Changing our Financial Culture OSD Office of Personal Finance & Transition “It’s all about the dollar, kid” – does that pretty much sum it up today? Movies/the media have a funny way of influencing our culture/attitudes about things like money and at the same time being influenced by our culture. The overall theme of the video clip was what: (easy money – money is very important – gotta have “the life”). Some of these movies go back as far as the 30’s – Gone with the Wind – so we haven’t really progressed much….in fact, we’ve digressed. These are the attitudes and images that bombard our young military families – it’s very hard to resist, but our job is to arm them with the tools they need to build a minimum level of financial literacy. Especially now, with the economy the way it is and what we are actually experiencing today. How many people 2 years ago, would have imagined our economy to be were it is today. If you had known would you have did things a little different, of course. However, that’s the key. We don’t know what will happen in the future, yet today we see history repeating itself in the overall financial market. That’s the purpose of the DoD Financial Readiness Campaign – to change our culture to ensure our Service members and their families – especially our young members and families – understand what it means to be financially literate. Who here knew the Campaign has been raging since 2003? (1-2 hands usually). That’s part of the problem, and why we’re out here delivering this message through the workshops! The culture change is a two-way street: we need to get the message across that it’s OK to ask for help when you run into financial difficulties and there are a host of resources available to help now, but that’s a tall order with our proud families that are trying to be self-sufficient. Question to the group: isn’t that one of your biggest challenges? To get your families to take advantage of resources that are in place specifically to help them? Unfortunately, it’s easier to ignore financial problems when you get into trouble, and as we all know: financial issues are not like a fine wine: they do NOT get better with age! But the other side of the culture change is to ensure our leadership lets the troops and families know that financial problems are hitting everyone and that punitive measures should not be the first reaction when a family runs into trouble. That’s a big reason why families don’t come forward in the first place. Both of these points may be a tall order, but it’s imperative that we get both those messages across – otherwise our families will sink into deeper and deeper financial trouble and it will be increasingly harder to help them. There is a “perfect storm” of financial pressure: we can probably name at least three components: mortgage/foreclosure crisis, the credit crisis, and the savings crisis: Mortgage Crisis: You can turn on the TV today and see how the mortgage crisis is affecting us. In the Washington,DC area, foreclosures are up 500% from last year and getting worse. There was a recent article in the news telling that foreclosures are up 300% near major military installations. This crisis IS affecting our families, but not only with home ownership but with renting, too. A military family in the National Capitol Region had to move three times this year because two of the homes they were renting were foreclosed on. We all know how fun PCS moves can be: they add stress to our families, it’s time off from work, and there are always out of pocket expenses you never recoup. The Credit Crisis – we’ll see how reliant we are on credit cards next slide. Suffice to say, we’re out of control in approaching a dangerous spiral of debt. Savings crisis: In 1950, the savings rate in this country was 12%. Today it’s negative 2%. We’re simply not saving and getting deeper into debt. Recently, the US fell out of the top 10 list of major industrialized countries for overall savings rate. Before I go on, let’s look a little deeper at America’s financial culture. It’s the culture we’re trying to protect our families AGAINST:

America’s Financial Culture The average American spends $1.22 for every $1.00 they make! The average household has seven credit cards and pays $8,500 a year in finance charges! The average 25-34 year old spends 25% of their income on paying down debt! The average American adult receives a failing grade for their knowledge of basic economic concepts! That means if you make $30,000 a year, you’re spending $36,600!? And meanwhile, the credit card balances continue to grow… That’s one-fourth of your income you can’t use for yourself or your family! Spend $1.22 for every $1.00 spent: “big deal – spending about a quarter more than we earn” – put that into real dollars of an annual salary. In 10 years, you’d be close to $70,000 in the hole! $8500 a year in FINANCE CHARGES only. Even if Americans are at this point – they’re NOT putting their credit cards on the shelf. They’re continuing to use them. Unfortunately, 71% of Americans only pay the minimum monthly amount on credit cards. They’ll never get there. Also: the average 2 adult family has $13,000 on credit cards!!? The average young American’s credit card debt is $4088 (www.feedthepig.org) The 25-34 year old age group is also the 2nd most likely age group to declare bankruptcy - why is this significant? Look at the military’s demographics. Nearly 85% of the military is 34 or younger. In case you’re interested: 20% of 18-24 year olds declare bankruptcy every year in this country. Basic economic concepts: average American doesn’t understand how to save, budget, or spell “IRA”. The bottom line is that our young Service members and families can’t afford to be the average American – OUR WORK IS FAR TOO IMPORTANT AND WE VALUE OUR PEOPLE TOO MUCH TO HAVE THEM FALL INTO THE FINANCIAL TRAPS THAT ARE STRANGLING AMERICA. Also, to give you an idea of what we’re up against just in the military, some military recruits begin boot camp with anywhere from $6000-12,000 in unsecured debt. This is before they event begin their military training! This reflects the poor financial footing some of our young people find themselves even before they start their careers! Finally, to sum up how our culture has changed: If I used the term “deadbeat” back in 1950 in regard to paying bills, what was the deadbeat NOT doing? (paying bills) Today, the term “deadbeat” is used by the credit card industry to describe someone who PAYS OFF THEIR CREDIT CARDS EVERY MONTH!!! They don’t understand how to properly budget, save, or invest You can’t afford to be average!! Bottom Line? Source: Financial Literacy and Education Commission – Jan 07; National Council on Economic Education

How will we change our culture? “Educate, not Regurgitate” Understand existing military benefits (TSP, SGLI, SDP, financial counseling and planning services, etc) Provide global, 24/7 access to resources, using multiple delivery methods Annual Military Saves Campaigns Work aggressively with on-installation banks and credit unions Alternative products to payday lenders, education Leverage financial partners for financial planning & educational resources Circulate prominent trainers DOD Office of Personal Finance and Transition Again, our approach is to really go on the offensive - to arm members and families with the tools they need before they need them and to avoid financial straits and common pitfalls altogether. This isn’t to say that Services aren’t already doing this, but DOD is posturing to support this stance. We need to “educate, not regurgitate” – just telling someone what TSP is for example is not going to get them to participate. Informing them of why it’s relevant to them and how they can instantly benefit in enrolling, might. Members are NOT taking advantage of their military benefits: TSP enrollment is only 38% between all the military services. Most folks are enrolled in SGLI because it’s an opt-out program. Many of our service members are not taking advantage of the Savings Deposit Program – a program available when a member is deployed/in a combat zone, where they can invest up to $10,000 of their pay and get a FEDERALLY GUARANTEED 10% return on their investment. This is a Defense Finance Accounting Service (DFAS) program, and very few people know about it! (which is why we’re out here talking to you). For more information on the Saving Deposit Program, you can go to DFAS website or Military OneSource. Mil Saves - 24 Feb - 2 March. Week dedicated to “building wealth, not debt” - focus on saving, reducing debt, paying yourself first. This last Mil Saves week was only our second annual event – more to follow on this. Credit Unions/Banks on installations – we’re encouraging them to create low interest, short term, loan products to help better serve our military and make payday loans/lenders less attractive. 26 + Financial Partners - non-profits, other Fed agencies – FINRA (www.saveandinvest.org), Defense Credit Union Council, Consumer Federal of America (Mil Saves), BBB, Dept of Treasury, In Charge Institute, etc. These official DoD partners are dedicated to providing financial education, training, and services at very low and no-cost to our members. They are vetted and approved - standing by to provide training where and when it is needed. Prominent trainers - already doing/done Mr. Kelvin Boston has a show on PBS called “Moneywise”. He has modified the program to form “Moneywise in the Military” Events. 5 conducted last year sponsored by OSD. San Diego, San Antonio, Fort Dix, WRAMC, and Scott AFB. Went to the gulf coast this year and prepping to hit EUCOM – more planned for 2008. He brings a panel of experts with him. Part financial expert, comedian, preacher, counselor. EXTREMELY well-received. Suze Orman (did some work for Army last Mil Saves Campaign), Kelly Perdew (winner of season 2 of The Apprentice and a West Point grad has shown interest as has Ben Stein. Get KNOWN folks out there who are obviously excited about helping our SM’s – have to get folks in the seats first, then deliver the message.

