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The impacts of mandatory financial education: Evidence from a randomized field study

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  • Collins, J. Michael

Abstract

Financial education is commonly assumed to affect knowledge and behavior, yet its impacts remain relatively untested. Very low-income families in a subsidized housing program were randomly assigned to a mandatory financial education program and tracked for 12 months. Financial education led to improvements in self-reported behaviors, but no measurable effects on savings or credit, except for participants in education expanding their use of credit, albeit with no evidence of problems in the study period. This study also illustrates the methodological issues that arise in social experiments with small samples, including non-compliance, attrition and self-report bias.

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  • Collins, J. Michael, 2013. "The impacts of mandatory financial education: Evidence from a randomized field study," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 146-158.
  • Handle: RePEc:eee:jeborg:v:95:y:2013:i:c:p:146-158
    DOI: 10.1016/j.jebo.2012.08.011
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    2. Ghafoori, Eraj & Ip, Edwin & Kabátek, Jan, 2021. "The impacts of a large-scale financial education intervention on retirement saving behaviors and portfolio allocation: Evidence from pension fund data," Journal of Banking & Finance, Elsevier, vol. 130(C).
    3. Brett Theodos & Christina Plerhoples Stacy & Devlin Hanson & Julian Jamison & Rebecca Daniels, 2020. "Do not swipe the small stuff: A randomized evaluation of rules of thumb‐based financial education," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(2), pages 701-722, June.
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    5. Robert Argento & Lariece Brown & Sergei Koulayev & Grace Li & Marina Myhre & Forrest W. Pafenberg & Saty Patrabansh, 2018. "First-Time Homebuyer Counseling and the Mortgage Selection Experience in the United States: Evidence from the National Survey of Mortgage Originations," NMDB Staff Working Papers 18-02, Federal Housing Finance Agency.
    6. Fenella Carpena & Shawn Cole & Jeremy Shapiro & Bilal Zia, 2019. "The ABCs of Financial Education: Experimental Evidence on Attitudes, Behavior, and Cognitive Biases," Management Science, INFORMS, vol. 65(1), pages 346-369, January.
    7. Huizingh, Eelko & Mulder, Machiel, 2014. "Effectiveness of regulatory interventions on firm behavior," Research Report 14011-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    8. Sandro Ambuehl & B. Douglas Bernheim & Annamaria Lusardi, 2022. "Evaluating Deliberative Competence: A Simple Method with an Application to Financial Choice," American Economic Review, American Economic Association, vol. 112(11), pages 3584-3626, November.
    9. Entorf, Horst & Hou, Jia, 2018. "Financial Education for the Disadvantaged? A Review," IZA Discussion Papers 11515, Institute of Labor Economics (IZA).
    10. Tim Kaiser & Lukas Menkhoff, 2017. "Does Financial Education Impact Financial Literacy and Financial Behavior, and If So, When?," The World Bank Economic Review, World Bank, vol. 31(3), pages 611-630.
    11. Rashmi Baura & Renuka Sane, 2014. "Repayment in microfinance: The Role of financial literacy and caste," Discussion Papers 14-06, Indian Statistical Institute, Delhi.
    12. Brounen, Dirk & Koedijk, Kees G. & Pownall, Rachel A.J., 2016. "Household financial planning and savings behavior," Journal of International Money and Finance, Elsevier, vol. 69(C), pages 95-107.
    13. Silvia Helena Barcellos & Leandro S. Carvalho & James P. Smith & Joanne Yoong, 2016. "Financial Education Interventions Targeting Immigrants and Children of Immigrants: Results from a Randomized Control Trial," Journal of Consumer Affairs, Wiley Blackwell, vol. 50(2), pages 263-285, July.
    14. repec:dgr:rugsom:14011-eef is not listed on IDEAS
    15. Lührmann, Melanie & Serra-Garcia, Marta & Winter, Joachim, 2015. "Teaching teenagers in finance: Does it work?," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 160-174.
    16. Emmanuel Kwablah Apiors & Aya Suzuki, 2023. "Effects of Mobile Money Education on Mobile Money Usage: Evidence from Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(3), pages 715-742, June.
    17. De Beckker, Kenneth & De Witte, Kristof & Van Campenhout, Geert, 2021. "The effect of financial education on students’ consumer choices: Evidence from a randomized experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 962-976.
    18. Basha, Shabeen Afsar & Bennasr, Hamdi & Goaied, Mohamed, 2023. "Financial literacy, financial development, and leverage of small firms," International Review of Financial Analysis, Elsevier, vol. 86(C).
    19. Aliza Moledina & Olivia Magwood & Eric Agbata & Jui‐Hsia Hung & Ammar Saad & Kednapa Thavorn & Ginetta Salvalaggio & Gary Bloch & David Ponka & Tim Aubry & Claire Kendall & Kevin Pottie, 2021. "A comprehensive review of prioritised interventions to improve the health and wellbeing of persons with lived experience of homelessness," Campbell Systematic Reviews, John Wiley & Sons, vol. 17(2), June.
    20. Beckmann, Elisabeth & Stix, Helmut, 2015. "Foreign currency borrowing and knowledge about exchange rate risk," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 1-16.
    21. Tsui-Yii Shih & Sheng-Chen Ke, 2014. "Determinates of financial behavior: insights into consumer money attitudes and financial literacy," Service Business, Springer;Pan-Pacific Business Association, vol. 8(2), pages 217-238, June.
    22. Marco Nieddu & Lorenzo Pandolfi, 2018. "Cutting Through the Fog: Financial Literacy and the Subjective Value of Financial Assets," CSEF Working Papers 497, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    23. Peter de Goeij & Geert Van Campenhout & Marjana SubotiÄ, 2018. "Improving Index Mutual Fund Risk Perception: Increase Financial Literacy or Communicate Better?," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 47(2-3), pages 519-552, July.
    24. Fan, Lu & Chatterjee, Swarn, 2018. "Application of situational stimuli for examining the effectiveness of financial education: A behavioral finance perspective," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 68-75.
    25. Tian, Guangning & Zhou, Shuyuan & Hsu, Sara, 2020. "Executive financial literacy and firm innovation in China," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).

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    More about this item

    Keywords

    Financial education; Asset accumulation; Financial security;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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