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Barry Wides, Deputy Comptroller, Community Affairs, Office of the Comptroller of the Currency (OCC)
Today's dynamic and complex financial markets demand that consumers be effective money managers. Especially at risk are unbanked and underserved consumers who may be unfamiliar with the fundamentals of personal financial management. Many of these consumers may be unaware of the value of saving through bank accounts or may not have the money management skills needed to prepare for unexpected life events or to accumulate assets and build long-term wealth.
This edition of Community Developments Investments highlights roles that banks can play through their participation in financial literacy initiatives. The articles describe the following four national initiatives that encourage banks and their community partners to help consumers use their money wisely and better protect their assets: Bank on Cities, America Saves, Operation Hope, and the Department of the Treasury's Community Financial Access Pilot. These programs target the unbanked and underserved markets by increasing consumer awareness of available, appropriate, and safe financial products.
Each program stresses money management, "second-chance" banking opportunities, and the importance of saving before spending. Through these programs, mainstream financial institutions can build bridges between themselves and unbanked and underserved consumers. To encourage banks to participate, these programs offer support to financial institutions that reach out to these customers. Banks can also earn positive Community Reinvestment Act consideration for a range of financial literacy initiatives serving low- and moderate-income populations (see CRA Consideration for Financial Literacy Initiatives).
Evidence suggests that these types of programs can be successful in helping the unbanked and underserved improve their financial skills and develop successful banking relationships. For example, a survey of participants in the FDIC's Money Smart program, showed that financial education training can positively change consumer behavior and improve knowledge about the basics of checking, saving, budgeting, and credit. Money Smart is a financial education curriculum launched in 2001 by the Federal Deposit Insurance Corporation that is in wide use today.
The survey results indicate that participants, 6 to 12 months after taking the Money Smart training, were more likely to open deposit accounts, save money in a mainstream deposit product, use and adhere to a budget, and have increased confidence in their financial ability. In addition, more than half of the respondents reported that their level of savings increased, their debt decreased, and they were more likely to comparison-shop for financial products and services.
The OCC Web site provides access to a wide variety of financial literacy resources and materials available from the OCC and others that address these topics. Bankers can stay up-to-date on new initiatives, partnerships, and collaborations by subscribing to the OCC's bi-monthly Financial Literacy Update. For more information about financial literacy and outreach activities and how they might be eligible for CRA consideration, contact your OCC District Community Affairs Officer.
Related resources for further reading: