1. INFORMING TODAY’S INVESTORS Financial Capability in the United States Report on the National Financial Capability Study – October 2010

2. Objective  Annamaria Lusardi (Dartmouth College)  Applied Research & Consulting LLC (ARC)  FINRA Investor Education Foundation  Office of Financial Education, U.S. Treasury Department  Additional input from: –Craig Copeland, Employee Benefit Research Institute (EBRI) –American Institute of Certified Public Accountants (AICPA) –Bob Willis, Univ. of Michigan, past PI of U.S. Health and Retirement Study Establish a baseline measure of the ability of Americans to manage their money. Multi-Disciplinary Team: Copyright 2007, FINRA Investor Education Foundation

3. Study Methodology National Financial Capability Study includes three linked surveys: 1.National Survey: Nationally-projectable telephone survey of 1,488 American adults 2.State-by-State Survey: Online survey of approximately 25,000 respondents (roughly 500 per state + DC) 3.Military Survey: Online survey of 800 military personnel and spouses Copyright 2007, FINRA Investor Education Foundation

4. Four Key Financial Capability Components 1.Making Ends Meet 2.Planning Ahead 3.Managing Financial Products 4.Financial Knowledge and Decision-Making Copyright 2007, FINRA Investor Education Foundation

5. 1. Making Ends Meet NationalMilitary Very difficult18%5% Somewhat difficult43%31% Not at all difficult36%64% Copyright 2007, FINRA Investor Education Foundation Keeping Up With Monthly Expenses

6. 1. Making Ends Meet NationalMilitary Spending less than income42%54% Spending about equal to income35%31% Spending more than income20%14% Copyright 2007, FINRA Investor Education Foundation Spending vs. Saving

7. 2. Planning Ahead NationalMilitary Have emergency funds35%50% Do not have emergency funds60%49% Copyright 2007, FINRA Investor Education Foundation Emergency Funds

8. 2. Planning Ahead NationalMilitary Have tried to figure out retirement savings needs 37%54% Have not tried to figure out retirement savings needs 58%43% Copyright 2007, FINRA Investor Education Foundation Planning for Retirement

9. 2. Planning Ahead NationalMilitary Have set aside money for college education 41%52% Copyright 2007, FINRA Investor Education Foundation Planning for Children’s College Education

10. 3. Managing Financial Products NationalMilitary Used one or more non-bank borrowing method in past 5 years 24%21% Copyright 2007, FINRA Investor Education Foundation Non-bank Borrowing

11. 3. Managing Financial Products Respondents who… NationalMilitary Have at least 4 credit cards26%36% Have $5,000 or more in credit card debt28%41% Have $10,000 or more in credit card debt16%27% Have $20,000 or more in credit card debt7%10% Copyright 2007, FINRA Investor Education Foundation Credit Cards

12. 4. Financial Knowledge and Decision-Making ProductNationalMilitary Credit Cards62%58% Auto Loans53%39% Copyright 2007, FINRA Investor Education Foundation Percentage Who Don’t Comparison Shop

13. 4. Financial Knowledge and Decision-Making NationalMilitary Interest rate question75%87% Inflation question62%72% Bond price question26%30% Mortgage question73%88% Risk question61%70% Mean number of correct answers2.993.47 Copyright 2007, FINRA Investor Education Foundation Measuring Financial Literacy

14. Summary The surveys provides evidence that:  People are not well equipped to make financial decision  People are not well informed about the terms of their financial contracts and they do not shop around  The majority of Americans do not plan ahead for life-cycle events Copyright 2007, FINRA Investor Education Foundation

15. Next Steps Military Online Survey  Data will be made available to the public for independent analysis State-By-State Online Survey  Preparation of report for public release (December 2010)  Creation of Web site for state-by-state comparison  Data will be made available to the public for independent analysis

16. 16 Contact Information John M. Gannon Senior Vice President, FINRA President, FINRA Investor Education Foundation 1735 K Street, NW Washington, DC 20006 202-974-2842 john.gannon@finra.org www.finrafoundation.org/capability