services. This article also examines the financial literacy gap in social work education and provides an overview of some key fringe economy enterprises, such as payday lenders, car title pawns, pawnshops, rent-to-own businesses, buy-here-pay-here used car lots, and debit/credit cards. Last, the article explores ways to integrate financial literacy training with traditional social work skills.
c) Relation to Capstone Project # 1, Financial Literacy Course:
I am realizing that financial literacy education is an extremely interdisciplinary topic. Here we have an article from the Journal of Social Work Education that is more useful than most articles from journals relating to teaching or personal finance directly. Karger dissects “fringe” economic businesses comprehensively, explaining how they work, who uses them, and why they do so. I really like that Karger avoids blaming the victims—economists or even financial planners may fall prey to this while social workers may have a more nuanced picture of the factors that lead poor individuals to patronize pawn shops, payday lenders, and rent-to-own (RTO) stores. The financial consequences are cyclical and devastating. However, these services are also important financial tools that allow poor people to kick the can down the road, at immense cost, nonetheless. How do we stop this? Social workers should intervene, offering financial education before their clients get over their heads in debt, of course! Perhaps I can design a course with value to social workers?
d) Key Insights:
“Going from payday lender to payday lender and making the rounds of pawnshops may seem normal for people whose income is insufficient to meet their daily needs” (p. 435) is all too true. I have dated women with very poor financial literacy; one girlfriend asked me to take her to a video rental store so she could sell a portion of her DVD collection for spending money, which I did. The store was over 10 miles away, and she got $5.00 for selling 10 DVDs, which she used to buy cigarettes. Not knowing how far the store was away before we left because she would not give me an exact address, I explained after the fact that the travel costs to me exceeded $5.00, and it would have made more sense for me to just give her $5.00. She countered that she “didn’t need my money.” By the time we broke up, I still had not improved her financial literacy nor habits; in fact, there was a bit of rebellion against my advice. Karger provides useful tips for social workers to avoid this, including relevant citations. Intervening early and offering sound financial advice tailored to the client was the main takeaway, for me. I think this works better if the individual you are helping looks at you as an authority, rather than a haughty meddler.
e) Further Reading:
Karger, H. J. (2005). Shortchanged: Life and debt in the fringe economy. San Francisco, CA: Berrett-Koehler.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 4]
Way, W. L., & Holden, K. C. (2009). 2009 outstanding AFCPE conference paper: Teachers’ background and capacity to teach personal finance: Results of a national study. Journal of Financial Counseling and Planning, 20(2), 64–78.
b) Abstract:
An on-line survey of K–12 teachers was conducted to determine teachers’ background and capacity to teach personal finance. Results indicate that while teachers recognize the importance of teaching personal finance, few have had formal preparation for teaching this subject matter; also, the teaching of personal finance is highly concentrated by grade level and discipline. Teachers feel limited in preparedness in both subject matter and pedagogy, particularly in the more technical topic areas of risk management and insurance and saving and investing. Perceived preparation and prior personal finance background varies greatly among disciplines. Teachers also have concerns about their own personal financial well-being, especially future retirement income adequacy.
c) Relation to Capstone Project # 2, Companion Paper:
Way and Holden find that less than a third of teachers are teaching financial topics, and that many of them feel unqualified to teach, most frequently with difficult topics like saving, investing, risk management, and insurance (p. 70). Teachers do not feel prepared in both “subject matter and pedagogy” (p. 76)—in fact, due to their relatively low incomes, they even have strong concerns about their financial knowledge and retirement planning (p. 74). My course, Introduction to American Personal Financial Literacy, will be aimed at adults. I am presently conceptualizing it as self-paced and self-contained, without requiring manual grading by me nor an ongoing commitment to students; auto-graded and self-graded assessments may aid in this. I can use the suggestions in this article to better design my course, and to increase its value for teachers, in multiple ways.
d) Key Insights:
• While the authors’ questionnaires were administered over 10 years after the Jump$tart Coalition standards came out, out of 504 teachers surveyed, only 12% were familiar with the standards (p. 76). This is a big problem. If we could get superintendents on board, we might be able to increase awareness of the Jump$tart standards among principals and teachers.
• Ironically, teachers felt most efficacious about teaching regarding “income and careers,” and yet their own careers lack income, which is shown in their many income-related concerns (pp. 73–74). I have heard from friends that in Japan, teachers are paid much better and are revered; I wonder if their approach would be better for America?
• Sadly, teachers strongly believed financial literacy education is fit for high school rather than elementary or middle school (p. 69). Bosshardt and Walstad (2014) propose “national standards” for financial literacy with empirical support that education should begin as early as fourth grade. Hopefully, these beliefs among teachers will change. We know that waiting until high school to teach foreign languages is a horrible idea, and yet the practice persists. Can we change the tide with financial literacy education? Ideally, it would be introduced in elementary school, in developmentally appropriate ways.
e) Further Reading:
Draut, T., & Silva, J. (2004). Generation broke: The growth of debt among young Americans. Retrieved November 29, 2006, from http://www.demosusa.org/pubs/Generation_Broke.pdf
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 5]
Bailey, S., Hendricks, S., & Applewhite, S. (2015). Student perspectives of assessment strategies in online courses. Journal of Interactive Online Learning, 13(3), 112–125.
b) Abstract:
Engaging professional adults in an online environment is a common challenge for online instructors. Often the temptation or commonly used approach is to mirror face-to-face strategies and practices. One premise of this study is that all strategies used in an online environment are assessment strategies, and as such should be considered for their value in measuring student experiences. This research study investigated student responses within a principal preparation course to the use of twelve assessment strategies that included: work samples, “Twitter” summaries, audio recordings, traditional papers, screencast/videos using “YouTube”, group projects, open discussion, paired discussion, response to video, field experiences, quizzes, and interviews. The redesigned course used in this research allowed the researchers to experiment with both traditional and innovative strategies within an online environment to determine how students perceive the value of each assessment strategy. Student experiences were measured in terms of level of enjoyment, level of engagement, and the extent to which students believed the assessments would result in the creation of knowledge that could be transferred to future professional practice. The results indicate that students prefer assignments that are less traditional and which fully incorporate the technological tools available.
c) Relation to Capstone Project # 2, Companion Paper:
The authors designed an online course using various assessment strategies, and then surveyed students to see which methods they thought were most enjoyable, engaging, and transferrable. The findings here can help me pick assessment methods. Overall, the students hated traditional quizzes and loved videos, field experiences, and Twitter summaries. Other methods, such as discussions and group projects, were disliked due to lack of peer involvement or objectivity; remarkably, students preferred working alone. Personally, I love quizzes and hate making videos—it may be hard to adjust, but I do love the idea of Twitter summaries. Further, I can include educational videos made by others, such as government agencies, in my course content, much as professors do in their lectures.
d) Key Insights:
• The questionnaires included not just Likert ratings, but also free text responses. The authors included many interesting quotes that bring student engagement to life, such as: “That was a new experience for me and took a TON of time, but I learned so MUCH” (p. 122), with respect to the audio/video production assignment. One idea for my course is that I should have a similar questionnaire at its conclusion. There are actually several potential publications I could produce with respect to the course, if I choose to and execute it well.
