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Growing Inequality Means a Change to Financial Ed Classes

You can learn a lot from helping more than 1,000 people — and hopefully those lessons will inform how you serve the next 1,000. That’s how one Massachusetts nonprofit focused on financial stability for low-income residents is thinking about change.

The Chelsea-based Connect started in 2012, and offers assistance in four areas: education, employment, housing and money management. Over 1,100 students have enrolled in Connect’s financial education classes since they started. Over 65 percent of Connect’s clients have an annual income of $25,000 or less, and the majority of those who disclosed their race/ethnicity identified as Hispanic.

Now the nonprofit is revamping the way it teaches students about money, credit and loans.

It’s building out and designing new class offerings (with a $25,000 grant from NeighborWorks America), and rethinking how they track their impact.

Historically to measure the success of their financial education program, says Stefanie Shull, Connect’s director, they’ve asked participants if they learned anything. But Shull says that was no longer enough, that now, they’re more interested in behavior change.

“We’re looking at how much self-reported knowledge gain was there, based on a scale of 1 to 10,” she says. “And then, what we’re moving toward is what kind of follow-up activity did a person do. Did they open a checking account? Did they make an appointment with a bank and actually meet with a banker to talk about credit or loans or other financial products?”

An analysis by the Connect team revealed their gaps, particularly with financial education programming and very-low-income residents, says Shull. She notes that some clients didn’t trust banks, had no credit record or history, and were fearful of getting a credit card because they’d heard of friends’ bad experiences and excessive fees.

“[Our financial education manager] felt like the content wasn’t quite hitting the mark for our population,” Shull says, “and it was sometimes not really contextualized to our client’s experience … like talking about saving for a vacation somewhere when a lot of our people just had never been on a vacation ever and can’t really conceive of doing that.”

Shull and the team also saw a report from the Center for Advanced Hindsight that concluded that only about 4 percent of behavior change can be attributed to financial education.

“That was just sort of the straw that broke the camel’s back for me,” Shull says. “When I saw those numbers, I thought, ‘What in hell are we doing, investing all of this time and effort into something if it’s not effective?’ Four percent isn’t an acceptable result.”

Over the next year, Connect is aiming to make financial education work better for more people by making the programming more approachable, hands on, action oriented and connected to a specific action that happens immediately.

To start, Connect is changing the way it names classes. For example, what might have once been called “Credit, Budgeting, and Saving,” would instead be “How to Buy a Car” or “Should I Buy a Car?”

“It’s just so much more real for people and you can weave in little bits and pieces about credit and savings,” Shull says. “It’s really more about helping people understand the specific applicability to their lives so that they can practice a range of skills and it’s all about practice.”

During the first revamped class, the Connect team brought in a timely, real-life example: They addressed fraud and identity theft prevention. The recent Equifax breach was a great tie-in that students had heard about.

Connect also plans to work more closely with its financial institution partners, which have already spent time and resources on honing methods to appeal to a wide range of demographics.

Students will also get more details about financial products that would provide more context. You know those matrices that compare credit cards’ APR and annual fees and any bonus offers? Connect wants to add a narrative column to the matrix that would tell students who the product was designed for and in what situations the product would be useful.

“It’s just really alienating just to line up a bunch of terms that says, this one takes $50 to open and this one charges you money if you go below this amount of balance,” Shull says. “It’s just not made accessible.”

Shull adds that Connect will identify holes in the range of financial products offered and investigate if any organization offers a helpful alternative.

For example, Shull says she recently learned about a small-dollar loan program in Brownsville, Texas, that doesn’t consider credit in the application process. Instead, they confirm a person’s employment and then the repayment happens through the individual’s paycheck.

Shull says her team will continue to tweak the financial education program over the next year to help people with lower incomes to thrive.

“We’ve designed our financial world for middle-class people and higher and we really have to do better, especially in an economic environment where we are creating an extremely unequal society,” she says. “We’re hollowing out a middle class but we have not yet redesigned our economy to really give people at the lower end of the spectrum a fighting chance to build wealth and credit worthiness.”