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The Complementary Effects of Financial Education and Payday Lending Regulations on Financial Inclusion

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Approximately 5.6 million U.S. households remained unbanked in 2023. We examine the effects of state-mandated high school personal finance coursework on banking outcomes. Because the unbanked population resorts to alternative financial services, such as payday loans, for their financial needs, we also examine the interplay between payday loan regulation and financial education. We find that exposure to personal finance coursework is associated with a lower likelihood of being unbanked and of unbanked adults being uninterested in opening a bank account. This finding holds regardless of whether the state has allowed or restricted payday lending, but we find larger effects in states with stronger restrictions. These results suggest that, for financial inclusion, regulatory measures and financial education are more likely complements than substitutes.

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  • Aditi Routh & Carly Urban, 2025. "The Complementary Effects of Financial Education and Payday Lending Regulations on Financial Inclusion," Research Working Paper RWP 25-14, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:101957
    DOI: 10.18651/RWP2025-14
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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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