Policy makers have embraced financial education as a necessary antidote to the increasing complexity of consumers’ financial decisions over the last generation. However, a meta-analysis of the relationship of financial literacy and of financial education to financial behaviors conducted by this article’s authors found that interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied, with weaker effects in low income samples.
Like other education, financial education decays over time; even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention. Financial education as studied to date has serious limitations that have been masked by the apparently larger effects in correlational studies. This article, published in Management Science, envisages a reduced role for financial education that is not elaborated or acted upon soon afterward.
This material was part of the 2015 AFN Grantmaker Conference, which included both regional and community-based funders and thought leaders concerned about a common goal–providing individuals, families and communities with greater economic security and opportunities for growth. View all the resources from this conference.
The 2015 Grantmaker Conference was sponsored by the following: The Kresge Foundation, The Annie E. Casey Foundation, MetLife Foundation, Citi Foundation, JPMorgan Chase and Company, Thomas Family Foundation, W.K. Kellogg Foundation.