AARP Foundation has found that a well-designed, specifically targeted educational program can help low-income older adults who face unique challenges in juggling their low savings rates, high debt loads and weak job prospects.
AARP recently reported on a financial capability curriculum targeted to the 50+ age group the foundation designed in collaboration with Charles Schwab Foundation and disseminated to 11 organizations nationwide for implementation.
The report evaluated the effects of the training by comparing behaviors relating to financial topics before and after participation in the class, and by determining whether desired financial behaviors increased after participation.
Results showed that whereas only 42% of participants had at least one financial goal at the start of the program, 63% reported having at least one after six months.
This then translated into behaviors, AARP found. The rate of those reporting spending more than they earned fell by a third, and 35% reported paying down debt by the six-month follow up.
Participants also engaged in such positive actions as tracking spending, savings and credit, and avoiding potentially negative actions, such as overdrawing accounts.
Life at the Margins
Approximately 2,775 people participated in classes offered from September 2012 through December 2013.
AARP made course materials available in English, Spanish and Chinese, important for targeting those most in need of information, it said.
About half of those who started the program had less than $10,000 in retirement savings, and about two-thirds had less than that amount in non-retirement savings.
Two-thirds had incomes below $35,000, compared with the 2012 median income of $51,000.
Unlike their affluent counterparts, participants in the programs were not worried about such things as estate planning or how to allocate assets across portfolios.
Most were retired, disabled or unemployed. More than half had some worries about managing expenses and cash flow at the program’s start, and nearly a quarter had been recently contacted by a creditor about unpaid bills.
Anxiety Falls, ‘Positive’ Behaviors Increase
AARP’s analysis of respondents’ financial behaviors before and after training revealed notable findings on the effect of the training classes.
The levels of participants’ anxiety about their financial situations fell significantly from before to after the training, with the proportion “very worried” dropping from 22% pre-training to 14% six months post-training.
Those “not very/not at all worried” increased from 34% to 42% during the same period.
Participant scores on the Financial Management Behavior Scale measured at three points in time showed a statistically significant improvement in average scale scores before and after training.
Researchers also looked at other discrete indicators of change in financial behaviors.
They found the most significant change six months post-training in the following “positive” behaviors:
- Calculating net worth
- Reducing financial fees
- Reducing spending and/or increasing earnings
- Prioritizing debt payment
- Reviewing credit card statement
Likewise, the frequency of several “negative” behaviors declined significantly six months after training:
- Being overdrawn
- Being contacted by a collector
- Taking out a payday loan
For those who took the training, developing a clear financial goal was a major accomplishment, with a 50% improvement rate in participants setting a goal.
Among those with a defined goal, the proportion with an action plan increased 40% by the end of the study period.
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