• The authors cite Johnson and Aragon’s (2003) criteria: “Addressing individual differences, creating real life contexts, providing hands-on activites, and encouraging reflection” (Bailey, Hendricks, & Appliewhite, 2015, p. 121). How can I do these things? I have several ideas. Some modules can be “remedial”; an introductory quiz can determine or suggest placement, much like college entrance exams due with respect to remedial math and language courses. Hands-on activities and real-life contexts might involve realistic cases, mathematical exercises, etc. Typed exercises can be self-graded by presenting a rubric after students complete them. I am planning to target students who are voluntarily taking this course out of interest, so I believe that preventing cheating can be a low priority. However, I will need to find journal articles offering empirical support to confirm this.
e) Further Reading:
Redmond, P. (2011). From face-to-face to online teaching: Pedagogical transitions. In G. Williams, P. Slatham, N. Brown & B. Cleland (Eds.), Changing Demands, Changing Directions. Proceedings ascilite Hobart 2011. (pp. 1050-1060). Retrieved from http://www.ascilite.org.au/conferences/hobart11/downloads/papers/Redmond-full.pdf
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 6]
Jordan, K. (2015). Massive open online course completion rates revisited: Assessment, length and attrition. International Review of Research in Open and Distributed Learning, 16(3), 341–358.
b) Abstract:
This analysis is based upon enrolment and completion data collected for a total of 221 Massive Open Online Courses (MOOCs). It extends previously reported work (Jordan, 2014) with an expanded dataset; the original work is extended to include a multiple regression analysis of factors that affect completion rates and analysis of attrition rates during courses. Completion rates (defined as the percentage of enrolled students who completed the course) vary from 0.7% to 52.1%, with a median value of 12.6%. Since their inception, enrolments on MOOCs have fallen while completion rates have increased. Completion rates vary significantly according to course length (longer courses having lower completion rates), start date (more recent courses having higher percentage completion) and assessment type (courses using auto grading only having higher completion rates). For a sub-sample of courses where rates of active use and assessment submission across the course are available, the first and second weeks appear to be critical in achieving student engagement, after which the proportion of active students and those submitting assessments levels out, with less than 3% difference between them.
c) Relation to Capstone Project # 2, Companion Paper:
Jordan suggests that courses should be shorter, use a modular approach, and minimize manual or peer grading to encourage higher completion rates. I can implement the author’s suggestions in my course to reduce attrition. Jordan analyzed 221 online courses, of which 120 were from Coursera. Notably, a lot of data was missing regarding many courses, which is unfortunate for courses heralded as “open.”
d) Key Insights:
• “The initial weeks of courses are key for students [sic] engagement” (p. 353)—this has been found repeatedly. More than half of my students will probably never get to the later modules if they have to go through the earlier modules as pre-requisites, due to attrition.
• Jordan found that most students who drop out early never compete activities, but by week 3, the vast majority of active students are not just “lurking,” but are completing the course activities as well (pp. 351–352).
• Jordan (p. 354) cites Kulkarni et al. (2013), who found that grades in peer-graded MOOCs discriminate against minority students, due to implicit biases of student graders. This is an important concern. Course material should also account for different cultural backgrounds, even if peer grading is not used.
e) Further Reading:
Kulkarni, C., Koh, P. W., Le, H., Chia, D., Papadopoulos, K., Cheng, J., … Klemmer, S. R. (2013). Peer and self-assessment in massive online classes. ACM Transactions on Computer-Human Interactions, 9(4), 1–31.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 7]
Carlin, B. I., & Robinson, D. T. (2012). What does financial literacy training teach us? Journal of Economic Education, 43, 235–247. http://dx.doi.org/10.1080/00220485.2012.686385
b) Abstract:
The authors use data from a finance-related theme park to explore how financial education changes investment, financing, and consumer behavior. Students were assigned fictitious life situations and asked to create household budgets. Some students received a 19-hour financial literacy curriculum before going to the park, and some did not. After controlling for demographic variables, the authors show that the treatment effects of the financial literacy program are strong. Students were more frugal, delayed gratification, paid off debt faster, and relied less on credit financing after training. Students who attended training showed greater uptake of decision support that was offered in the park, which indicates that decision support and financial literacy training are complements, not substitutes.
c) Relation to Capstone Project # 1, Financial Literacy Course:
This paper analyzes the decisions that students aged 13–19 made at the Junior Achievement Finance Park of Southern California, based on whether they received in-class instruction before going to the park. Students who received instruction performed better. The layout of the finance park has 17 kiosks that tackle various issues, such as health insurance, home improvement, and transportation. Students are given fictitious identities and incomes, which they must roleplay as. This paper gives me ideas for activities in my financial literacy course, and also shows that instruction can have significant, immediate effects, albeit the authors did not analyze how these effects diminish over time.
d) Key Insights:
The part about JA Finance Park participants calculating their “NMI” or “net monthly income” (p. 237) is something I want to incorporate into an early module of my course, under the “Spending and Saving” unit of my course. I like how they have students deduct income tax and payroll deductions. Many people just look at their gross pay without thinking about taxes. As for budgeting, there are obviously several approaches, including amortizing less-than-monthly obligations, such as property taxes, into your monthly budget. I will probably want to present learners with multiple options, including a budget-free option focusing on wise choices.
The authors reach a conclusion that is a common thread in financial literacy research, and is empirically supported: “just-in-time” financial education is important, and often superior to what we may call “just-in-case education” (but the authors did not use this term). However, they see these as being complementary, unlike Fernandes, Lynch, and Netemeyer (2014; see project # 2, citation # 8), who empirically discredit just-in-case education. However, it is actually possible to incorporate “just-in-time” education into my course, by allowing learners to access the modules in any order. Learners could join the Udemy course just for one particular module that they want to learn right now, without having to advance through the whole course.
e) Further Reading:
Bernheim, B. D., & Garrett, D. M. (2003). The effects of financial education in the workplace: Evidence from a survey of households. Journal of Public Economics, 87, 1487–1519.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 8]
Roszkowski, M. J., Glatzer, M., & Lombardo, R. (2015). An analysis of the nature of the relationship between SAT scores and financial literacy. Journal of Business & Finance Librarianship, 20, 66–94. http://dx.doi.org/10.1080/08963568.2015.978715
b) Abstract:
The 2008 Jump$tart study, assessing the financial literacy of American high school seniors and college students, reported an association between self-reported SAT scores and financial literacy scores. In the present study, an even stronger relationship was found between actual SAT scores and financial literacy scores from an abbreviated version of the Jump$tart test. Given that SAT scores are known to be correlated to parental income, also investigated was whether the relationship exists because the SAT serves as a proxy for parental income. By means of multiple regressions, it was determined that this relationship cannot be entirely explained by parental income.
c) Relation to Capstone Project # 1, Financial Literacy Course:
The authors show that actual SAT scores are highly correlated with financial literacy, as measured by an abbreviated Jump$tart questionnaire that had a Cronbach alpha of .79. There are definite methodological issues here—I do not understand why they shortened the Jump$tart questionnaire from 31 to 20 items, and the authors used a volunteer sample without discussing this limitation at length. However, their results actually confirm prior results regarding financial literacy and parental income (Mandell, 2009 as cited by Roszkowski et al., 2015). Specifically, high school and college students who have high-income parents are not more likely to be financially literate! For my course, this article can be cited as evidence that financial literacy is not something that just “happens” if you come from a high-income family; it must be consciously pursued.
d) Key Insights:
The authors cite only Lucey (2005) as evidence for the Jump$tart questionnaire’s reliability, which is a reference I included in a previous annotated bibliography, and was the only good article I could find. The authors say: “The psychometric properties of the Jump$tart instrument have been studied to a very limited extent” (p. 88). This is a relief for me, since I had talked at length with Bobby Hoffman, Ph.D., about my inability to find well-supported financial literacy instruments—he said he would be surprised if there were none. However, these authors could not find anything better than Jump$tart either, and this article is very recent (from 2015), so it definitely seems that there is no better instrument at this time. Therefore, it might not be my search strategies that are lacking.
Suggesting “ecologically valid” approaches that rely on behavioral observation (p. 85) is an interesting proposition. Written or multiple-choice tests are easier to administer, but looking at whether learners invest well, avoid payday loans and other schemes, and have control of their finances might be more useful, even if assessed via self-report.
e) Further Reading:
Mandell, L. (2009, January 4). The impact of financial education in high school and college on financial literacy and subsequent financial decision making. Paper presented at the American Economic Association Meeting, San Francisco, CA. Retrieved from www.datamasher.org/mash-ups/financial-literacy#table-tab
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 9]
Scott, R. H., III (2010). Credit card ownership among American high school seniors: 1997–2008. Journal of Family and Economic Issues, 31, 151–160. http://dx.doi.org/10.1007/s10834-010-9182-7
b) Abstract:
The purpose of this study is to investigate the rise in credit card ownership rates among high school seniors in the United States. It uses the Jump$tart Coalition’s cross-sectional surveys from 1997 to 2008 to analyze the determinants of credit card ownership among high school seniors. These results show that students with credit cards are less financially literate than students without credit cards and students with credit cards in their own names are almost twice as likely to work during the school year for money. These findings help make a case for improved financial education and training, and institutional changes that limit the pervasive issuance of credit cards to high school students.
c) Relation to Capstone Project # 1, Financial Literacy Course:
Scott presents a convincing analysis of how the Credit CARD Act of 2009 failed to protect high schoolers from credit card issuers. Lobbyists or other forces resulted in drafts of the bill being watered down; in the final version, individuals under 21 can receive unsecured credit cards merely by signing a form saying they can repay potential debts, without income verification or a cosigner! Scott presents an analysis of Jump$tart survey data indicating that participants who reported having credit card(s) are actually less financially literate. High schoolers with credit cards are nearly twice as likely to work during the school year, which hurts their grades. One possible explanation is that they need to work to pay their credit card bills. For my course, two implications are: 1) Parents and educators should try to educate children to avoid the credit card trap, which might involve financial literacy education and numeracy education, and 2) We should be working toward reining the credit card industry in. These implications will be covered in the following units of my course: “Credit and Debt” and “Paying it Forward.”
d) Key Insights:
“The fastest growing sector of bankruptcy filers is young adults below age 25” (Sullivan et al., 2000 as cited by Scott, 2010, p. 158). This is quite alarming! However, I should check out the cited article, since “fastest growing” may be of little practical significance if the sector was small to start with. Nevertheless, new issues have emerged since 2000, such as the CARD act of 2009 and the Bankruptcy Act of 2005, which benefit the credit industry at the expense of ill-informed consumers.
