Context

The Canadian government has introduced a number of financial education initiatives to improve the financial knowledge and self-efficacy of different groups of people. These initiatives usually take place in schools, community venues and workplace settings. The interventions aim to improve people’s ability to process economic information to make informed financial decisions (financial knowledge), as well as their self-assessment of their own financial ability (financial self-efficacy).

Both financial knowledge and self-efficacy are associated with a number of positive financial outcomes, such as paying bills on time, budgeting and saving. However, limited research has been carried out into how financial education affects outcomes such as financial knowledge and self-efficacy.

The study

The study analysed two waves (2009 and 2014) of the nationally representative Canadian Financial Capability Survey undertaken by Statistics Canada. It compared outcomes for individuals who had undertaken a financial education course during the past five years, to outcomes for a control group who had not. The study also analysed how the impact of financial education varied across age and gender.

The research examined how financial education affects financial knowledge and self-efficacy. The key research questions were:

• What is the association between financial education and financial knowledge?
• What is the association between financial education and financial self-efficacy?
• How do the associations vary by age and gender?

Propensity score matching was applied to reduce sample bias and compare the group who had participated in financial education with the cohort that had not. Regression analysis was used to examine the association between the outcome variables and financial education, controlling for labour market and welfare policies that vary by area.

Key findings

Around 11% of survey respondents had taken a course to increase their financial knowledge in the preceding five years. Of these:

• About half (48%) were female;
• They were distributed fairly evenly across age groups (18- 65+ years);
• The majority (79%) were University educated (or above);
• Almost two thirds (62%) worked full-time;
• One third (34%) were married and had children;
• About 16% were immigrants.

After matching and adjusting for demographic and economic factors, respondents who had taken a financial education course reported significantly higher financial knowledge (p less than .01) and financial self-efficacy (p less than .01) than those who had not. However, some important differences were identified:

• • Males aged 25 to 64 who had received financial education had significantly higher financial knowledge than those who had not received it.
  • In contrast, the results for women (from all age groups) did not demonstrate a statistically significant difference between those who had received financial education and those who had not.
  • The financial knowledge scores of men who did not participate in financial education were higher than the scores of women in the same age bracket who did participate.
• • Financial education participants had higher efficacy scores for both genders and across all age groups.

Points to consider

• The study did not ask about the timing of the financial education course in question, making it impossible to examine whether the impact of education on knowledge reduces over time.
• The study did not include information about the type of financial education received, which has the potential to influence the outcomes.
• Other known factors that affect financial capability, such as access to financial advice, trust in providers and safety concerns were not measured.

• The findings are relevant to policy makers wishing to develop policies to improve financial knowledge and self-efficacy.