Tags: financial | education | marketing | consumers

Stop the Hype: Report Finds US Needs More Financial Education, Not Marketing

Tuesday, 26 Nov 2013 11:45 AM

Consumers receive a lot of information to influence their financial decisions. But there's a huge disparity between spending on marketing and spending on financial education, a new report from the Consumer Financial Protection Bureau (CFPB) finds.

When consumers make financial decisions they're probably relying on various sources of information, says the CFPB's report. That information can be divided into two categories — that which is meant to educate consumers and that which is intended to drive a purchase decision.

Spending to market financial products is 25 times greater than spending on financial education. According to CFPB estimates, about $54 per person is spent on financial marketing and only $2 per person is spent on financial education.

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The financial services industry spends some $17 billion marketing financial products and services, the report says.

That includes about over $5 billion for efforts to generate awareness about products such as credit cards and loans. The remaining $12 billion is spent on direct marketing efforts, such as internet displays, direct mail and television ads, which are designed to prompt consumers to take immediate action.

And those figures do not even include marketing of products related to retirement, college loans and other investments, says the CFPB.

By comparison $670 million is spent on financial education, such as housing counseling, credit counseling and school-based financial education.

More than half of this funding is from the federal government, which spends $230 million, and financial institutions, which spend about $160 million. The remainder of financial education funding comes from a variety of sources such as non-profit organizations, state governments and municipal governments and school districts.

Still, the disparity in spending on these two types of information is huge. And that's a cause for concern, experts say.

“When consumers receive the vast majority of their financial information from companies that are trying to promote an image or sell products, consumers have very little unbiased information,” Richard Cordray, director of the CFPB, told CNBC in a statement.

This report “further reinforces the dire need for more and better financial education in this country,” he added.

“Our financial lives are becoming increasingly complicated and it's hard to make good decisions when you don't even understand the basics,” Gerri Detweiler, director of consumer education at Credit.com tells CNBC.

In a recent Credit.com survey, 63 percent of participants believe America's children learn little to nothing about personal finance. And 56 percent of the young adults surveyed said they know very little about how to manage their finances.

“This is completely unacceptable,” Adam Levin, chairman and co-founder of Credit.com tells CNBC. “We should do better. We must do better.”

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Consumers receive a lot of information to influence their financial decisions. But there's a huge disparity between spending on marketing and spending on financial education, a new report from the Consumer Financial Protection Bureau (CFPB) finds.
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Tuesday, 26 Nov 2013 11:45 AM
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