DoD Financial Readiness Organization Dr. David Chu Under Secretary of Defense (Personnel & Readiness) Dr. Linda Davis Deputy Under Secretary of Defense (Military Community & Family Policy) Ms. Barbara Thompson Director Office of Family Policy/ Children and Youth CDR Dave Julian Director Office of Personal Finance & Transition In the packet you received, an organization chart was included showing were Personal Finance and Transition fell within the current organization. Personal Financial Readiness was formerly under the Office of Family Policy, but it was realize that key elements of PFR were so important, it was best to have it as a separate directorate. And within that directorate it would included not only Financial Readiness but also Transition Assistance. Since Children and Youth is included within the Office of Family Policy they retained the Youth Financial Readiness program, however we continue to work closely together. Financial Readiness Program Youth Financial Readiness Program Transition Assistance Program

DOD Office of Personal Finance & Transition (PF&T) Benefits Personal Finance & Transition or PF &T is the newest office within the MC&FP directorate. As transition, personal finance, and benefits are linked – we must address them as a whole: the philosophy of the new office. We’re hoping to establish life-long financial/transition accounts for our Service members and families so that they are aware of their benefits during every step of their military career and beyond. And always having the information available for the “should I stay or should I go” question. Navy has a subcomponent program under their Transition Assistance Program called CONSEP – Career Options & Navy Skills Evaluation Program. CONSEP is given to junior, mid-grade, and transitioning Sailors which helps them decide “whether they should leave or remain in the service”. The program gives a frank explanation of military benefits and how they compare to civilian benefits. 26% of all members who go through CONSEP at TAP and who intended to separate from the Navy REENLIST after hearing the CONSEP message and seeing the numbers!!! Understanding your benefits throughout your military career and their impact on your personal financial plan will impact your career decision and ultimate retention

The Pillars of Personal Financial Readiness Stability Good Credit Routine Savings TSP/ SDP SGLI/ Insurance Low % Loans Security Clearance MWR If we were going to discuss our financial readiness campaign “platform”, we would discuss these eight objectives or pillars. These pillars represent the minimum level of financial competency we want our troops and families to have. Financial stability - Good spending habits – this is simply living within one’s means. This is also where we’re going to try to lose the word “budget” from our vernacular - it has negative connotations, like the word “diet”. The operative phrase we’re going to try to use is “spending plan” - positive connotations and implies you can still spend - after paying yourself, bills, TSP, etc!! This is also where we address debt management and reduction. Good credit - how to manage it, track it, get on the good side of credit, and protect it, which includes protecting identity and preventing ID theft Routine savings - emergency savings, etc. Statistics show that as little as $500 in savings for emergencies would eliminate nearly 90% of the payday loans which were historically loan to Military members. And we all know that, some savings (even $10 a month is better than no savings). TSP/SDP – We’ve already talked about these, but again, there are no better deals around. And it’s a major concern that many folks who are deploying and have deployed 3-4 times have never heard of the SDP program. SGLI/Insurance - best deal around. Name a $400,000 insurance policy that does NOT require a separate physical? Significant impact: You get Traumatic SGLI if you’re enrolled in SGLI ($25,000 - $100,000 depending on your traumatic injury sustained). We included insurance on this pillar as someone at the San Diego workshop said that after the fires, some military families who lost their homes HAD NO INSURANCE and lost everything. Low % loans – already discussed, but again, we’re working with our financial partners, on-base CU’s and banks, and the Military Service relief societies (Navy-Marine Corps Relief, Amy Emergency Relief, and Air Force Aid) all offer no-interest loans to help. You’ve heard that the Predatory Lending Law put a 36% cap on payday loans (which is still outrageous) – we still need to identify alternatives as predatory lenders will be getting smarter and finding alternate ways to “get at” our members/families. The new regulation covers refund anticipation loans, car title loans, and payday loans. MWR – Kind of an odd “pillar” but the simple message here is that Morale, Welfare, and Recreation facilities offer low cost alternatives for equipment rentals, tours, etc for a fraction of the cost of what they would be outside the gate. Security Clearance - it is a myth that receiving counseling of any kind will endanger your security clearance, but it is NOT a myth that significant financial troubles will. Navy reported in a message last year (NAVADMIN 198/07) that 78% of the Dept of the Navy denials/revocations of clearances were due to poor financial management. This obviously becomes a clearance issue. Also, and active clearance when you depart the military is a marketable commodity – could add significantly to a starting salary.