I love that there is a strong social justice element to this article—Scott says we should require cosigners for credit cards issued to minors and restrict credit offered to individuals under 21. While he does not make this allusion, we already forbid adults and children under 21 from drinking alcohol; ruined credit and mounting debts due to usury interest rates and fees seem justification enough to set higher age limits on credit cards. I was a bit disappointed that Scott did not criticize the U.S. Supreme Court for their ruling in the Marquette National Bank of Minneapolis v. First of Omaha Service Corp. case of 1978; this ruling allowed credit card issuers to move their headquarters to obscure states like South Dakota, that allow usury interest rates, while offering their cards in other states without consideration of local laws. For example, if a credit card issuer located its headquarters in Florida, the maximum interest rate they could collect is 18%, which is actually quite high compared to many states, but is still lower than the 22% rates that are commonly seen, and far lower than the prevailing penalty rate of 29.99%.
Sources for preceding paragraph:
http://www.creditcards.com/credit-card-news/marquette-interest-rate-usury-laws-credit-cards-1282.php
http://www.usurylaw.com/state/florida.php
http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0687/0687.html
e) Further Reading:
Sullivan, T. A., Warren, E., & Westbrook, J. L. (2000). The fragile middle class: Americans in debt. New Haven, CT: Yale University Press.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 7]
Collins, J. M., & Holden, K. C. (2014). Measuring the impacts of financial literacy: Challenges for community-based financial education. New Directions for Adult and Continuing Education, 2014(141), 79–88. http://dx.doi.org/10.1002/ace.20087
b) Abstract:
This chapter addresses financial education across the lifespan, which has the potential to enhance adult financial capability, yet methodological barriers and a lack of robust measures have hampered the ability to identify and measure the effects of educational programs on financial decisions and behavior.
c) Relation to Capstone Project # 2, Companion Paper:
This chapter is another indictment of the lack of rigor regarding financial literacy interventions. While billions are spent on such programs, hardly any of them target their audience or identify outcomes. When scientific studies are conducted, they typically lack control groups and are often based on convenience samples. The whole field is a trainwreck. My course will not address the issues of outcome measurement and I will not have the time to comprehensively tailor it to multiple demographics, but I do want to use theory-driven approaches, which Collins and Holden advocate, lamenting that few programs do so.
d) Key Insights:
I recently read a blog post by Ramit Sethi—he is trying to sell his books and courses and presents little empirical evidence, and yet presents an interesting argument: people want to be “rich,” not “financially literate.” Of course, Sethi argues that everyone else is “wrong”—others present pedantic, topic-oriented material, while Sethi “knows” that people actually want problem–solution oriented manuals that tell them how to negotiate lower credit card interest rates or get started investing. The title of this blog post is “Why personal finance ‘experts’ continue giving worthless advice.” http://www.iwillteachyoutoberich.com/blog/why-personal-finance-experts-continue-writing-worthless-advice/
The relation of the above blog post to this article and my course in general is that it has inclined me to be action- and problem–solution oriented. While I will have to seek new evidence to support this, the existing evidence can also be interpreted in support of such an approach. For example, self-determination theory can be used as a lens to propose that problem–solution oriented course modules, such as negotiating a higher salary or bank fee waiver, can entice learners through extrinsic motivation, which might be transformed into intrinsic motivation over time. Given the dismal results of current financial literacy interventions (cf. Fernandes, Lynch, & Netemeyer, 2014), this approach might be worthwhile, even if supporting evidence is somewhat wanting.
As for community-based financial education, the opportunities for comradery that they present are interesting; Collins and Holden (2014) did not explore this, sadly. Instructors who have a personal tie to the community they are educating can offer insights about local laws and businesses that are much better targeted than regional or national initiatives. Working with peers can be inspiring, too. Because public libraries offer many self-enrichment courses, they are an excellent avenue for community-based financial education. When I worked at the Holly Hill, FL public library in 2006–2008, I taught a computer literacy class to senior citizens; we met for two-hour sessions on three consecutive weeks. The process was rewarding; the learners came away knowing how to do basic web searches and how to use web email, after having to learn things as basic as using the keyboard and mouse in the first session. I could see similar “workshops” being created for financial literacy. In fact, Borden et al. (2008) as cited by Scott (2010) found that focused financial literacy workshops are more effective than general education.
e) Further Reading:
Barron, J., & Staten, M. (2009, May). Is technology-enhanced credit counseling as effective as in-person delivery? Paper presented at the Networks Financial Institute at Indiana State University Conference: Improving Financial Literacy and Reshaping Financial Behavior, Indianapolis, IN.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 8]
Fernandes, D., Lynch, J. G., Jr., & Netemeyer, R. G. (2014). Financial literacy, financial education, and downstream financial behaviors. Management Science, 60, 1861–1883. http://dx.doi.org/10.1287/mnsc.2013.1849
b) Abstract:
Policy makers have embraced financial education as a necessary antidote to the increasing complexity of consumers’ financial decisions over the last generation. We conduct a meta-analysis of the relationship of financial literacy and of financial education to financial behaviors in 168 papers covering 201 prior studies. We find that interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied, with weaker effects in low-income samples. Like other education, financial education decays over time; even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention. Correlational studies that measure financial literacy find stronger associations with financial behaviors. We conduct three empirical studies, and we find that the partial effects of financial literacy diminish dramatically when one controls for psychological traits that have been omitted in prior research or when one uses an instrument for financial literacy to control for omitted variables. Financial education as studied to date has serious limitations that have been masked by the apparently larger effects in correlational studies. We envisage a reduced role for financial education that is not elaborated or acted upon soon afterward. We suggest a real but narrower role for “just-in-time” financial education tied to specific behaviors it intends to help. We conclude with a discussion of the characteristics of behaviors that might affect the policy maker’s mix of financial education, choice architecture, and regulation as tools to help consumer financial behavior.
c) Relation to Capstone Project # 2, Companion Paper:
This meta-analysis finds that studies that manipulate financial literacy produce results of little practical significance. Even studies that simply measure financial literacy, such as by pre- and post-intervention questionnaires, produce results of miniscule practical significance. Overall, the authors condemn the lack of detail and rigor provided by researchers in this field. Only correlational studies present results of practical significance, and yet these studies are muddied by volunteer samples, omitted variables, and biased reporting and assessment methods. When we add in the factor of knowledge decay, which is shockingly not discussed in many studies, we see that the effects of interventions disappear after 20 months, and that large interventions decay faster. Therefore, the authors suggest “just in time” financial education as an efficacious solution. I intend to accomplish this in my course by allowing learners to access modules in any order, and to include problem-oriented exercises that can help them with issues they are currently facing.
d) Key Insights:
Overall, financial intervention studies with better designs find weaker results. This implies that poorly-designed studies are finding stronger results incorrectly. The trend of high schoolers becoming less financially literate in the Jump$tart surveys, during a time period when financial literacy has become a hot-button issue with increasing resource deployment, might serve as a sign that present methods are not working, though there are admittedly far too many extraneous variables to infer a causal relationship.
