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Financial Education and the Debt Behavior of the Young

Author

Listed:
  • Meta Brown
  • John Grigsby
  • Wilbert van der Klaauw
  • Jaya Wen
  • Basit Zafar

Abstract

Young Americans are heavily reliant on debt and have clear financial literacy shortcomings. In this paper, we study the effects of exposure to financial training on debt outcomes in early adulthood among a large and representative sample of young Americans. Variation in exposure to financial training comes from statewide changes in high school graduation requirements. Using a flexible event study approach, we find that both mathematics and financial education, by and large, decrease reliance on nonstudent debt and improve repayment behavior. Economics training, on the other hand, increases both the likelihood of holding outstanding debt and the prevalence of repayment difficulties.Received July 9, 2014; accepted December 5, 2015 by Editor Stefan Nagel.

Suggested Citation

  • Meta Brown & John Grigsby & Wilbert van der Klaauw & Jaya Wen & Basit Zafar, 2016. "Financial Education and the Debt Behavior of the Young," Review of Financial Studies, Society for Financial Studies, vol. 29(9), pages 2490-2522.
  • Handle: RePEc:oup:rfinst:v:29:y:2016:i:9:p:2490-2522.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhw006
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    Cited by:

    1. A.S. Kalwij & Rob Alessie & M. Dinkova & Gea Schonewille & Anna van der Schors & Minou van der Werf, 2017. "The effects of financial education on financial literacy and savings behavior : Evidence from a controlled field experiment in Dutch primary schools," Working Papers 17-05, Utrecht School of Economics.
    2. Judith Scott-Clayton & Basit Zafar, 2016. "Financial Aid, Debt Management, and Socioeconomic Outcomes: Post-College Effects of Merit-Based Aid," NBER Working Papers 22574, National Bureau of Economic Research, Inc.
    3. 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.
    4. Laura Hospido & Ernesto Villanueva & Gema Zamarro, 2015. "Finance For All: The Impact Of Financial Literacy Training In Compulsory Secondary Education In Spain," Working Papers 1502, Banco de España;Working Papers Homepage.
    5. Ghent, Andra C. & Kudlyak, Marianna, 2015. "Intergenerational Linkages in Household Credit," Working Paper 15-14, Federal Reserve Bank of Richmond.
    6. repec:onb:oenbmp:y:2018:i:q1/18:b:2 is not listed on IDEAS
    7. Sarena Goodman & Adam Isen & Constantine Yannelis, 2018. "A Day Late and a Dollar Short : Liquidity and Household Formation among Student Borrowers," Finance and Economics Discussion Series 2018-025, Board of Governors of the Federal Reserve System (U.S.).
    8. Brown, Alexandra & Collins, J. Michael & Schmeiser, Maximilian D. & Urban, Carly, 2014. "State Mandated Financial Education and the Credit Behavior of Young Adults," Finance and Economics Discussion Series 2014-68, Board of Governors of the Federal Reserve System (U.S.).
    9. repec:eee:jfinec:v:129:y:2018:i:1:p:24-45 is not listed on IDEAS
    10. Entorf, Horst & Hou, Jia, 2018. "Financial education for the disadvantaged? A review," SAFE Working Paper Series 205, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    11. Tim Kaiser & Lukas Menkhoff, 2017. "Does Financial Education Impact Financial Literacy and Financial Behavior, and If So, When?," World Bank Economic Review, World Bank Group, vol. 31(3), pages 611-630.
    12. 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.
    13. Olympia Bover & Laura Hospido & Ernesto Villanueva, "undated". "The impact of high school financial education on financial knowledge and choices: evidence from a randomized trial in Spain," Working Papers 1801, Banco de España;Working Papers Homepage.
    14. Entorf, Horst & Hou, Jia, 2018. "Financial Education for the Disadvantaged? A Review," IZA Discussion Papers 11515, Institute for the Study of Labor (IZA).
    15. Melanie Lührmann & Marta Serra-Garcia & Joachim Winter, 2014. "The Impact of Financial Education on Adolescents' Intertemporal Choices," CESifo Working Paper Series 4925, CESifo Group Munich.
    16. repec:nup:jrmdke:v:5:y:2017:i:2:307-326 is not listed on IDEAS
    17. Carlos Madeira, 2014. "El Impacto del Endeudamiento y Riesgo de Desempleo en la Morosidad de las Familias Chilenas," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 17(1), pages 88-102, April.
    18. repec:eee:soceco:v:74:y:2018:i:c:p:104-111 is not listed on IDEAS
    19. Tim Kaiser & Lukas Menkhoff, 2018. "Active Learning Fosters Financial Behavior: Experimental Evidence," Discussion Papers of DIW Berlin 1743, DIW Berlin, German Institute for Economic Research.

    More about this item

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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