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Financial wellbeing and some problems in assessing its link to financial education

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  • Tatom, John

Abstract

In 2009, the National Endowment for Financial Education initiated a project to study the “Implications of a Quarter Century Research in Personal Finance.” As part of that effort, one of the major themes chosen was to study the measurement and evaluation of participant outcomes. This paper is part of the investigation of measurement and evaluation. It focuses more on what the macro-measures of financial wellbeing are that financial education is aimed at improving and the extent to which these larger scale measures can be improved by financial education, as well as obstacles to good evaluations and limitations of correlation outcomes. The case for improving financial education rests upon (1) the hypothesis that financial education can improve financial wellbeing, (2) the documented low state of financial literacy and individual satisfaction with their financial knowledge, behavior and financial outcomes of consumer decision making, and finally (3) the stress that recent financial shocks have put on household wellbeing. This article also reviews some of those recent changes and the initial recovery from the most recent shock to wellbeing. Section I reviews macro measures of wellbeing and the principal measures and approaches of most studies of the effects of financial education programs. Section II reviews the extent of two major shocks to household net worth in the past decade, some of the potential stress for households this created and the implications for the importance of financial education. Section III reviews some of the principal obstacles to effective assessment and the difficulties with reliance on simple correlations of financial programs and outcomes for such assessments.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26411.

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Date of creation: 01 Oct 2010
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Publication status: Published in Networks Financial Institute Working Paper Series 2010-WP-03.Networ(2010): pp. 1-14
Handle: RePEc:pra:mprapa:26411

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Keywords: Financial wellbeing; financial education; educational assessment.;

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  1. John P. Caskey, 2006. "Can Personal Financial Management Education Promote Asset Accumulation by the Poor?," NFI Policy Briefs, Indiana State University, Scott College of Business, Networks Financial Institute 2006-PB-06, Indiana State University, Scott College of Business, Networks Financial Institute.
  2. B. Douglas Bernheim & Daniel M. Garrett & Dean M. Maki, 1997. "Education and Saving: The Long-Term Effects of High School Financial Curriculum Mandates," NBER Working Papers 6085, National Bureau of Economic Research, Inc.
  3. Kevin Hoover & Mark Siegler, 2008. "Sound and fury: McCloskey and significance testing in economics," Journal of Economic Methodology, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(1), pages 1-37.
  4. McCloskey, Donald N, 1983. "The Rhetoric of Economics," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 21(2), pages 481-517, June.
  5. Annamaria Lusardi, 2006. "Financial Literacy and Financial Education: Review and Policy Implications," NFI Policy Briefs, Indiana State University, Scott College of Business, Networks Financial Institute 2006-PB-11, Indiana State University, Scott College of Business, Networks Financial Institute.
  6. Bernheim, B. Douglas & Garrett, Daniel M., 2003. "The effects of financial education in the workplace: evidence from a survey of households," Journal of Public Economics, Elsevier, Elsevier, vol. 87(7-8), pages 1487-1519, August.
  7. Robert I. Lerman & Elizabeth Bell, 2006. "Financial Literacy Strategies: Where Do We Go From Here?," NFI Policy Briefs, Indiana State University, Scott College of Business, Networks Financial Institute 2006-PB-10, Indiana State University, Scott College of Business, Networks Financial Institute.
  8. Meier, Stephan & Sprenger, Charles, 2008. "Discounting Financial Literacy: Time Preferences and Participation in Financial Education Programs," IZA Discussion Papers 3507, Institute for the Study of Labor (IZA).
  9. John Karl Scholz & Ananth Seshadri, 2008. "Are All Americans Saving ‘Optimally’ for Retirement?," Working Papers, University of Michigan, Michigan Retirement Research Center wp189, University of Michigan, Michigan Retirement Research Center.
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