The study

This meta-study investigates the relationship of financial education and financial literacy (largely defined and measured in terms of skills and knowledge) to longer-term financial behaviour.

The study considered seven areas of financial behaviour in the analysis: saving; planning for retirement; absence of debt; stock ownership and investment decisions; cash flow management; activity in retirement plans; and financial inertia such as choice of default options and payment of unnecessary fees.

Using clear and robust criteria, the authors aggregated data from 201 prior studies from 168 separate papers and used sophisticated statistical techniques to analyse the data and produce robust findings.

The study also incorporated evaluation results from different types of interventions including financial seminars and workshops, counselling, financial education in high schools, multiple sources of financial education, exposure to information about financial education and general financial education programmes.

The authors also conducted their own quantitative analysis to explore the relationship between financial literacy and financial behaviour. The report includes the findings of this new research.

Key findings

• Financial education programmes designed to improve financial literacy do have statistically significant effects on longer-term financial behaviours, but these effects are deemed to be ‘miniscule’ (participation in financial education explains only 0.1% of the variance in financial behaviour studied).
• The study found statistically significant but practically small differences between the impacts of different types of intervention. The interventions that explained the largest amount of variance in behaviour were seminars or workshops (0.18%) and financial counselling (0.14%). Those that explained the smallest amount of variance were exposure to information about financial education (0.5%) and participating in a financial education programme (0.10%).
• The longer the length of the financial education programme (measured in terms of number of hours of instruction provided) the larger the effects on longer-term behaviours.
• However, the effect of these interventions decreases over time. Even interventions involving many hours of instruction have negligible effects on behaviour 20 months or more after the intervention has been delivered:
• After 18.5 months or greater there is no significant effect of 24 hours (or less) of instruction, after 23.5 months there are no significant effects of any amount of instruction.
• The effects of financial education on behaviour are weaker for low-income participants than in general population samples.
• The study found no differences in the impact of mandatory compared with voluntary programmes.

• Financial education leads to surprisingly weak changes in financial knowledge. Participation in interventions explains only 0.44% of the variance in knowledge (much lower than in other comparable areas such as science and maths).
• The analysis in the report also questioned the links often identified between financial literacy (skills and knowledge) and financial behaviour when other traits (such as impulsivity, level of risk taking and confidence in information searching and processing) are taken into account. The authors found that the predictive effects of financial literacy on financial behaviour diminish dramatically when they controlled for these other traits. They therefore conclude that financial literacy may not be as strong a driver of financial behaviour as previously thought.

Points to consider

• The study’s authors recommend a role for ‘just in time’ financial education, that is tied to the specific behaviours that it intends to influence and can be acted on soon after being taught. They suggest that it may be difficult to retrieve and apply knowledge for the first-time months or years after it has been taught as that knowledge decays unless it is put to immediate use.
• The authors also suggest that a combination of focused, ‘just in time’ financial education, financial regulation and well-designed ‘choice architecture’ (using behavioural techniques to positively shape people’s financial choices) will be most effective in creating the kind of positive behaviour change financial educators are working towards.
• The results indicate that studies with better evaluation designs (e.g. randomised control studies) have tended to find weaker or no effects of financial education. This emphasises the importance of robust evaluation in order to avoid us over-estimating the positive impacts of programmes.

Full report

Meta-study of the impact of financial education programmes on financial literacy and behaviour - full report