Late Spring 2020
June 03, 2020
Image source: Global Financial Literacy Excellence Center
Does financial education work?
This question lies at the heart of the ongoing debate over whether investing in financial education is “worth it.” Those on both sides of the debate point to research to bolster their positions. The problem is, some of this research—and the conclusions drawn from it—are outdated.
A new study should bring everyone up to speed.
“Financial Education Affects Financial Knowledge and Downstream Behaviors” (Kaiser, Lusardi, Menkhoff, & Urban, 2020), a meta-analysis conducted by leading experts in the field, concludes that financial education has a sizable effect on both financial knowledge and financial behavior. In fact:
- The effect sizes of financial education interventions on financial knowledge were similar to those of educational interventions in reading and math.
- The effect sizes for financial behavior were similar to those in health or energy conservation behavior interventions.
These striking findings are powerful evidence in the debate over whether financial education works.
After so many years of purportedly mixed research findings, how do the authors draw such a clear-cut conclusion? It’s based on their meta-analysis of 76 studies of the effectiveness of financial education interventions—studies that represent a collective sample size of 160,000 people at all life stages in 33 countries across six continents.
Meta-analyses are, fundamentally, studies of many related research studies. Meta-analyses examine the results found in each study in the aggregate, estimating the overall effect of an innovation across all the studies. The body of research on financial education has been expanding rapidly over recent years. Moving beyond the limited number of studies in prior meta-analyses, this new meta-analysis synthesizes findings from more robust and newer studies and draws general conclusions on the collective evidence.
This new meta-analysis was conducted with careful attention to quality and thoroughness. It only includes randomized control trials, considered the most rigorous types of studies. All included studies were published in top economic or general interest journals. And the analysis carefully takes into account differences in financial education programs, such as intensity, duration, and content.
So, does financial education work?
It’s time to move past this debate, and move on to the important work of high-quality education.