The horrible results from financial literacy education are unfortunately substantiated. I had read other articles indicating that taking a financial literacy course typically does little to nothing for improving quiz performance or behaviors; the authors performed an exhaustive meta-analysis of 168 papers from 1987 to 2013 and came to equally dismal conclusions. Nevertheless, we should take heart—this means “raising the bar” might be quite easy.
On page 1873, the authors present the idea from Hader, Sood, and Fox (2013) of teaching “soft skills” such as planning, confidence, proactivity, and investment willingness, rather than content knowledge. This makes sense, given that the authors’ meta-analysis revealed that technical knowledge has no practical impact on financial behavior. Teaching “soft skills” might be likened to the practice of analyzing “fundamentals” in financial markets, whereas teaching content knowledge might be compared to technical analysis in financial markets.
Are the poor controlled by circumstances? The authors present this as a potential explanation for why financial literacy interventions are even less effective for the poor than for the middle-class. Perhaps education should focus on motivating the poor to increase “financial slack” and “fungibility of money across periods to deal with financial shocks” as the authors suggest (p. 1874)? We must be cautious not to digress into victim-blaming, of course.
e) Further Reading:
Hadar, L., Sood, S., & Fox, C. R. (2013). Subjective knowledge in consumer financial decisions. Journal of Marketing Research, 50, 303–316. http://dx.doi.org/10.1509/jmr.10.0518
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 9]
Gross, K., Ingham, J., & Matasar, R. (2005). Strong palliative, but not a panacea: Results of an experiment teaching students about financial literacy. Journal of Student Financial Aid, 35(2), 7–26.
b) Abstract:
Although rising student debt levels are frequently studied, very little attention has been paid to the lack of student financial literacy and its negative effects. The absence of financial management skills and accompanying low credit scores can increase debt, cause inadvertent defaults, and be harmful for both students and their institutions. For these reasons, one Northeastern law school designed, instituted, and studied a pilot financial literacy education course for its law students. This paper presents a detailed description of this course, which was offered on a one-credit, pass/fail basis over a two-day (14-hour) period. The study involved focus groups and a pre- and post-test questionnaire that was conducted to test its efficacy. The article also describes adaptations made to the course following the study and makes suggestions for course replication. As the study demonstrates, teaching financial literacy to students has measurable benefits, and the prospect of implementing a similar course in a variety of graduate and undergraduate settings merits serious attention. The article also describes avenues for important additional research, including on the longitudinal benefits of financial management education.
c) Relation to Capstone Project # 2, Companion Paper:
Gross and Matasar developed an intensive course, similar to the workshop formats that others have recommended. While it was mostly law based, being intended for law students, they also included “psychodynamic properties” (p. 12), though little elaboration is given. Overall, the course greatly improved results on a pre- and post-test of financial knowledge. Distressingly, the post-test was identical to the pre-test and was given immediately after the course; knowledge decay was not considered. However, a “focus group” of five students was revisited two weeks after the course, and “most” students reported they had taken action steps to improve their financial lives (pp. 18–19). Why this focus group was so small, and why the authors did not indicate the exact number of students that reported as such, remains a mystery to me. However, the authors’ work can be cited in my companion paper as an example of a successful course that is still being conducted, developed, and expanded to new campuses, 12 years after its development. Moreover, many of the subjects covered, such as consumer scams and debt collection strategies, are prime candidates for “just-in-time” teaching, and yet are rarely prioritized in financial literacy curricula.
d) Key Insights:
The authors say that compressing the course into two days “created a sense of a shared, collaborative academic endeavor” (p. 10). However, they did not talk about the tradeoff regarding massed versus distributed practice—cramming all this learning into two, seven-hour sessions is surely an example of massed practice, which is typically inferior to distributed practice.
I love that the greatest pre- to post-test gains occurred in the “Scams/Consumer Protection” category (p. 17). This lends support to the value of covering these topics at length in my course.
The authors talk about student loans a lot, in their paper and their course. They were ahead of their time; in 2016, American student loan debts are much higher than in 2005, as shown by a graph from the Federal Reserve Bank of New York, which can be seen at this URL: http://libertystreeteconomics.newyorkfed.org/2015/02/the_student_loan-landscape.html
e) Further Reading:
Block-Lieb, S., Gross, K., & Wiener, R. L. (2001). Lessons from the trenches: Debtor education in theory and practice. Fordham Journal of Corporate & Financial Law, 7, 503–523.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 10]
Rick, S. I., Small, D. A., & Finkel, E. J. (2011). Fatal (fiscal) Attraction: Spendthrifts and tightwads in marriage. Journal of Marketing Research, 48, 228–237. http://dx.doi.org/10.1509/jmkr.48.2.228
b) Abstract:
Although much research has found that “birds of a feather flock together,” the authors suggest that opposites tend to attract when it comes to certain spending tendencies; that is, tightwads, who generally spend less than they would ideally like to spend, and spendthrifts, who generally spend more than they would ideally like to spend, tend to marry each other, consistent with the notion that people are attracted to mates who possess characteristics dissimilar to those they deplore in themselves. Despite this complementary attraction, tightwad-spendthrift differences within a marriage predict conflict over finances, which in turn predicts diminished marital well-being. These relationships persist when controlling for important financial outcomes (household-level savings and credit card debt). These findings underscore the importance of studying the relationships among money, consumption, and happiness at an interpersonal level.
c) Relation to Capstone Project # 1, Financial Literacy Course:
Funny note: I thought before reading this article that a “spendthrift” is someone frugal, because I associated “thrift” with “thrift stores.” I also used to think a “prodigal son” was a child prodigy.
This article shows, through adroitly executed online questionnaires, that while “opposites attract” (complementarity) has been thoroughly debunked for many attributes in human partner selection, the authors have actually found that complementarity does happen with respect to frugal and reckless spenders, or “tightwads” and “spendthrifts,” as they call them (TW and ST for short). Naturally, this article will provide critical support for module 7.3 of my course, “Dealing with the financially reckless significant other,” particularly for tightwads who are trying to rein in their spendthrift partners.
d) Key Insights:
The authors conclude that TW–ST marriages are more common due to complementary attraction stemming from internal dislike for personal spending strategies. Such marriages have better financial wellbeing but more strife than ST–ST marriages; however, the financial ruination that may ensue from ST–ST marriages can outweigh the value of harmony! TW–TW marriages, however, can have greater relationship satisfaction and amazing financial outcomes. (Hopefully, the partners overcome their tightwad tendencies enough to enjoy their financial abundance on occasion.) Assuming change is not an option, a ST should probably marry a TW, and a TW can marry either a ST or TW, depending on whether he or she wants to diminish or accentuate the TW “trait,” if we may call it that. Of course, wanting to diminish the trait is allegedly more common—this unusual predilection for complementarity is the thesis of the authors’ article. I was really hoping to see a figure reminiscent of a Punnett square, but my hopes were dashed.
This article provides explanatory power for why the fiscally responsible are so often married to profligate spenders, and is an enticing “seductive” (but also relevant) detail to add to my course.
e) Further Reading:
Frederick, S., Novemsky, N., Wang, J., Dhar, R., & Nowlis, S. (2009). Opportunity cost neglect. Journal of Consumer Research, 36. 553–561. http://dx.doi.org/10.1086/599764
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 11]
Garbinsky, E. N., Kleese, A., & Aaker, J. (2014). Money in the bank: Feeling powerful increases saving. Journal of Consumer Research, 41, 610–623. http://dx.doi.org/10.1086/676965
b) Abstract:
Across five studies, this research reveals that feeling powerful increases saving. This effect is driven by the desire to maintain one’s current state. When the purpose of saving is no longer to accumulate money but to spend it on a status-related product, the basic effect is reversed, and those who feel powerless save more. Further, if money can no longer aid in maintaining one’s current state because power is already secure or because power is maintained by accumulating an alternative resource (i.e., knowledge), the effect of feeling powerful on saving disappears. These findings are discussed in light of their implications for research on power and financial decision making.
c) Relation to Capstone Project # 1, Financial Literacy Course:
This article will provide supporting evidence for module 2.5: “Goal-oriented saving,” module 3.1: “The psychological toll of debt,” and module 8.1: “Charity and philanthropy.” The authors show that goal-oriented saving is enticing to individuals who feel powerless if the goal is a high-status item–a BMW luxury car, in their example. However, individuals who feel powerful do not even care about raising their outward status with profligate spending. We might infer that if saving for a purchase, they would want something that perpetuates their power—perhaps a college education or a reliable but inexpensive car. The authors assert that individuals who feel powerful are more enticed by saving for no particular purpose; they further assert that money itself confers power, quoting Andrew Jackson in their opening. However, in study 5, the authors successfully demonstrated that when knowledge is seen as more empowering than money, participants’ focus shifted accordingly.
d) Key Insights:
• For module 3.1 of my course, I can cite this article as evidence for how feeling disempowered can become a vicious cycle. Specifically, disempowered-feeling individuals tend to want high-status items, but purchasing these items is bad for financial health. Since this article demonstrates that simple psychological tricks such as imagining yourself as a boss or sitting in a tall chair can make you feel empowered and save more, I may encourage learners in my course to feel empowered and make saving, spending, and budgeting decisions when they are in that psychological frame.
