FORT WORTH, Texas--(BUSINESS WIRE)--America’s financial literacy programs may be failing the very people who need them most, according to newly released research from Elevate’s Center for the New Middle Class (CNMC). Non-prime consumers learn and retain financial education material differently than their prime peers, the research indicated.
“Most financial literacy programs are designed for people with prime credit,” said Jonathan Walker, executive director of Elevate’s CNMC. “But non-prime consumers learn differently because they face unique challenges such as income volatility, a lack of confidence, and planning challenges.” Elevate engaged with the Clinton Global Initiative (CGI) to study the efficacy of different financial literacy tools.
To be most effective for a non-prime audience, financial literacy curricula should:
Be trans-media. Use different media types to deliver different messages. Respondents were tested for information retention immediately following exposure to their curriculum, as well as a few weeks later. Findings showed that videos are effective for information retention and articles are effective for information breadth.
However, personalized tools designed to help users improve their finances were even more effective when it came to engagement, empowerment, and behavioral change.
Address the unique challenges of non-prime Americans. A financial wellness program will be more effective for non-prime Americans if it directly addresses their unique challenges – things like income volatility and a lack of available resources. It also needs to identify outcomes that are relevant, attainable, and meaningful to them.
Highlight the next immediate steps. Broad advice that focuses on overall principles or is focused too far into the future is ineffective. It often also fails to acknowledge what is even possible for the participant and can lead to discouragement and disengagement. The best financial literacy content will break those broad principles into small, attainable steps.
Focus on building their credit. Non-prime Americans understand that their credit scores affect every part of their financial lives and they are hyper-focused on what they can do to improve them. Anchoring a financial wellness program on credit score management can actually lead non-prime consumers to understand broader financial management principles.
The multi-stage survey of 476 respondents was completed in partnership with the CGI, RLJ Companies, Republic Bank, CreditDNA (ScoreNavigator), TransUnion, FELA (LifeCents), and research partner Maru/Matchbox.
“As a company, we’re committed to increasing financial inclusion for all non-prime consumers,” said Ken Rees, CEO of Elevate. “If others can, like us, leverage these insights to better understand and support America’s New Middle Class, we all benefit.”
About the Research
The Center’s research compared the responses and performance of 479 Americans enrolled in various financial literacy curricula from Q4 2016 to Q1 2017. For more details on the study, click here.
About Elevate’s Center for the New Middle Class
Elevate’s Center for the New Middle Class conducts research, engages in dialogue, and builds cooperation to generate understanding of the behaviors, attitudes, and challenges of America’s growing “New Middle Class,” defined as those with credit scores below 700. For more information, visit: http://www.newmiddleclass.org.
Elevate (NYSE: ELVT) has originated $4.9 billion in non-prime credit to more than 1.8 million non-prime consumers to date and has saved its customers more than $2 billion versus the cost of payday loans. Its responsible, tech-enabled online credit solutions provide immediate relief to customers today and help them build a brighter financial future. The company is committed to rewarding borrowers’ good financial behavior with features like interest rates that can go down over time, free financial training and free credit monitoring. Elevate’s suite of ground-breaking credit products includes RISE, Elastic and Sunny. For more information, please visit http://www.elevate.com.