IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Financial Education and Savings Outcomes in Individual Development Accounts

Listed author(s):
  • 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by EconWPA in its series HEW with number 0108001.

in new window

Length: 18 pages
Date of creation: 02 Sep 2001
Date of revision: 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
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Bernheim, B. Douglas & Garrett, Daniel M. & Maki, Dean M., 2001. "Education and saving:: The long-term effects of high school financial curriculum mandates," Journal of Public Economics, Elsevier, vol. 80(3), pages 435-465, June.
  2. B. Douglas Bernheim & Daniel M. Garrett, 1996. "The Determinants and Consequences of Financial Education in the Workplace: Evidence from a Survey of Households," NBER Working Papers 5667, National Bureau of Economic Research, Inc.
  3. Alan Greenspan, 2001. "The importance of education in today's economy," Proceedings 767, Federal Reserve Bank of Chicago.
  4. 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.
  5. Jagadeesh Gokhale, 2000. "Are we saving enough?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jul.
  6. Sondra Beverly & Amanda Moore & Mark Schreiner, 2001. "A Framework of Asset-Accumulation Stages and Strategies," Development and Comp Systems 0109004, EconWPA.
  7. Arthur B. Kennickell & Martha Starr-McCluer & Annika E. Sunden, "undated". "Saving and Financial Planning: Some Findings from a Focus Group," Finance and Economics Discussion Series 1996-01, Board of Governors of the Federal Reserve System (U.S.).
  8. Beverly, Sondra G. & Sherraden, Michael, 1999. "Institutional determinants of saving: implications for low-income households and public policy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 28(4), pages 457-473.
  9. B. Douglas Bernheim, 1996. "Rethinking Saving Incentives," Working Papers 96009, Stanford University, Department of Economics.
  10. Thaler, Richard H, 1994. "Psychology and Savings Policies," American Economic Review, American Economic Association, vol. 84(2), pages 186-192, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwphe:0108001. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.