Dear Sir, I am with the Nigerian Chambers Of Commerce And Industry, I have the privilege to request your assistance to transfer the sum of $47,500,000.00 into your account. Please reply urgently. Best regards Howgul Abul Arhu Dear Sir, I am with the Nigerian Chambers Of Commerce And Industry, I have the privilege to request your assistance to transfer the sum of $47,500,000.00 into your account. Please reply urgently. Best regards Howgul Abul Arhu You may have seen or received a few of these - perhaps enough so that you might think that e-mail is Nigeria’s #1 export! You might think that this could never happen to one of our Service members and their families – they’re too smart, but unfortunately, desperate people are forced to take desperate measures, and the lure of quick, easy money that might be believed to be the answer to all their prayers could be too difficult to resist. Enough of these are sent out in sufficient numbers that some poor, unsuspecting souls are taking the bait. The problem is, you’ll end up losing your identity in the process - all you have to do is give your bank account number, SSN, possibly birthdate, and Mr. Arhu will do the rest. Just something to keep in mind - as we get more savvy, these phishing attempts will get more and more sophisticated. Are DoD computers immune - can’t filters, firewalls, etc protect DoD accounts? NO.

How NOT to Build Wealth or Get Out of Debt* Dear Sir, I am with the Nigerian Chambers Of Commerce And Industry, I have the privilege to request your assistance to transfer the sum of $47,500,000.00 into your account. Please reply urgently. Best regards Howgul Abul Arhu *and lose your identity at the same time! You may have seen or received a few of these - perhaps enough so that you might think that e-mail is Nigeria’s #1 export! You might think that this could never happen to one of our Service members and their families - but desperate people are forced to take desperate measures, and the lure of quick, easy money that might be believed to be the answer to all their prayers could be too difficult to resist. Enough of these are sent out in sufficient numbers that some poor, unsuspecting souls are taking the bait. The problem is you’ll end up losing your identity in the process - all you have to do is give you bank account number, SSN, possibly birthdate, and Mr. Arbu will do the rest. Just something to keep in mind - as we get more savvy, these phishing attempts will get more and more sophisticated. Are DoD computers immune - can’t filters, firewalls, etc protect DoD accounts? NO. In Seattle, we asked the question, and one family support professional knew a Navy family that fell for the scam.

Partner Initiatives & Programs Consumer Federation of America Military Saves Campaign: Feb 24 – 2 Mar 2008 Military Youth Saves Pilot 2008 - 11 volunteer installations www.MilitarySaves.org InCharge Institute Education Foundation Military Money magazine to CONUS/overseas (250K per issue) Young Money magazine (www.youngmoney.com) www.Inchargefoundation.org FINRA (Financial Industry Regulatory Authority) Investor Education Program www.SaveandInvest.org Bright Score Credit Assessment Program AFCPE (Association for Financial Counseling Planning Education) Spouse Fellowship Program (FINRA + NMFA + AFCPE) Military Home Front (Lists Financial Readiness Partners w/websites) “Service providers”  “Financial Readiness”  “Financial Readiness Resources” Official DoD Financial Partners can be found on Military Homefront. Again, these are OFFICIAL partners via memoranda of understanding, so you can and should feel confident in referring Service members and families to these partners. Military HomeFront will have links to each of the partner websites and again, they all offer some form of assistance to the military at low or no-cost. Incharge has both an on-line and telephonic debt management program!! It costs about $35 in a “donation fee” plus $10 per month for up to 5 years ($600 total for a complete debt elimination program is a total bargain). And if the member is military and can’t afford it, INCHARGE WAIVES THE FEES. Bright score accounts are running low (funded by FINRA) so until they replenish the supply, the only way you can get a free account is getting a code from the installation Personal Financial Manager after they do a financial assessment. FINRA/NMFA - AFCPE financial certification/fellowship program. 200 spouses were enrolled last year - get full certification in financial counseling, and required to give back to their installation by providing counseling as part of their cert. DoD also is planning on hiring the spouses who take the course to be financial counselors. Talk about a portable career!!

