First the abstract:
A large and growing literature documents that a large fraction of the population lacks of the basic skills to make sound financial decisions. This evidence has prompted a number of financial education initiatives around the world. These initiatives often take the form of education programs, but are rarely designed to be evaluated. A first urgent question is whether financial education is actually effective in enhancing the level of financial literacy. Using an evaluation design, our experiment studies the effect of financial education on financial literacy, investment attitudes and on how individuals perceive their level of financial literacy. To remove the effect of potentially important confounders, we run the same experiment in the field and in the laboratory. Our evidence shows a non-negligible effect on financial literacy and investment attitude, but an even larger effect on the degree of self-assessed financial literacy in the population of university students. The exercise thus uncovers an interesting pattern: financial education seems to improve more what individuals think to know than what individuals actually know. The results suggest that, while being able to increase financial literacy, financial education programs can also cause individuals to become more confident in their abilities without actually being more equipped to face financial decisions. Our results imply an important warning on the effectiveness of financial education initiatives. The increase in self-confidence seems to be a necessary by-product of financial education. An extremely polluting by-product, if the increase in self-confidence is not matched by the improvement in actual skills.
Financial literacy has been a bit of a bug bear for me for many moons now. I have taught my son on how to look after money and investments along with some friends. Helped develop a trading game for the London School of Economics which deployed to many many schools over many years to help the kids learn about finance and moneys. Helped all the families in another charity that I look after with learning about debt and money. And in my own teaching as part of STEM Ambassadorship, I talk about money to school students. But this is a fascinating result, that its not just enough to tell them what to do, this telling and teaching doesn't seem to be reflecting in actual money handling skills.
Much to think about now, but at least they are conscious of money. Something that we just do not do enough of.