• For module 8.1 of my course, the following may be helpful: “When one’s sense of power is already secure and saving money no longer enables individuals to keep their current state, the effect of power on saving disappears” (p. 618). One possible conclusion is that once an individual has enough money saved to feel powerful, becoming charitable and philanthropic makes sense. The recent work of Bill Gates is a salient example. Of course, if one has achieved higher income, there are also significant tax benefits from becoming charitable! Instead of giving the money to Uncle Sam to fund Social Security and endless wars, high earners can choose the causes their would-be tax money will fund.
• The authors write of “the issues that arise when examining windfalls as individuals perceive windfalls differently than personal income (Levav and McGraw 2009)” (p. 615). I want to address this! Money is money and, except with respect to taxes, has the same value regardless of source. I will educate learners about this phenomenon and hopefully empower them to consciously override it. It would be wonderful if my course can save a lottery winner from financial destitution.
e) Further Reading:
Levav, J., & McGraw, A. P. (2009). Emotional accounting: How feelings about money influence consumer choice. Journal of Marketing Research, 46. 66–80. http://dx.doi.org/10.1509/jmkr.46.1.66
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 12]
Doran, J. M., Kraha, A., Marks, L. R., Ameen, E. J., & El-Ghoroury, N. H. (2016). Graduate debt in psychology: A quantitative analysis. Training and Education in Professional Psychology, 10, 3–13. http://dx.doi.org/10.1037/tep0000112
b) Abstract:
Student loan debt has become an issue of national concern in the context of rapidly increasing higher education costs. Graduate education can be prohibitively expensive, particularly at the doctoral level. The present study provides an updated and comprehensive analysis of the financial circumstances and debt loads related to pursuing a graduate degree in psychology. The study surveyed a random sample of graduate students and early career psychologists (ECPs) listed in the American Psychological Association membership database. Participants were asked about their debt loads for educational costs, sources of financial support, living circumstances, financial stress, and the impact of student loan debt on their personal and professional lives. The results indicate that current debt loads are substantially higher than what has been previously reported (Michalski, Kohout, Wicherski, & Hart, 2011), with some variation by subfield and type of degree. A number of participants endorsed significant financial stress, as well as having to delay major life milestones because of their debt. While education costs and loan debt have continued to increase, starting salaries appear relatively stagnant, suggesting the need for a thoughtful cost/benefit analysis of graduate education in psychology. The psychology community is urged to increase awareness of and advocate for these issues, with several specific advocacy steps recommended.
c) Relation to Capstone Project # 1, Financial Literacy Course:
This article will provide primary supporting evidence for module 3.1: “The psychological toll of debt,” module 3.4: “Student loans and alternatives,” and module 7.2: “When college is not worth it,” as well as ancillary support for several other modules. The authors found that about one-third of early-career psychologists (ECPs) self-reported that they would not have studied psychology if given the choice again, because of their massive student loan debts and lower-than-expected earnings! Psy.D. students in the authors’ sample of current students anticipated a mean of $173,239 in debt at the conclusion of their educations, but ECPs with Psy.D.s report near-identical first-year earnings to Ph.D. psychology graduates, who only anticipated $105,461 of debt. This calls into question the ROI (return on investment) for pursuing a Psy.D. Further, pursuing many costly degrees, such as degrees offered at professional or other private schools, and any graduate program without funding, obviously has a less desirable cost–value ratio than the elusive, fully-funded Ph.D. Therefore, we might reasonably conclude that the Psy.D. is worthwhile if pursued specifically because the learner wants to be a practitioner. However, learners who would enjoy research but merely cannot gain admission to their desired Ph.D. programs may be making a poor choice by pursuing a Psy.D. Analogous implications abound for undergraduates.
d) Key Insights:
• A key point: “Typically, at no point during the admissions process is information provided about the full cost of attending …, limits on and consequences of borrowing, expected repayment terms or average monthly payment based on the amount of loans taken, or important information about issues in the field” (p. 11). While, of course, higher education has an agenda and a product to sell, most students are not as wary of college “salespeople” as they would be of car salespeople. Perhaps this should change?
• On page 10, the authors deduce, based on salary reports from ECPs and considering the mean debt of over $140,000 among current students in their sample, that over one-third of these students’ net income will go toward student loan repayments after graduation. Federal policies say a “financial hardship” is when debt repayments exceed 10% of discretionary income. The debt American graduate students are asked to bear is astounding.
e) Further Reading:
Mueller, T. (2014). Changes to the student loan experience: Psychological predictors and outcomes. Journal of Student Financial Aid, 43(3), 148–164.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 10]
Ross, L. M., & Squires, G. D. (2011). The personal costs of subprime lending and the foreclosure crisis: A matter of trust, insecurity, and institutional deception. Social Science Quarterly, 92, 140–163. http://dx.doi.org/10.1111/j.1540-6237.2011.00761.x
b) Abstract:
Research on widespread loan failures suggests that many of the mortgage loans that were made since 2000 were of a deceptive or predatory nature. This study explores the experiences and sentiments of those who are at risk of foreclosure within a broader framework of trust, individualization, and ontological security. Interviews examine families’ lending experience and how they have coped with their personal troubles that resulted from their housing crisis. As many of these loans were of a deceptive or predatory nature, individuals are likely to reflect on the psychological consequences of their predicament. Although these findings suggest that these individuals have lost trust in the housing market, many have internalized their situation as a personal failure. In addition, feelings of anxiety, stress, insecurity, and uncertainty have come to characterize their experiences. This research calls for policy recommendations that seek to restore confidence and to ensure greater consumer protection in financial markets.
c) Relation to Capstone Project # 2, Companion Paper:
Like with student loans, victims of the subprime lending crisis feel hurt and misled. Commonly, they blame themselves for being gullible or underperforming. This is sad, because many were genuinely misled by mortgage brokers and other agents who encouraged homebuyers to agree to terms without reading or comprehending them. In fact, many agents outright lied to homebuyers. Some homebuyers were financially literature—they were older and had purchased homes before. However, they were unfamiliar with the chicanery of adjustable rate mortgages (ARMs), balloon payments, and other devices that had recently emerged in the new millennium, and unscrupulous agents were willing to let them believe they were signing on to a traditional, fixed-rate mortgage. This article will provide support for module 1.1: “The disastrous consequences of financial illiteracy,” module 3.1: “The psychological toll of debt,” module 3.5: “Mortgages,” module 5.3: “Pros and cons of home ownership,” and module 7.1: “Every decision has financial consequences.”
d) Key Insights:
• I want to apply Dweck’s mindset model to my course and encourage the growth mindset, particularly for numeracy skills. However, the mindset model could conceivably encourage self-blaming and victim-blaming, by encouraging personal responsibility (agency) even when structural constraints are at play. Ross and Squires tackle this issue in a qualitative study that includes many disheartening quotes from interviewees. Particularly in our views toward others, we must be cautious to avoid victim-blaming.