Military Saves Week 2008 Overall Results 40% increase in numbers over 2007 ~26,000 Savers from 1 Jan – 2 Mar 08 Events held throughout the world 100% participation by all Services 100% Navy Youth Centers participated and pilot sites from Air Force, Army and Marine Corps 200+ defense credit unions and military banks accepted millions in savings deposits Incentive programs, activities, co-branding, giveaways Military units large & small declared themselves Military Saves organizations Here is just some numbers from the 2008 military saves week. Again, it’s a social marketing campaign to get members to take some form of savings action during the week: start a savings account, increase allotment to a savings account, enroll in TSP, etc. The other part of this was the Mil Saves wanted military members to be part of the savings community and take the “saver’s pledge”. The social marketing part is simply to get folks to recognize the pet phrase of the Mil Saves Week: “Build Wealth, Not Debt”, much in the same way of the “Only You – can prevent forest fires” and “Click it or Ticket” have become. Military Banks and Defense Credit Unions are key partners!

Save and invest. org is a free service of the FINRA Investor Education Foundation which helps protect you from investment fraud and provide information to help handle your finances with confidence.

Youth Financial Readiness The Challenge: Fewer than half of high school and college students have a regular savings plan Only about one-fourth of those students stick to a budget Over 30% of students don't keep track of their spending at all 50% of our military youth will join (or seriously consider joining) the military Our youth are ill-prepared when it comes to financial literacy (look at the stats) One reason: where to we expect them to learn it? “From their parents” yet we’ve seen that the average American gets a failing grade when it comes to basic financial concepts. Also, we form our basic attitudes about money in the first 12 years of life. After that, something drastic sometimes has to happen to get us to change our attitude/behavior. Very little training in high schools and colleges provided to our young people. The key is that 50% of our youth will join or seriously consider joining the military. “Financial baggage” - remember that some recruits may bring into the service with them significant unsecured debt prior to even starting boot camp. Disturbing facts: 94% of young singles know that insurance is important, but: 20% of young singles let their auto insurance lapse to save money 18% decline employer health plans (not a concern of our crowd), but shows the bad decisions that can be made. 87% of students rent; only 24% have renter’s insurance. We must instill sound financial practices in our youth NOW or they will bring their financial baggage into the Service with them or not be good “financial citizens” “Youth and Money” Study – American Savings Education Council 2007

Boys and Girls Club of America Youth Financial Readiness How are we helping them? According to the National Endowment for Financial Education, as few as ten hours of classroom instruction can be enough to persuade students to improve their spending and saving habits Boys and Girls Club of America “Money Matters” Jump$tart Coalition Some of our partners and programs for youth – BBB also has a tremendous program for youth. 10 hours of classroom training: To put it in perspective, for just the high school years: 1600 hours of console video games (Wii, Playstation, Xbox, etc) are played as a conservative estimate! Can’t we fit in 10 hours of financial literacy training as the NEFE suggests? Stats: National Institute on Media and the Family, Entertainment Software Association (ESA). American Bankers Association (ABA) Education Foundation & Association of Military Banks Operation Hope National Endowment for Financial Education

Issue: Money Matters Homepage Navigation Introduction/Link to Category Page Financial Tools Click “MORE” Of course, Military One Source has fantastic resources to assist Service members and their families: - On line (many listed here) - Via phone (can get telephonic financial counseling) - In-person (can get referred to a financial professional in your area) MOS will and does refer callers to many of the Financial Readiness Partners we’ve already discussed, so it’s all interlinked. Big deal is that many of the lessons and quick tips are downloadable as podcasts. Financial Topics Debt quiz Click “MORE”

Financial Calculators Financial Content Financial Materials Yesterday, Jessica briefly demonstrated on Military One Source where you can find financial calculators and other financial material. Financial Calculators

