Evaluation White Paper


Youth covers a wide age range that includes the typical ages (about 11 to 18 years old) for students attending middle school or high school. One reason for financial education at these schooling levels is to provide a foundation for developing the understanding of basic financial concepts and their application to financial issues that these students will experience later in life. This section focuses on high school because it is the last formative period in the transition from youth to adulthood. Adult consumers today face a complex financial world and financial mistakes can be costly for these consumers. Accordingly, financial education for high school students is one common policy intervention targeting individuals before they begin making major financial decisions as adults.

This financial education can be particularly important for high school students who are not bound to attend a college or university, as it may be their only chance in life to receive formal instruction about financial concepts and their application to financial decisions and issues they may encounter later in life. This financial education that gets added to students’ class schedules comes at a cost. By adding a personal finance course requirement, students could forfeit other courses in arts, science, math, physical education, or college-level courses. Thus, it is important to determine the effect of personal finance education on knowledge and financial behaviors to properly assess the costs and benefits of mandating the education.

2A. Key Programs and Resources

A variety of non-profit organizations offer financial education curricula. First, the National Endowment for Financial Education (NEFE) offers the High School Financial Planning Program (HSFPP). Second, the Council for Economic Education (CEE) provides a flagship personal finance high school curriculum entitled Financial Fitness for Life (FFFL). The curriculum also includes a nationally normed test instrument that can be used to assess student knowledge. Third, the Jump$tart Coalition for Personal Financial Literacy (Jump$tart) offers a variety of high school financial education resources via its online clearinghouse. Fourth, Next Generation Personal Finance (NGPF) is a relatively new online site that supplies a curriculum and extensive lesson materials for teachers on major topics in personal finance.

Both Jump$tart and the CEE have outlined personal finance competencies for K-12 students. Jump$tart publishes the National Standards in K-12 Personal Finance Education (Jump$tart, 2015). It defines six personal finance categories within which students should be knowledgeable: spending and saving, credit and debt, employment and income, investing, risk management and insurance, and financial decision making. Second, the CEE provides a similar set of categories in its National Standards for Financial Literacy (CEE, 2013): earning income, buying goods and services, saving, using credit, investing, and using insurance for protection against several financial risks. These categories are generally consistent with topics taught in states with personal finance course requirements.

The Federal Reserve System offers a variety of personal finance education programs through some of its Reserve Banks. One example is Keys to Financial Success (Keys), a one-semester personal finance program for high school students offered by the Federal Reserve Bank of Philadelphia and the University of Delaware Center for Economic Education and Entrepreneurship.

The 2016 Survey of the States gives an overview of the state of U.S. personal finance education in K-12 (CEE, 2016). In 2016, 17 states require a high school personal finance course, and only 5 states require a semester course solely focused on personal finance. The CFPB has put together a guide for policymakers on advancing K-12 financial education across states. This toolkit provides policymakers with tips and information for state officials looking to incorporate personal finance into public education in their states.

Many states requiring a course in personal finance prior to high school graduation provide content guidelines and sample curricula when adding the requirement. A well-specified curriculum, however, is only part of the problem with personal finance instruction in the schools. A common issue across states that offer a course in personal finance is that teachers do not think they are well-prepared in course content and pedagogy for teaching it (Way & Holden, 2009). One reason for this situation is that personal finance is a minor subject in the school curriculum. Most high school teachers received their undergraduate education for teaching in such major areas as math, science, English, social studies, and business. They rarely specialize in teaching personal finance or learn how to teach it as part of the undergraduate education. To combat this issue, state councils in the CEE network, state Jump$tart coalitions, and other organizations provide teacher training programs to improve the financial knowledge and pedagogical skills of teachers.

2B. Major Topics and Literature Review

Outcomes in evaluations of youth financial education come in two forms: financial knowledge and financial behaviors. While most youth studies focus on financial knowledge in the short run, those focusing on financial behaviors often study long-run outcomes as well. Testing knowledge gains from financial education is an important first step to understanding how and when the curriculum and instruction for youth can be effective. Beyond knowledge, financial education must lead to an eventual reduction in financial mistakes in order to be beneficial. For example, do students exposed to financial education in high school benefit from improved credit scores and fewer missed payments? Or do they have a misperception of finances and acquire more debt?

Several research studies have examined the effect that various curricula have on the personal finance knowledge of high school students. The studies often vary in pedagogical content, assessment instruments, levels of teacher training, and amount of instructional time. These variations lead research findings to differ in the sign, magnitude, and overall interpretation of their results. To provide a concise review, the following reviews discuss the results of three programs with valid assessment instruments, appropriate content, and a minimum time allotted to the curriculum. It also omits reference to middle school studies, some of which were cited in conjunction with the elementary school studies in the previous section.

