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Maybe Financial Education Doesn't Work.

There is probably more research out there that shows financial education doesn't work than evidence that it does.

Photo of Jared Bybee
12 10

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The immediate reaction upon seeing poor financial decisions being made is to offer education.  The assumption being, that if an actor had more information or know-how, they would make a different decision.  People wouldn't spend too much if they knew how to budget, wouldn't carry a credit card debt if they knew how interest works.  

It seems reasonable, but there is growing research that indicates the fix is not so simple.  Here is a blog post by one of the leaders in the field, Lauren Willis, that lays out her main findings.  

This is not squarely my field, so I won't categorically say that financial education is a waste of time, but it is certainly worth stopping for a moment to question the assumption that if we can just get people to take a course then they will adopt good financial decision making.  Many researchers are now looking more toward prompting behaviors, like saving for an emergency, as a more effective at getting the "lesson" to stick. 

Finally, it has been my experience that often what looks like irrational financial decision making to my US middle-class self is often perfectly rational given the world of the decision maker.  I think it is important to see and understand and recognize that it is not just a stupid financial move. 


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Photo of Peregrine Badger

This was super interesting Jared, thank you for sharing! After reading through the research papers mentioned in the blog post, it seems like Lauren Willis is mostly talking about middle class Americans understanding complex financial products more clearly. If you follow one of her links to, the author writes

"For consumers in middle and lower income groups, counseling was associated with a reduction in debt
between 2% and 12%, although at higher incomes, counseling associated with an increase in debt"

So while Willis seems to be very confident of her arguments concerning Americans, and especially middle and upper class Americans, it might be worthwhile to consider section 3 (Empirical Evidence of the Importance of Financial Literacy) of for a more global discussion of this issue. Note that this was just some quick research, and I'd love to hear your thoughts about the big picture here!

Photo of Jared Bybee

You went deep! That's great. It seems like Willis is reacting to so many programs out there that focus only on communicating information, and arguing that such programs alone can't bring about changes in behavior. The Global Brigades article seems to echo that in that the info needs to be paired with opportunities to model and try out those new financial concepts.

I sometimes see organizations that are going through the motions of "doing something" by offering classes on credit scores, how to make a budget, etc and there needs to be some methodology to such work. For low income folks that live on the edge of financial catastrophe, there is seldom the space to experiment and make mistakes so as to learn organically.

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