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Using online compound interest tools to improve financial literacy

Author

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  • Edward Hubbard
  • Percival Matthews
  • Anya Samek

Abstract

The widespread use of personal computing presents the opportunity to design educational materials that can be delivered online, potentially addressing low financial literacy. The authors developed and evaluated three different educational tools focusing on interest compounding. In the authors’ laboratory experiment, individuals were randomized to one of three display tools: text, linear graph, or volumetric graph. They found that the text and volumetric tools were most effective at improving understanding of interest compounding, whereas individuals using the linear tool made little gains. The superiority of the text over the linear tool runs counter to the prediction of theories that suggest advantages of graphics over text. For researchers, the authors’ findings highlight the importance of pedagogy evaluation. For practitioners, they provide research-validated tools for online dissemination.

Suggested Citation

  • Edward Hubbard & Percival Matthews & Anya Samek, 2016. "Using online compound interest tools to improve financial literacy," The Journal of Economic Education, Taylor & Francis Journals, vol. 47(2), pages 106-120, April.
    • Handle: RePEc:taf:jeduce:v:47:y:2016:i:2:p:106-120
    DOI: 10.1080/00220485.2016.1146097
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    References listed on IDEAS

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    1. Aileen Heinberg & Angela Hung & Arie Kapteyn & Annamaria Lusardi & Anya Savikhin Samek & Joanne Yoong, 2014. "Five steps to planning success: experimental evidence from US households," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 30(4), pages 697-724.
    2. Lusardi, Annamaria & Samek, Anya & Kapteyn, Arie & Glinert, Lewis & Hung, Angela & Heinberg, Aileen, 2017. "Visual tools and narratives: new ways to improve financial literacy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(3), pages 297-323, July.
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    Cited by:

    1. 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.

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