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Five Steps to Planning Success. Experimental Evidence from U.S. Households

  • Aileen Heinberg
  • Angela A. Hung
  • Arie Kapteyn
  • Annamaria Lusardi
  • Anya Savikhin Samek
  • Joanne Yoong

While financial knowledge has been linked to improved financial behavior, there is little consensus on the value of financial education, in part because rigorous evaluation of various programs has yielded mixed results. However, given the heterogeneity of financial education programs in the literature, focusing on "generic" financial education can be inappropriate and even misleading. Lusardi (2009) and others argue that pedagogy and delivery matter significantly. In this paper, we design and field a low-cost, easily-replicable financial education program called "Five Steps," covering five basic financial planning concepts that relate to retirement. We conduct a field experiment to evaluate the overall impact of "Five Steps" on a probability sample of the American population. In different treatment arms, we quantify the relative impact of delivering the program through video and narrative formats. Our results show that short videos and narratives (each takes about three minutes) have sizable short-run effects on objective measures of respondent knowledge. Moreover, keeping informational content relatively constant, format has significant effects on other psychological levers of behavioral change: effects on motivation and self-efficacy are significantly higher when videos are used, which ultimately influences knowledge acquisition. Follow-up tests of respondents' knowledge approximately eight months after the interventions suggest that between one-quarter and one-third of the knowledge gains and about one-fifth of the self-efficacy gains persist. Thus, this simple program has effects both in the short run and medium run.

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File URL: http://www.nber.org/papers/w20203.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 20203.

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Date of creation: Jun 2014
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Publication status: published as Aileen Heinberg & Angela Hung & Arie Kapteyn & Annamaria Lusardi & Anya Savikhin Samek & Joanne Yoong, 2014. "Five steps to planning success: experimental evidence from US households," Oxford Review of Economic Policy, Oxford University Press, vol. 30(4), pages 697-724.
Handle: RePEc:nbr:nberwo:20203
Note: AG
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  1. Emmanuel Saez & Esther Duflo, 2003. "The role of information and social interactions in retirement plan decisions: Evidence from a randomized experiment," Framed Field Experiments 00141, The Field Experiments Website.
  2. Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 1996. "The Effects of Financial Education in the Workplace: Evidence from a Survey of Employers," Working Papers 96011, Stanford University, Department of Economics.
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  11. Richard Thaler & Shlomo Benartzi, 2004. "Save more tomorrow: Using behavioral economics to increase employee saving," Natural Field Experiments 00337, The Field Experiments Website.
  12. Meier, Stephan & Sprenger, Charles D., 2013. "Discounting financial literacy: Time preferences and participation in financial education programs," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 159-174.
  13. Adeline Delavande & Susann Rohwedder & Robert Willis, 2008. "Preparation for Retirement, Financial Literacy and Cognitive Resources," Working Papers wp190, University of Michigan, Michigan Retirement Research Center.
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  15. Angela A. Hung & Erik Meijer & Kata Mihaly & Joanne Yoong, 2009. "Building Up, Spending Down: Financial Literacy, Retirement Savings Management, and Decumulation," Working Papers 712, RAND Corporation Publications Department.
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