Feed the Pig www.feedthepig.org Feed the Pig is another website: - It’s specifically designed to reach the 25-34 year old age group (it’s kind of quarky – you may have seen the commercials on TV with the guy dressed up as a pig intimidating people to save and not spend). Remember the 25-34 year old age group is 85% of our military and the second most likely age group to declare bankruptcy. Message here is that you need multiple avenues to reach our military members and families – one resource may appeal to one member but not the other. Need any and all approaches – otherwise, families and Service members will slip through the cracks and fall victim to the perfect storm of financial pressure hitting America now. www.feedthepig.org

Financial Readiness Campaign A Commander sponsored event, the Personal Financial Readiness Campaign is designed to attract and serve the widest possible number of soldiers, families, and the local Guard and Reserve Components. OSD will customize a Financial Readiness Campaign to take place on or near your installation. Theme and offerings will address specific financial needs identified by local installation Focus on financial and lifestyle empowerment One of the newest initiatives from PF&T is the Personal Financial Readiness Campaign or you may here the words “financial readiness roadshows.” This is an event that must be approved and supported by the installation commander to have the most success. It’s designed to reach as many services members and families in the local area of the installation or base. OSD is will present and package financial presentations and information to support the service members based on the needs or desires of the command. For example: A commander from of Ft Drum, out of NY had notice that service members returning from deployments were spending that hard earn money on new fancy vehicles, only to be deployed a few months later and the vehicles just sitting on the base parking lots until their return. So Ft Drum commander has requested a Financial Roadshow with major focus on car buying tips, car loans, buying versus leasing, and other relevant information that would be beneficial to the service members and families.

Financial Road Show Customize blend with motivational speaker/entertainment, engaging presentations, financial support resources with the goal of changed behavior/financial status Focus on financial and lifestyle empowerment Specific/expert advice, trainings, one-on-one financial consultations and solution-based referrals to approved DoD and Installation financial partners In order to attract people to these events we will have prominent speakers to

Financial Road Show Customize blend with motivational speaker/entertainment, engaging presentations, financial support resources with the goal of changed behavior/financial status Personalities in the mix: Kelvin Boston Ben Stein Suze Orman (Ft Dix) Kelly Perdew Dr. Robert Manning (Credit Card Nation) Combined with supporting presentations tailored to this site PFC on site and to stay behind to support SM and their families with financial counseling In order to attract people to these events we will have prominent speakers to

Financial Readiness Campaign Circulate prominent financial trainers globally to reach military members and their families Personalities in the mix: Kelvin Boston Ben Stein Suze Orman (Ft Dix) Kelly Perdew Dr. Robert Manning (Credit Card Nation) Combined with supporting presentations tailored to this site PFC on site and to stay behind to support SM and their families with financial counseling

Financial Readiness Campaign Keys to Success: Command emphasis Tailored to your needs Maximum participation by service members Strongly encouraging family participation Speakers who address financial issues with a personal flair Activities that enable participants to change/start to change financial lifestyle

Leave Behind Support Who: Team of rotational and local MFLC-Personal Financial Counselors in the community to offer face-to-face counseling services in coordination with PFMs and Legal Assistance Advisors Timeframe: From 30 to 90 days to support Where: Personal Financial Counseling service on base or within the local community Coordinated network of solution-based referrals to meet the specific needs to each customer Lasting support structure to address issues that may require longer term support PFC assistance in identifying an navigating array of services Referrals to other community supports Referrals to MOS for telephonic counseling/information

Questions? www.feedthepig.org Feed the Pig is another website: - It’s specifically designed to reach the 25-34 year old age group (it’s kind of quarky – you may have seen the commercials on TV with the guy dressed up as a pig intimidating people to save and not spend). Remember the 25-34 year old age group is 85% of our military and the second most likely age group to declare bankruptcy. Message here is that you need multiple avenues to reach our military members and families – one resource may appeal to one member but not the other. Need any and all approaches – otherwise, families and Service members will slip through the cracks and fall victim to the perfect storm of financial pressure hitting America now. www.feedthepig.org