For every dollar allocated to increasing financial literacy, $25 is spent on financial marketing according to a year-long study by the Consumer Financial Protection Bureau. Approximately $670 million is spent annually on financial education while about $17 billion is spent every year by the financial services industry marketing products and services.
For financial education, non-profits spend the most money annually (about $472 million) followed by the federal government ($130 million) and financial institutions (about $31 million). In all, approximately three-quarters of the money comes from private sources and one quarter from public sources.
On the financial marketing side, the CFPB broke the sum down into two categories: awareness advertising, which concentrates on general promotional messages, and direct marketing, which focuses on a specific product.
Awareness advertising totals $5.5 billion, 56 percent of which is spent on credit- and loan-related products. An additional 24 percent is spent on banking services. About half of awareness advertising appears on television.
Direct marketing totals $12 billion annually, 44 percent of which is spent on internet marketing. Mailers and television ads account for an additional 22 and 16 percent, respectively.
The difference in spending “underscores the importance of providing high-quality sources of unbiased financial information to consumers,” Camille Busette, CFPB’s Assistant Director of Financial Education, said.
CFPB Director Richard Cordray agreed with Busette, saying the American consumer is under a barrage of marketing from the financial services industry. “By contrast, very little of the money spent on financial education efforts is put toward any type of advertising. It is truly a David and Goliath scenario,” Cordray said.
The CFPB admitted, however, that numbers for the study were not exact. Data for the study were drawn from different years, and the financial education findings in particular “should be treated as a general order of magnitude of spending rather than as a precise number.”
Industry observers commented that additional data is needed to put the 1-to-25 ratio for education versus marketing spending into perspective. “It would be interesting to know, for example, how much money is spent promoting drivers’ education relative to selling cars, or how much is spent promoting responsible drinking versus selling beer,” commented Tom Bengtson, editor/publisher of NorthWestern Financial Review magazine.