New Employment Program Provision Could Expand Financial Capability for Youth
This week, as part of our Financial Capability Month campaign, we are talking about the critical importance of engaging youth (ages 0-21) in financial capability services. A growing body of research from Prosperity Now and others shows that it is never too early to talk to young people about finances and build hands-on skills that prepare them for future. Early financial education is especially important as our financial system grows in complexity and more knowledge and tools are needed to successfully manage day-to-day finances.
The workforce development system is one leverage point that has the potential to expand youth financial capability. Last year, President Obama signed the Workforce Innovation and Opportunity Act (WIOA), the first update to the nation's core workforce training programs in 16 years. WIOA helps address the growing barriers many low- and moderate-income youth and adult workers face to gaining more job skills and education, both of which lead to better-paying jobs.
One new provision within WIOA expands the required youth employment program elements to include financial education. This is a huge opportunity to ensure that the 20 million young people who participate in WIOA-funded youth employment programs around the country have access to quality, hands-on financial education. Research suggests that financial education is most effective when provided at a point in time when people feel that the information is relevant to their lives and can apply their new knowledge promptly. However, young people will only benefit if the financial literacy programming is implemented correctly.
So how do policymakers and practitioners ensure that this part of the law has the biggest impact? We learn from promising practices in the field.
Practitioners who have engaged in financial capability services for youth recognize that four main components are needed to make a program successful:
- Private-public partnerships are necessary: To provide a comprehensive suite of services, banks, nonprofit organizations and government agencies must all work together.
- Financial education is not one-size-fits-all: Curricula should be tailored to youth participants' needs and priorities, and should be seamlessly integrated into the program's structure.
- Financial products need vetting: For some youth, the financial literacy programming might be their first experience with a bank account, so programs need to ensure that there are no hidden fees. In order to have the youth continue to use the product, practitioners should connect youth to quality, low-cost financial products.
- Short- and long-term engagement strategies are needed: Engagement is needed both during and after the employment program. Behavior change does not happen overnight, and youth need to be engaged so that they continue to practice the skills they learned during the program.
CFPB is actively working to promote youth financial education by providing technical assistance in the upcoming year to 25 municipalities that are working to integrate financial knowledge and skills into existing youth employment and training programs.
The new WIOA financial literacy provision offers a promising opportunity to get the youth participating in workforce programs banked, financially literate and onto a path of economic self-sufficiency.