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Financial Education and Savings Outcomes in Individual Development Accounts


  • Margaret Clancy

    (Washington University in St. Louis)

  • Michal Grinstein-Weiss

    (Washington University in St. Louis)

  • Mark Schreiner

    (Washington University in St. Louis)


Individual Development Accounts (IDAs) are subsidized savings accounts. Unlike other subsidized savings accounts such as Individual Retirement Accounts (IRAs) or 401(k) plans, IDAs are targeted to the poor, provide subsidies through matches rather than through tax breaks, and require participants to attend financial education. Participants accrue matches as they save for purposes that build assets that increase long-term well-being and financial self-sufficiency. Matched uses of withdrawals typically include home purchase, post-secondary education, and microenterprise. The purpose of this study is to examine the relationship between the hours of financial education attended by IDA participants and savings outcomes. The data are from the Downpayments on the American Dream Policy Demonstration (ADD). The goal of financial education is to make people more aware of financial choices and possible consequences. IDA programs require financial education, but there is no systematic/scientific evidence that this requirement is essential. As of June 30, 2000, 81 percent of the 2,378 participants in ADD had attended general financial-education classes. Most participants (65 percent) had one to twelve hours of attendance recorded, 16 percent had 13 hours or more, and 14 percent were recorded as having no hours. Mean attendance was 10.4 hours, with a low of zero and a high of 35. To measure the association between attendance at financial education and savings outcomes, we used a Heckman two-step regression in which the first step predicted exit from the IDA program (and thus a high likelihood of a low opportunity for attendance at financial education). The second step predicted average monthly net deposit (AMND) for those participants who did not exit, controlling for length of participation and a wide range of other factors that might affect AMND. These results broadly suggest that between 0 and 12 hours of financial education have large, positive effects on savings (in the range of one dollar of AMND for each hour of general financial education up to 12 hours). After that point, the effects leveled off. Results for asset-specific education were similar. In short, financial education seems to have had large effects on savings outcomes.

Suggested Citation

  • Margaret Clancy & Michal Grinstein-Weiss & Mark Schreiner, 2001. "Financial Education and Savings Outcomes in Individual Development Accounts," HEW 0108001, University Library of Munich, Germany, revised 27 Dec 2001.
  • Handle: RePEc:wpa:wuwphe:0108001
    Note: Type of Document - Adobe Acrobat 3.0; prepared on Windows 98; to print on Adobe Acrobat 3.0; pages: 18 ; figures: Included in pdf file

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    References listed on IDEAS

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    Cited by:

    1. Margaret Miller & Julia Reichelstein & Christian Salas & Bilal Zia, 2015. "Can You Help Someone Become Financially Capable? A Meta-Analysis of the Literature," World Bank Research Observer, World Bank Group, vol. 30(2), pages 220-246.
    2. Johnson, Toni & Adams, Deborah & Kim, Johnny S., 2010. "Mapping the perspectives of low-income parents in a children's college savings account program," Children and Youth Services Review, Elsevier, vol. 32(1), pages 129-136, January.
    3. Leonardo Becchetti & Fabio Pisani, 2011. "Financial education on secondary school students: the randomized experiment revisited," Econometica Working Papers wp34, Econometica.
    4. Matthew Martin, 2007. "A literature review on the effectiveness of financial education," Working Paper 07-03, Federal Reserve Bank of Richmond, revised 2007.
    5. Grinstein-Weiss, Michal & Wagner, Kristen & Ssewamala, Fred M., 2006. "Saving and asset accumulation among low-income families with children in IDAs," Children and Youth Services Review, Elsevier, vol. 28(2), pages 193-211, February.
    6. 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.
    7. Ian Hathaway & Sameer Khatiwada, 2008. "Do financial education programs work?," Working Papers (Old Series) 0803, Federal Reserve Bank of Cleveland, revised 2008.
    8. Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 2009. "The Effects Of Financial Education In The Workplace: Evidence From A Survey Of Employers," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 605-624, October.
    9. Anna Maria Santiago & George C. Galster & Ana H. Santiago-San Roman & Cristina M. Tucker & Angela A. Kaiser & Rebecca A. Grace, 2010. "Foreclosing on the American dream? The financial consequences of low-income homeownership," Housing Policy Debate, Taylor & Francis Journals, vol. 20(4), pages 707-742, September.
    10. Angela Hung & Joanne Yoong & Elizabeth Brown, 2012. "Empowering Women Through Financial Awareness and Education," OECD Working Papers on Finance, Insurance and Private Pensions 14, OECD Publishing.
    11. Andrew Carswell, 2009. "Does Housing Counseling Change Consumer Financial Behaviors? Evidence from Philadelphia," Journal of Family and Economic Issues, Springer, vol. 30(4), pages 339-356, December.
    12. Rist, Carl & Humphrey, Liana, 2010. "City and community innovations in CDAs: The role of community-based organizations," Children and Youth Services Review, Elsevier, vol. 32(11), pages 1520-1527, November.
    13. Xu, Lisa & Zia, Bilal, 2012. "Financial literacy around the world : an overview of the evidence with practical suggestions for the way forward," Policy Research Working Paper Series 6107, The World Bank.
    14. Oliver Williams & Stephen Satchell, 2011. "Social welfare issues of financial literacy and their implications for regulation," Journal of Regulatory Economics, Springer, vol. 40(1), pages 1-40, August.
    15. Chatterjee, Swarn & Green-Pimentel, Leslie & Turner, Pamela, 2010. "Financial education and consumers’ willingness to change behavior," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 73-81.

    More about this item


    education; financial literacy; savings incentives; Individual Development Accounts;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • I2 - Health, Education, and Welfare - - Education
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy

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