• The authors write: “The psychological aspects seem to be quite profound, with all individuals reporting that they have signs of or have been diagnosed and treated for clinical depression, anxiety, or high blood pressure” (p. 152). Naturally, this will be applicable to module 3.1. Unfortunately, it shows that home ownership may no longer be an imperative, given the risks. There is also an environmental aspect that should be addressed (the authors did not)—home ownership can waste many resources and produce more garbage and carbon emissions, particularly with so-called “McMansions.” The recent “tiny homes” movement addresses this and also provides a way to avoid crushing mortgage debt.
e) Further Reading:
Williams, R., Nesiba, R., & McConnell, E. D. (2005). The changing face of inequality in home mortgage lending. Social Problems, 43, 181–208. http://dx.doi.org/10.1525/sp.2005.52.2.181
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 11]
Grinstein-Weiss, M., Spader, J. S., Yeo, Y. H., Key, C. C., & Freeze, E. B. (2012). Loan performance among low-income households: Does prior parental teaching of money management matter? Social Work Research, 36, 257–270. http://dx.doi.org/10.1093/swr/svs016
b) Abstract:
Financial literacy and financial education play a central role in asset accumulation, shaping individuals’ attitudes, behaviors, and decisions in ways that, ultimately, affect their financial and social well-being. The acquisition of financial skills begins with parental teaching and role modeling, which provides children with their first exposure to concepts of saving and money management. Because such parental instruction is crucial to children’s later financial outcomes, children whose parents lack basic financial literacy may be further disadvantaged by the absence of financial instruction at home. This study uses a sample of low- and moderate- income homeowners to test the hypothesis that parental teaching of money management influences children’s asset-building outcomes in adulthood. The empirical analysis examines the likelihood of delinquency and default among low- and moderate-income homeowners with mortgages purchased through the Community Advantage Program. The results are consistent with a long-term impact of parental teaching on children’s later asset outcomes: greater parental teaching is found to be associated with reduced loan delinquency and foreclosure. Implications for intervention programs to close the financial literacy gap are discussed.
c) Relation to Capstone Project # 2, Companion Paper:
The authors combined data from the Community Advantage Program, including information on delinquencies and foreclosures, with questionnaires sent to CAP participants. They discovered that respondents who answered the trinary multiple-choice question: “How much did your parents teach you about managing money” as “they taught you a lot about managing money” (p. 263) were significantly less likely to have 30-day delinquent payments, 90-day delinquent payments, or foreclosure, even when controlling for other variables. Furthermore, respondents who answered they were taught “some” were significantly less likely to have foreclosures (but not 30- or 90-day delinquent payments) than those who answered “none/not much.” This will be relevant to module 7.4: “Having and raising children” and module 8.2: “Be an agent for financial literacy,” because it provides evidence that providing financial guidance to children is effective. Unfortunately, the authors did not inquire about whether their parents’ teaching was sound, but we can probably presume that giving your children sound financial advice is generally better than unsound advice.
d) Key Insights:
• It is interesting that responses were evenly distributed between receiving “a lot,” “some,” and “none/not much” parental financial advice, with 34.19%, 35.62%, and 30.19%, respectively (p. 265). While these results are based on self-report from adults with a mean age of 33.52 years (SD = 9.82), nonetheless there was likely a wide range of financial involvement among parents of respondents in this fairly-diverse sample of low- and middle-income homebuyers. Obviously, receiving “a lot” of financial guidance from parents would ideally be the norm.
• This surprised me: “Anecdotally, one of the early lessons of data collection was that many borrowers were not aware they held a CAP mortgage” (p. 260). The Self-Help Credit Union of Durham, North Carolina started the CAP program in 1994, which purchases mortgages from lenders who have offered favorable terms to borrowers, courtesy of Community Reinvestment Act funds, and requires the lenders pledge to recycle the funds to continue offering favorable terms to homebuyers. For borrowers to not notice that their mortgage has been acquired, despite having surely received notice by mail and other avenues, is shocking.
e) Further Reading:
Grinstein-Weiss, M., Spader, J., Yeo, Y., Freeze, E. B., & Taylor, A. (2009). Teach your children well: Credit outcomes and prior parental teaching of money management (Working Paper). Chapel Hill: Center for Community Capital, University of North Carolina.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 12]
Hanna, S. D., Yuh, Y., & Chatterjee, S. (2012). The increasing financial obligations burden of US households: Who is affected? International Journal of Consumer Studies, 36, 588–594. http://dx.doi.org/10.1111/j.1470-6431.2012.01125.x
b) Abstract:
The purpose of this paper is to examine factors associated with changes in the proportion of households with high financial obligations ratios in the United States. The proportion of households paying more than 40% of income for debt, rent, vehicle leases, property taxes and homeowners’ insurance, which we refer to as having a heavy burden, increased from 18% in 1992 to 27% in 2007. Multivariate analysis of a combination of six Survey of Consumer Finances data sets indicates that the likelihood of having a heavy burden was positively associated with homeownership, self-employment and retirement status. Those with an optimistic 5-year expectation of the economy were more likely to be in a household with a heavy burden. Education was positively related to having a heavy burden, suggesting that having a heavy burden is not simply a cognitive error.
c) Relation to Capstone Project # 2, Companion Paper:
While this article unfortunately only covers data up until 2007, we know that a certain category of debt has exploded since then (student loans; Doran, Kraha, Marks, Ameen, & El-Ghoroury, 2016), while other categories have declined. Due to student loans, the issue presented here—that an increasing proportion of Americans are having to dedicating too much income to debt repayment—remains relevant. College attendance, low income, and home ownership were related to heavy debt burden, which shows that many things that are part of the “American dream” might actually contribute to a debt nightmare. This article will be particularly relevant to the modules in Unit 7: “Financial Decision Making,” in my course.
d) Key Insights:
• The authors allege that college-educated individuals are unlikely to have assumed heavy debt burdens due to cognitive error, on the basis that they are well-educated. This seems like a circular argument. As we know from Doran et al. (2016), many psychologists report that they would not have gotten their doctoral degrees, knowing what they do now about student loans and their incomes. We could argue these early-career practitioners made a cognitive error. It does not seem safe to assume that highly educated individuals are immune from cognitive errors.
• The authors elucidate an important point: “Debt payment guidelines are not applicable to consumers who rent homes or lease vehicles, as those obligations are not considered debt, even though there are serious consequences for failure to make payments” (p. 589). Not counting renting and leasing in a metric of financial burden is disingenuous. It follows that the situation for many Americans is worse than generally known, and that some are making the best choices they can, given the predicaments they are currently in.
e) Further Reading:
Hanna, S. D., & Lindamood, S. (2008). The decrease in stock ownership by minority households. Financial Counseling and Planning, 19(2), 46–58.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 13]
Mueller, T. (2014). Changes to the student loan experience: Psychological predictors and outcomes. Journal of Student Financial Aid, 43, 148–164.
b) Abstract:
This study builds on the work of scholars who have explored psychological perceptions of the student loan experience. Survey analysis (N = 175) revealed a multidimensional model was developed through factor analysis and testing, which revealed four latent variables: “Duress,” “Mandatory,” “Financial,” and “Success.” Duress and Mandatory were found to be independent unique predictors of the student loan process. Though perceptions were not differentiated among groups, a predominant segment of respondents did not recall their loan interest rates or terms of repayment. Respondents acknowledged the availability of loans but did not correlate availability to the value of university degrees and future earning potential. A greater understanding of the psychology behind student loan procurement can assist student loan practitioners in creating better messaging and communication for this important consumer group.
c) Relation to Capstone Project # 1, Financial Literacy Course:
In my course, this article can be cited in module 3.4: “Student loans and alternatives” and module 7.2: “When college is not worth it.” Mueller’s survey results indicate that “duress” and “mandatory” are the factors strongly associated with student loans. To allay this, Mueller recommends both better education and marketing regarding the value of college degrees. My course can actually tackle both issues, by educating learners on the fundamental issues with student loans, and by presenting evidence that shows attending a 2-year for-profit college is a horrible idea, at least when it comes to student loan debt. Instead, attending public universities is often a better option.
d) Key Insights:
• On page 149, Mueller addresses the change in worldview that results from high student loan debt. The sociological implications are astounding. Levels of debt that students consider “unimaginable” are now the norm in American higher education (p. 149), which results in delayed life milestones, social degradation, despair, and increased competition for high-paying jobs, possibly out of a desire for higher income stemming from repayment obligations.
• It is very bad that 23% of respondents in Muller’s survey do not know the term (in years) of their repayment plans and 28% do not know their average student loan interest rate (p. 154). Knowledge of interest rates should obviously guide decisions about repayment velocity—in fact, both the average interest rate and the rates of individual student loans should be known by all indebted students.
