‘Money is a very emotional thing’: Effective financial literacy programs involve more than budgeting

Deb Neubauer, administrator of the Financial Education Center on South Park Street, oversees around 200 volunteers. (Cara Lombardo/Madison Commons)

Nia Alayeto was a senior in high school when a Junior Achievement volunteer spoke to her class about setting financial goals. Her family moved from Florida to Wisconsin. Alayeto’s father, an immigrant, was still learning English. Her parents were having trouble keeping up with the mortgage and bills.

“There was a lot of fighting at home over money,” she said.

She brought home a brochure listing the earning potentials of various professions and degrees and had a conversation with her parents about what she had learned. She said the conversation gave her mom the courage to go back to college to finish her degree. Nia credits Junior Achievement for changing her family’s trajectory.

Deb Neubauer, administrator of the Financial Education Center on South Park Street, said changes often stem from a crisis.

“You have to be at a place where you say, ‘Enough is enough. I want to turn this around,’” Neubauer said.

The desire to make a reliable income, find different housing or ensure financial independence after a divorce might motivate someone to seek financial counseling. 

J. Michael Collins, faculty director of the Center for Financial Literacy at the University of Wisconsin-Madison, said that catching people at an inflection point helps them implement new skills.

“As tangible as it is, money is a very emotional thing,” Neubauer said, “We forget about that.”

Effective financial literacy education, while it brings to mind budgeting exercises and detailed reviews of fine print on credit card agreements, goes beyond numbers.

Neubauer oversees nearly 200 volunteers (she is the center’s only staff member currently) and runs regular financial literacy programs at the center. Ninety-five percent of participants in their programs are low-income, though all Dane County residents are welcome. Many are single parents.

The center offers workshops, consultation and personal coaches. Starting a program can be daunting, which is why a change often triggers it.

“Some people get to a point where they think it’s so hopeless that they don’t want to open their bills. Denial is a big part of it,” Neubauer said.

She said when a coach takes an initial inventory of a client’s finances, the client often feels relieved.

An individualized approach to finances

Traditional financial literacy education offers guidelines for individuals to size to their budgets: Spend no more than 30 percent of your monthly income on rent. Set aside 10 percent of each paycheck for retirement. Rules can be useful suggestions but the most effective budget is built around what matters most to the person making it, Neubauer said.

She suggests that clients examine how they’ve spent their money in the past to determine what they value--and what they’ve spent money on that they don’t. “You can make budgeting decisions for the future if you know exactly where your money is going in the past,” she said.

People also need to know what type of support they need. Some people need an involved coach to hold them accountable “like an exercise buddy,” said Neubauer, and others prefer to get information from the workshops and go it alone. The most important thing, she said, is to be able to plan ahead in order to maintain a sense of control. 

“We’re trying to get people to think more proactively so they’re not always at the mercy of what comes in the mail,” she said.

Monetary habits and coping mechanisms are formed from an early age and often stem from the behaviors of our parents.

“If their parents were always yelling about money when it came up, they might avoid thinking about it,” Neubauer said. 

Collins pointed out, “A lot of parents are uncomfortable with their own finances, so they don’t talk to their kids about finances and that creates a taboo that is not helpful for anyone.”

Engaging children in finances

Neubauer often hears parents talk about how difficult it is to always have to say no to their children. She said it is discouraging to see the small things that can be major burdens to families trying to stay within a budget, such as kids bringing home Scholastic Book order forms and wanting to order books like their classmates.

She encourages them to explain the situation to their children and include them in the decision-making process.

“Kids are creative,” Neubauer said. “Get them involved in thinking of free things the family can do.”

Studies in other states have shown that prescriptive financial literacy programs in schools raise students’ credit scores and decrease late payment rates two or three years after high school graduation. Improving their financial literacy also increases the likelihood that these students will pass on sound financial skills to their children.

Currently, nearly 40 percent of school districts in Wisconsin do not require exposure to financial literacy concepts before high school graduation, according to a survey from 2014. Even in districts with requirements, the quantity, format and content varies widely: The material can last only a few days or social studies or economics courses can fulfill requirements and personal finance skills may never be covered.

“At the state level, it’s effectively a recommendation,” said Collins.

Wisconsin legislators introduced a bill in May 2015 that would require financial literacy education in Wisconsin schools and will likely vote on the bill this spring.  

Andrew Pfluger, now a student at the University of Minnesota, said his favorite class at his Green Bay high school was a personal financial literacy class that taught him skills he hadn’t acquired at home.

“I was so excited at how applicable everything was,” he said. “I felt like everything I learned, I could use.”

He strongly supports financial literacy programming in schools: “I can’t imagine where I’d be if I didn’t have that background.”