Financial knowledge of the low-income population: effects of a financial education program

This application of mind examines the effects of individual large financial management training program for low-income race The data are from proofs of pre- and post-training financial knowledge of 163 participants. The experiment was designed to measure basic knowledge of participants in five easy in mind areas: predatory lending practices, public and work-related benefits, banking practices, savings and investing strategies, and credit use and interest rates.

The findings demonstrate that substantial pre-training knowledge deficiencies existed upon basic financial management issues, especially upon public and work-related benefits and savings and investing. accrues also indicate that the program was effective in improving the financial knowledge of participants in each of the five satisfied areas. Further analyses suggest that pre-training knowledge and horizontals varied according to participant characteristics. In addition, participants' education, English proficiency, race / ethnicity, and marital status were associated with their knowledge gains from the program. Policy and practice implications for developing effective financial management training for the low-income population are discussed.

Keywords: financial knowledge, financial management training, low-income audience, welfare reform

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sum of two units factors have fostered the unravelling of financial training programs for low-income clan in recent years. First, the character of financial literacy in promoting economic well-being has increasingly been recognized (Bernheim, 1998; Jacob, Hudson & Bush, 2000) As a proceed financial management training programs have emerg for diverse audiences of that kind as employees and youth. a certain quantity of of these programs have been targeted upon low-income consumers, who are particularly at risk of financial illiteracy (Jacob, Hudson & Bush, 2000) next to the first the implementation of Temporary Assistance for indigent Families (TANF) programs in 1996 has proceeded in large welfare caseload decreases. However, studies have base that many welfare leavers face troubling economic circumstances, and in turn round may face increasing pressures to manage limited resources (Anderson & Gryzlak, 2002; Cancian, 2001; Loprest 2001) This has generated increasing interest in educational and investment approaches designed to enhance long-term self-sufficiency among welfare recipients and the working poor.

Financial management training programs are individual such approach. As a specialized form of human capital disclosure strategy, these programs are designed to help the low-income population improve their financial decision-making skills. This is intended to help low-income individuals access financial information and opportunities, and to utilize their resources more efficiently.

Despite the development of financial management training programs, and anecdotal evidence supporting the notion that like programs can improve financial management skills of low-income someones empirical studies on program issues have not been adequate (Caskey, 2001) smooth less is known about by what mode different participant characteristics are related to financial knowledge and to program effectiveness. In order to lay open these programs more effectively, it is important to examine whether they are effective, as well as whether program succes varies with the characteristics of participants.

In this article, we examine financial knowledge of participants before and after they received training from individual financial management program targeted at low-income audiences. We begin by dint of reviewing previous research on financial literacy and the events of financial management programs, with special attention to the low-income population. Analyses are then guidanceed to assess initial knowledge and knowledge improvement among participants. We also examine by what means participant characteristics are related to pre-training financial knowledge and to program effectiveness. The implications for financial management training targeted upon low-income persons are discussed.

Background

Financial Literacy of the Low-income Population

Americans in general are not actual educated on financial matters, and financial illiteracy may be particularly acute among the poor (Bernheim, 1998) Previous research has shown that compared to those with high-incomes, low-income someones are much less likely to have bank accounts (Jacob, Hudson & Bush, 2000) les likely to save or invest (Haveman & Wolff 2000) and more susceptible to predatory lending practices (Consumer Federation of America and National Consumer Law Center 2002)

While these financial practices largely rise from lack of resources, it has been argued that knowledge deficiencies and the inefficient handling of personal finances also are problematic (Caskey, 2001; Hogarth & to leeward 2000). The limited access many low-income nation have to financial and community institutions may, in turn round exacerbate their knowledge deficiencies. In addition, several studies have place that low-income persons lack information about available public benefits, which contribute to the underutilization of like services (Anderson, 2002; Anderson & Gryzlak, 2002; Julne et al., 2000)