Does financial education work?  

This question comes up a lot when talking about financial education. School districts ask this question when considering if schools should offer personal finance courses. State policy makers ask this question when contemplating if financial education should be a requirement for high school graduation. Even teachers and parents may wonder if advocating for more financial education is worth the effort, will it make an impact?

One of the best ways to answer this question, is to look at the research.

Tim Kaiser, Annamaria Lusardi, Lukas Menkhoff, and Carly Urban’s recently released working paper, Financial Education Affects Financial Knowledge and Downstream Behaviors, seeks to answer just that question.

What’s it about?

The field of financial literacy has exploded in the last few years, which means there is a lot more research out there about financial education. With all this research, it can be hard to know what their findings are and what those findings mean. Therefore, this paper looks at a lot of different studies to understand if there was a common result, known as a meta-analysis. The co-authors examine 76 rigorous studies which cover 33 countries across six continents. By looking at rigorous studies only, they can determine if financial education causes improvements in financial knowledge and behavior. Moreover, because they aggregate these studies, they are able to examine results for over 160,000 individuals.

What are the results?

Key findings of the paper:

• Financial education works! There is clear evidence of positive effects of financial education on financial behaviors and knowledge. In fact, the authors find the effects of financial education are much larger than previous work has shown, three to five times larger.

• Financial education’s impact is big enough to matter. The impact of financial education, the authors find, has similar effects to those found in other fields, such as the effects of education on math and reading.

• There is no strong evidence that gains from financial education are lost over time.