CFPB Analyzes Data on Youth Financial Education Efforts
By Aubrey Sitler
Evidence shows that receiving financial education at an early age can set people up for financial security, capability and well-being for the rest of their lives. And yet, a recent report found that a mere one in six high school students of over 13 million surveyed across 11,000 high schools received financial education. Furthermore, another report notes that only 17 states require the inclusion of personal financial education in their public schools’ K-12 curricula.
So what are the best ways to provide financial education? What role can and should schools play in providing that financial education? How can policymakers, educators, researchers, and other practitioners develop programs that set people up to thrive financially as adults?
These are the types of questions that a literature review published by the Consumer Financial Protection Bureau (CFPB) earlier this year strives to answer. A Review of Youth Financial Education: Effects and Evidence reports on a full overview of current research in the field of youth financial education and what models have worked. Nearly all of the studies reviewed are school-based, namely because they are the most prevalently researched and evaluated.
Three types of studies are included in the report: those that “(1) evaluate youth financial education programs in schools, (2) have a causal interpretation evidenced by a randomized controlled trial, natural experiment setting, or a valid pre-post study design, and (3) have been published in peer-reviewed academic journals or as reviewed working papers.”
Through the research it analyzes, the CFPB report identifies three main findings:
- “Well-implemented state financial education mandates led to a clear improvement in financial behaviors.” For the states where rigorous financial education is made part of the public school curriculum, students had better credit scores and fewer delinquencies, and the effect on students overall increased as financial education programs matured. Students who participated in high-quality, state-mandated financial education programs also tended toward lower-cost borrowing options rather than their predatory and high-cost counterparts, such as payday loans.
- “Many U.S. financial education programs improve financial knowledge for students, though effect sizes vary based on the population served, amount of instruction time, and topics covered.” Some programs implemented for students in grades 3 through 5 in Florida and Kentucky showed increased financial knowledge and participation in savings, but, as might be predicted, overall impacts of these types of programs across the U.S. varied significantly depending on the population participating in them, the amount of time spent with instructors, and specific topics covered.
- “Other countries have used more widespread randomized controlled trials to study the effects of programs as they embed and expand them broadly. Those studies also provide useful information.” Decision-makers in the U.S. can benefit from other countries’ lessons learned in financial education. Examples from Brazil and Peru provide valuable insights into how increased financial knowledge is at least correlated with, if not the cause of, things like increased graduation rates and savings, spillover effects on student participants’ parents’ financial habits, and reduced impulsive spending.
The report also notes that it would be valuable for future research to focus on the specific types and models of programs that offer the most benefit, as well as who benefits most from those and other models.
For more complete insight into the methodologies behind the research reviewed, check out the full report here.