The economic downturn provides a chance to chart a new course for financial education, arming customers with the information and skills they need to recover financially and to be strong financial stewards. The financial services industry has a critical role to play.

The financial crisis has made it plain that Americans need to sharpen these skills. Americans themselves would agree. In the National Foundation for Credit Counseling's 2009 Consumer Financial Literacy Survey, 41% of respondents gave themselves a grade of C, D or F on their knowledge of personal finance.

Nearly two-thirds said they did not use a budget to guide their spending. A third reported having no discretionary or emergency savings, and 26% admitted not paying all their bills on time.

There has been no shortage of efforts over the last two decades to help consumers build assets and achieve financial prosperity. Countless financial education programs and curricula have been delivered by a wide variety of organizations, typically through classroom seminars or self-study materials.

Yet there is little evidence that these efforts have succeeded beyond raising awareness of the importance of financial education and creating an enormous field dedicated to it. Too often, success has been defined as increased knowledge of financial information. We should be aiming for behavioral change.

Signs are emerging that the financial education field is beginning to embrace a broader framework of financial capability, which emphasizes what people need to do to be financially successful. One such indication came last month when President Obama signed an executive order creating the President's Advisory Council on Financial Capability.

There is no standard definition of financial capability, but most definitions include the ability to cover monthly expenses with income, track spending, save for the future, select and manage financial products and gain and exercise financial knowledge.

To learn what strategies might prove effective in improving financial capability, my organization, with the support of the Citi Foundation, scanned the financial education literature, interviewed practitioners and stakeholders and explored a range of new interventions. We found that the most effective interventions are:

Relevant: They address specific concerns and financial situations that are meaningful to the consumer in order to capture attention and motivate change.

Timely: They coincide with key life events or moments of decision that can provide immediate feedback.

Actionable: They enable consumers to put newly gained knowledge into action immediately, in ways that can improve their financial situation.

Ongoing: They are offered in the context of relationships that provide support, instill a sense of accountability, and track progress.

Banks have been big players in financial education. A 2009 FDIC report showed that 63% of the 700 banks it surveyed offered financial education materials to underserved groups. Just over half said they held financial literacy sessions.

Financial institutions need to move beyond brochures and classes if they are serious about improving their customers' financial capability. They are well positioned to do so, from the way they structure their products to the methods they use to communicate with account holders. For instance, a recent study in Peru, Bolivia and the Philippines found that sending text messages to low-income bank customers reminding them to save led to an average 6% increase in savings balances. Reminders that mentioned incentives offered by the participating bank for consistent deposits led to increases of almost 16%.

From cell phones to Web sites, there are more ways than ever to communicate with consumers in real time about their finances. It is increasingly possible to reach consumers with timely, relevant information that can help them avoid relatively small, short-term mistakes and encourage longer-term thinking. These interventions are often integrated into financial transactions, creating an opportunity to influence behavior at actionable moments as decisions are made.

In addition, banks and other financial companies have developed new online tools to aggregate and analyze financial data from disparate sources. These tools can help with budgeting, cash-flow management and planning for the future. Social networking tools also can be integrated to provide peer support around financial issues, motivating consumers to achieve their goals.

If the financial industry is serious about setting up customers for success, then it needs to start by aligning the information and advice it gives with the products and services it offers. Only then will both consumers and the industry be better off.

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