• Mueller writes, “consider improving financial aid borrowing information material that will ease the entry and procurement of student loans” (p. 161). Easing the procurement of loans is a tricky thing—student loans are already much easier to procure than other types of debt, yet much harder to escape from (they are immune from bankruptcy). Better presentation of information can help, but a case can be made for making digestion of this information mandatory through expanded, compulsory education classes or modules prior to being granted a loan.
e) Further Reading:
Perna, L. W. (2008). Understanding high school students’ willingness to borrow to pay college prices. Research in Higher Education, 49, 589–606. http://dx.doi.org/10.1007/s11162-008-9095-6
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 14]
St. Pierre, E., & Shreffler, K. (2013). Credit card usage among older adults: Assessing financial literacy and pressures. Journal of Extension, 51(3), 1–10.
b) Abstract:
The research reported here assessed the financial literacy of older adults living in rural communities, current use of and attitudes towards debt, and debt pressures. Those surveyed exhibit low credit card usage and responsible payment practices. Most never use credit to pay medical expenses. Respondents display a financial literacy level similar to the Jump$tart Coalition’s 2008 college sample. While the financial situations and well-being for most are positive, those with financial pressures face some negative outcomes. Increasing financial literacy and teaching basic budgeting to a targeted segment of older adults have the potential to increase well-being and family relationships.
c) Relation to Capstone Project # 1, Financial Literacy Course:
This article relates to several modules in my course about credit cards, psychological issues, and general debt-related issues. St. Pierre and Shreffler surveyed seniors age 65 and older who live in rural Oklahoma counties. While potentially marred by self-report bias, they found these seniors have exemplary credit card habits—71% reported paying their balances in full each month, and only 5% acquired credit cards “because they were offered” (p. 6). On the other hand, high school seniors and young adults often sign up for credit cards due to direct mail advertisements, which can be a very bad decision. Applying for a credit card should be a decision made with careful thought, and with good reasons. Further, direct-mail advertisements often offer inferior terms to what an applicant would get if signing up online. This article shows an example population that uses credit cards responsibly, generally.
d) Key Insights:
• The authors also administered a financial literacy quiz. Only half of respondents correctly answered basic questions on investment growth, auto insurance, and life insurance (pp. 4–5). This is very bad, considering the life experience the sample has.
• Respondents who carry credit card debt often acquired it due to medical expenses. Dental and prescription expenses, which are often not covered by insurance, were most common. From a social justice perspective in the style of English (2014; see project # 1, citation # 15), this is a travesty and can help form a case for universal healthcare, and an indictment of the arguably predatorily capitalistic system in the United States. While younger people typically hold less medical debt, one accident or health problem can spell financial ruination for many Americans, even if they have Health Insurance Marketplace coverage. The most inexpensive plans on the marketplace have annual deductibles as high as $13,600! If you are ill in December–January, this means you can be on the hook for $27,200 in medical bills, even with insurance! These “bronze” plans are marketed for “catastrophic” medical expenses, but are only marginally less costly than silver plans. Module 6.4: “Navigating the Health Insurance Marketplace,” will address these issues in my course.
e) Further Reading:
Lusardi, A., Mitchell, O., & Curto, V. (2009). Financial literacy and financial sophistication in the older population: Evidence from the 2008 HRS. Working paper 2009-216, University of Michigan Retirement Research Center, Ann Arbor, MI.
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a) Citation [PROJECT # 1, FINANCIAL LITERACY COURSE, CITATION # 15]
English, L. M. (2014). Financial literacy: A critical adult education appraisal. New Directions for Adult and Continuing Education, 2014(141), 47–55. http://dx.doi.org/10.1002/ace.20084
b) Abstract:
This chapter critically examines financial literacy education, asking what its assumptions are and what adult educators need to ask of its curriculum, its bases, and the people being taught to be financially literate.
c) Relation to Capstone Project # 1, Financial Literacy Course:
English definitely has an agenda of criticizing the established banks and other financial mechanisms, particularly for offering financial education “altruistically.” Alluding to Karl Marx’s teachings, English alleges that in America, the purpose of such education is to place blame on the poor for inferior self-regulation and decision making, when in fact they are victims of an oligarchy that financially oppresses them. As a Canadian, English lambasts the United States government for failing to offer universal healthcare and for shifting responsibilities to the people that should be handled by the government, such as retirement planning, higher education expenses, and healthcare expenses.
For my course, the purpose of articles like English’s is to guide course design in a way that is culturally and socioeconomically competent. With English’s empirically-supported persuasive piece, among other references, I am empowered to shift blame that is frequently but incorrectly placed on the individual. Instead, blame should be placed on the social, corporate, and governmental structures that keep the poor poor. For learners in my course, this absolves them of some of the “shame” associated with poor financial standing, while still allowing meaningful change to take place.
d) Key Insights:
• English even criticizes professors for accepting or soliciting grant money from financial institutions to fund ill-guided financial literacy programs encouraging participants to “pull themselves up by their bootstraps” (p. 50). My course is different—I am receiving no such funding or support.
• English addresses the fact that fiscally prudent people are often bankrupted by health issues (pp. 51–52). This is an excellent quote: “The fact that costs for health care are enormous and that all the financial literacy programs in the world will not fix this are not the fault of the individual who is rendered penniless through family ill health” (p. 51). I may be able to address this in my course by discussing financial planning strategies, such as avoiding cosigning for loans or insurance, which may allow an individual’s medical expenses to be picked up by Medicaid or absolved in bankruptcy, without dragging down a relative or cohabitating partner’s finances.
• I love that English criticizes the hypocrisy of Toronto Dominion Bank (TD Bank in the United States) In Canada, Toronto Dominion Bank provided $14.5 million to fund the SEDI financial literacy program. However, this program does not address that TD, among other banks, are to blame for many of the public’s financial problems. Instead, participants are simply encouraged to develop better habits and willpower. How demeaning!
e) Further Reading:
English, L. M., McAulay, K., & Mahaffey, T. (2012). Financial literacy and academics: A critical discourse analysis. Canadian Journal for the Study of Adult Education, 25(1), 17–25.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 13]
Crain, S. J., & Ragan, K. P. (2012). Designing a financial literacy course for a liberal arts curriculum. International Journal of Consumer Studies, 36, 515–522. http://dx.doi.org/10.1111/j.1470-6431.2012.01117.x
b) Abstract:
The broad objectives of liberal education include the instilling of a sense of responsible citizenship along with knowledge that creates a better society. Although financial literacy is required at both the individual and public levels for an improved societal outcome to ensue, it is rare to find a finance-related course within the general education curriculum of most universities. Liberal arts administrators and faculty are reluctant to include finance-related courses because they are not perceived to be sufficiently broad in scope. The argument is accurate for a typical personal finance course. However, the purpose of this article is to show that it is possible to construct a financial literacy course with design features that make it acceptable for inclusion in the general education curriculum of a liberal arts university. First, the objectives of liberal education are highlighted, as enumerated by three independent organizations [American Academy for Liberal Education (AALE), Association of American Colleges and Universities and the Annapolis Group]. Next, the assessment standards of the AALE are utilized to develop the pedagogical features of the course design. A liberal arts focus can be achieved by including topical readings, in-class discussions or debates and a research paper that highlights the societal impacts of financial decisions. Finally, it is illustrated how the design features allow the course to fulfil the assessment standards of liberal arts objectives including effective reasoning, broad and deep learning and the inclination to inquire.
c) Relation to Capstone Project # 2, Companion Paper:
Crain and Ragan (2012) lay out recommendations for how a financial literacy course can fit into a liberal arts curriculum—specifically, by appealing to broader issues than personal finance, such as societal concerns and the antecedents of legislation and policies. While many of these broader issues will not be covered in my course, some do fit; for example, background information on the housing and student loan bubbles will give learners in my course a better perspective on their personal situations. This article recommends that foundational topics like taxation, spending, and savings also be covered, which serves as additional evidence that these are important topics, even though provosts have argued they do not easily fit into a liberal arts curriculum due to their narrowness (Crain, 2009 as cited by Crain & Ragan, 2012, p. 515).
d) Key Insights:
• The authors provide a nice list of suggested foundational topics: “using financial statements, managing taxes, managing cash and savings, making automobile and housing decisions, using consumer loans, purchasing insurance, making investments, planning for retirement and estate planning” (p. 517). I intend to cover all these my course except estate planning. I will have lighter coverage on investing and retirement planning since I am not personally familiar with these areas, but I will convey easily verifiable truths, such as the statistical advantages of index funds, and the obvious reasons to contribute the maximum amount to employer-matched retirement accounts.
