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What Does Financial Literacy Training Teach Us?

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  • Bruce Ian Carlin
  • David T. Robinson

Abstract

This paper uses a quasi natural experiment to explore how financial education changes savings, investment, and consumer behavior. We use data from a Junior Achievement Finance Park to measure the effect of a financial literacy program on students who are assigned fictitious life situations and asked to create household budgets for these roles. The treatment effects of the financial literacy program are strong. Students who experienced training were somewhat better at making current-cost/current-benefit tradeoff decisions (spending more today versus spending less today). But the tendency to try to save more today often led them to make poor choices when they faced tradeoffs between current-costs and future-benefits today (i.e., when spending more today is cheaper in present value terms). Most importantly, students who had attended training showed greater up-take of decision support that was offered in the park. This indicates that decision support and financial literacy training are complements, not substitutes.

Suggested Citation

  • Bruce Ian Carlin & David T. Robinson, 2010. "What Does Financial Literacy Training Teach Us?," NBER Working Papers 16271, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16271
    Note: CF ED PE
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    References listed on IDEAS

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    1. Annamaria Lusardi & Olivia S. Mitchell & Vilsa Curto, 2009. "Financial Literacy among the Young: Evidence and Implications for Consumer Policy," NBER Working Papers 15352, National Bureau of Economic Research, Inc.
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    6. Annamaria Lusardi & Olivia Mitchell, 2006. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education Programs," Working Papers wp144, University of Michigan, Michigan Retirement Research Center.
    7. Thompson, Leigh & Gentner, Dedre & Loewenstein, Jeffrey, 2000. "Avoiding Missed Opportunities in Managerial Life: Analogical Training More Powerful Than Individual Case Training," Organizational Behavior and Human Decision Processes, Elsevier, vol. 82(1), pages 60-75, May.
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    More about this item

    JEL classification:

    • A21 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Pre-college
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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