Why ‘budgeting skills’ isn’t the same as financial literacy.
“Janet’s 98th Percentile”
When Janet entered our transitional housing program, she had a bachelor’s degree in business administration and fifteen years of corporate accounting experience. She could calculate compound interest in her head. She’d built spreadsheets more sophisticated than anything I could teach in a workshop.
She’d also just spent two months living in her car behind a grocery store.
When she took our intake financial literacy assessment — the standard numeracy-based kind most programs use — she scored in the 98th percentile. The assessment classified her as “highly financially literate.” She was also, at that exact moment, homeless.
I’ve sat with this contradiction for years. If financial literacy is fundamentally about math skills and budgeting knowledge, Janet should never have ended up sleeping in a parking lot. She had more numerical competency than most people who will ever walk through our doors. And it didn’t prevent her crisis, and it wasn’t going to solve it either.
This isn’t an isolated anomaly. Fernandes et al. (2014) found that measured financial knowledge — the kind captured by numeracy-based assessments — explains only about 0.1% of the variance in actual financial behaviors. Point one percent. We’ve built an entire field of education and assessment around a variable that barely moves the outcome we claim to care about.
Here’s what I’ve learned running Fresh Start Housing for seventeen years: financial literacy for someone in crisis isn’t a deficit of knowledge. It’s a different kind of knowledge entirely. Janet didn’t need another lesson in interest rates. She needed to understand how to navigate an eviction record on a rental application, how emergency assistance funds actually get disbursed, what a landlord can and can’t legally ask her. None of that shows up on a numeracy test. All of it determined whether she’d have a roof over her head.
We keep testing for the wrong thing, and then we keep being surprised when the test doesn’t predict the outcome.
I think about how many “highly financially literate” people are sitting in shelters right now, and how many programs are handing them budgeting worksheets instead of asking what they actually need to know.
Have you seen this gap yourself — someone with real financial competency who still ended up in crisis?
What did they actually need instead?
source: Beyond Budgeting — abstract/intro Author Sandra Roussel
Author: Sandra Roussel
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