• Encouraging a student to “ponder his/her own individual behavior (or that of his/her family) in the context of a collective society” (p. 519) is a worthy goal. While the authors recommend doing this with a mandatory, research-based essay assignment, it will not be possible for me to do so in my course. However, I will provide a personal reflection assignment that is self-assessed in module 8.3: “Reflection.”
e) Further Reading:
Crain, S. J. (2009) Are universities improving financial literacy? Working paper presented at the 2009 Annual Meeting of the Financial Education Association.
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 14]
Kulkarni, C., Wei, K. P., Le, H., Chia, D., Papadopoulos, K., Cheng, J., & … Klemmer, S. R. (2013). Peer and self assessment in massive online courses. ACM Transactions on Computer–Human Interaction, 20(6), 1–28. http://dx.doi.org/10.1145/2505057
b) Abstract:
Peer and self-assessment offer an opportunity to scale both assessment and learning to global classrooms. This article reports our experiences with two iterations of the first large online class to use peer and self-assessment. In this class, peer grades correlated highly with staff-assigned grades. The second iteration had 42.9% of students’ grades within 5% of the staff grade, and 65.5% within 10%. On average, students assessed their work 7% higher than staff did. Students also rated peers’ work from their own country 3.6% higher than those from elsewhere. We performed three experiments to improve grading accuracy. We found that giving students feedback about their grading bias increased subsequent accuracy. We introduce short, customizable feedback snippets that cover common issues with assignments, providing students more qualitative peer feedback. Finally, we introduce a data-driven approach that highlights high-variance items for improvement. We find that rubrics that use a parallel sentence structure, unambiguous wording, and well-specified dimensions have lower variance. After revising rubrics, median grading error decreased from 12.4% to 9.9%.
c) Relation to Capstone Project # 2, Companion Paper:
This paper talks about implementing peer assessment in various massive open online courses (MOOCs) on the Coursera.org platform. While I was hoping the authors would tackle self-assessment like their title indicates, they did not. However, the information on peer-assessment is useful because I can adapt it for self-assessment in my Udemy course. While Udemy does not offer peer-assessment and I do not want to create a course that requires an ongoing personal grading commitment, the idea of feedback snippets or “fortune cookie feedback” (pp. 17–20) can be adapted to my course by giving learners scenarios they are asked to evaluate (with multiple-choice “fortune cookies”). Then, learners will receive feedback about their choices. Udemy only offers multiple-choice quizzes as assessments; fortune cookie scenarios can fit within the multiple-choice framework by constructing questions with a clear, best answer. Since learners in my course should be self-regulated, text-based modules can have exercises that are self-assessed, with the learner scrolling down to view and self-apply the rubric after completing the exercise.
Finally, the authors’ findings regarding the limitations of peer-assessment, such as perceptions of unfair grading and discrimination against minority students, are consistent with Jordan (2015) from my 1/27/2016 annotated bibliography (project # 2, citation # 6).
d) Key Insights:
• The authors cite Mazar et al. (2008) on page 22, as evidence that students “rarely blatantly cheat” when intrinsically motivated. I will look at the Mazar et al. article and likely cite it in my companion paper, as justification for not employing anti-cheating measures in my course. Not addressing cheating will cut down on my course development workload.
• The authors say that rubrics have the limitation of not specifying how to improve, but only what needs improvement (p. 18). Further, they write that rubrics are only useful if the student doing the peer grading has some minimum understanding of the materials and expectations. This will be important to my self-assessment implementation.
• Regarding rubrics, an additional key insight is that using parallel grammatical structures between descriptions for each item yielded significantly higher satisfaction and lower disagreement with grades (p. 20). Therefore, my rubrics should follow this practice, e.g.:
· Unsatisfactory: The learner identified none of the key issues regarding mechanics of credit card usage.
· Needs improvement: The learner identified at least one key issue regarding mechanics of credit card usage, but had misconceptions regarding the issue(s).
· Satisfactory: The learner identified two or more key issues regarding mechanics of credit card usage and had accurate conceptions regarding the issues.
e) Further Reading:
Ehrlinger, J., Johnson, K., Banner, M., Dunning, D., & Kruger, J. (2008). Why the unskilled are unaware: Further explorations of (absent) self-insight among the incompetent. Organizational Behavior and Human Decision Processes, 105, 98–121. http://dx.doi.org/10.1016/j.obhdp.2007.05.002
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a) Citation [PROJECT # 2, COMPANION PAPER, CITATION # 15]
Impey, C. D., Wenger, M. C., & Austin, C. L. (2015). Astronomy for astronomical numbers: A worldwide massive open online class. International Review of Research in Open and Distributed Learning, 16(1), 57–79.
Richard’s note: This journal is open-access and provides audio books of all articles for free download in MP3 format. I wish every journal did this! http://www.irrodl.org/index.php/irrodl/issue/view/67
b) Abstract:
Astronomy: State of the Art is a massive, open, online class (MOOC) offered through Udemy by an instructional team at the University of Arizona. With nearly 24,000 enrolled as of early 2015, it is the largest astronomy MOOC available. The astronomical numbers enrolled do not translate into a similar level of engagement. The content consists of 14 hours of video lecture, nearly 1,000 Powerpoint slides, 250 pages of background readings, and 20 podcast interviews with leading researchers. Perhaps in part because of the large amount of course content, the overall completion rate is low, about 3%. However, this number was four times higher for an early cohort of learners who were selected to have a prior interest in astronomy and who took the class in synchronous mode, with new content being added every week. Completion correlates with engagement as measured by posts to the online discussion board. For a subset of learners, social media like Facebook and Twitter provide an additional, important mode of engagement. For the asynchronous learners who have continuously enrolled for the past 15 months, those who complete the course do so quickly, with few persisting longer than two months. The availability of a free completion certificate had no impact on completion rates when it was added midway through the period of data analyzed in this paper. This experiment informs a new offering of an enhanced version of this MOOC via Coursera, along with a co-convened “flipped” introductory astronomy class at the University of Arizona, where the video lectures will be online and class time will be used exclusively for small group labs and hands-on activities. Despite their typically low completion rates, MOOCs have the potential to add significantly to public engagement with science, and they attract a worldwide audience.
c) Relation to Capstone Project # 2, Companion Paper:
Impey has built an amazingly in-depth and successful Udemy course about astronomy. Since I am creating a Udemy course, there are many ideas and lessons I can extract from this paper. I was surprised to see that, like Hoffman’s Udemy course on motivation, Impey’s course uses multiple-choice quizzes and does not have other types of exercises or evaluations. Also, Dr. Impey embeds 100+ page PDFs and PowerPoints with nearly 100 slides into his Udemy modules. These practices are contrary to the recommendations discerned by Bailey, Hendrics, and Appliewhite (2015; see 1/27/2016 annotated bibliography, project # 2, citation # 5). They also run contrary to cognitive load theory. While Impey’s course has amazing breadth, depth, and conceptual accuracy, I will not overwhelm students in my Udemy course with information as he has. While his attrition rates are about 97%—not significantly higher than other MOOCs—it is possible they would be lower if he embraced cognitive load theory.
d) Key Insights:
• It is quite surprising to me that when Impey began offering a free completion certificate months after his course launched, no increase in completion was observed. Perhaps this is not an effective motivator? This could relate to the subject matter or platform, as well.
• To garner interest for his Udemy course, Impey sent emails to over 600 astronomy instructors and direct-mail advertising to over 800 astronomy clubs across the United States. What great ideas! I wonder if Dr. Hoffman thought of this?
• Impey implemented Google Analytics tracking on his Udemy course and presents statistical analyses and charts based on nearly 250,000 impressions that Google Analytics recorded. The potential to combine MOOCs with “big data” analysis should not be overlooked. Due to increased breadth, “big data” can reveal statistically significant interactions where normal data collection methods would not.
e) Further Reading:
Ebben, M., & Murphy, J. (2014). Unpacking MOOC scholarly discourse: A review of nascent MOOC scholarship. Learning Media and Technology, 39, 328–345. http://dx.doi.org/10.1080/17439884.2013.878352