Four papers in particular look at three rigorous curricula and test high school students before and after the education to see if their knowledge improved. First, Harter and Harter (2009) examined the effectiveness of the FFFL curriculum in an underprivileged area of eastern Kentucky. Prior to instruction, participating teachers received FFFL training. The FFFL instruction improved financial knowledge for the 433 high school students who received it. Second, Danes, Rodriguez, and Brewton (2013) found that NEFE’s HSFPP improved personal finance knowledge and behaviors in a sample of 4,794 students enrolled in 130 U.S. high schools. Third, Asarta, Hill, and Meszaros (2014) used a sample of 967 students enrolled in a one-semester Keys to Financial Success course offered to high school students in Delaware, Pennsylvania, and New Jersey and showed that students participating in the course increased their personal finance knowledge by over 60 percent on average, with improvements taking place in each of the standards and concept areas of the FFFL test. Fourth, Walstad, Rebeck, and MacDonald (2010) showed that the Financing Your Future (FYF) curriculum improved the financial knowledge of high school students. The authors tested 673 senior high school students who received the six hours of instruction, as well as 127 who did not, from New York, Minnesota, Texas, and Maryland both before and after the instruction. Notably, teachers were trained prior to the instruction period. The instruction increased student’s personal finance knowledge by 19.7 percentage points.

Several early studies explored the effects that state-mandated financial education have on financial knowledge and behaviors, as well as on other financial outcomes. Bernheim, Garrett, and Maki (2001) used household survey data to examine the long-term effects associated with personal finance mandates in high school. Comparing individuals living in states with personal finance mandates after they were implemented to individuals within the same states before the policies were implemented, as well as to individuals living in states without mandates at the same time, the authors found that those who took a personal finance high school course saved and accumulated wealth at greater rates during adulthood than those who did not. Tennyson and Nguyen (2001) used the same empirical strategy with testing data and found that personal finance mandates requiring students to take a personal finance course that included a testing component improved knowledge. The authors found, however, that broadly defined mandates did not change the financial knowledge of students.

More recently, Cole et al. (2015) found that financial education mandates in high school did not affect credit behaviors later in life or asset accumulation. This study used data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel (CCP) and survey data from the U.S. Census Bureau. Brown et al. (2016) use a similar empirical approach and the CCP data, but investigated the effects for only young adults (under age 29). They found that financial education in high school decreases delinquency, decreases collections, and decreases non-student debt.

State mandates vary in content, duration, and enforcement. To control for these differences, Urban et al. (2015) choose three states (Georgia, Idaho, and Texas) that had rigorously implemented mandates post 2000, where no other education requirements changed at the same time, all students were required to complete a course on personal finance prior to high school graduation, and sample curricula were provided to instructors. They designated a border state without any personal finance education (or other education changes) as a control group, along with students within both states before the education was required. The authors found that exposure to mandated personal finance education in high school increased credit scores and lowered delinquency rates in 18-22 year olds.

For an international perspective consider the study by Bruhn et al. (2016). It showed that randomly assigning an intensive financial education curriculum and involving parents' improved financial knowledge and financial behaviors of students in Brazil. This work complements Urban et al. (2015) in showing that rigorous financial education improves financial behaviors.

2C: Evaluation Practices, Strengths and Limitations

There are three main caveats to studying the effect of personal finance curricula on financial knowledge. First, each study tests the effects of curricula for only a small population. It could be that the results are not externally valid, meaning that the education would not work similarly for other groups of students in other schools. This factor makes it difficult to make comparisons across curricula. For example, it is difficult to determine if one curriculum is more successful, or if there is a different effect for different populations. Second, testing students before and after education is completed does not take into account what the students would have learned anyway during that period. Instead, a control group with similar students who were not exposed to the education should ideally be used as a baseline for the change in financial knowledge during those months. Third, even if knowledge gains are present in the short run, it is important to understand if those knowledge gains persist and how actual financial behaviors change in the long run.

In measuring the effects of financial education in high school on financial behaviors, measurement challenges also arise. First, personal finance mandates are heterogeneous. While some of the mandates require content to be taught through the years in any class, others simply recommend a class be offered, and others still require a full year course with standardized testing covering the topics. Classifying each of these as a personal finance mandate results in a large standard error, or an imprecise measure of zero. It is thus important to look at specific content and requirements and ask what works not does financial education in high school work. Second, the year the mandate is passed is often not the year the first graduating class is required to take the course. Instead, these implementations often happen at a lag of nearly three years. In some circumstances states often reverse the mandate before it is implemented in schools. Third, administrative and survey data often do not report where individuals lived at age 18. This requires assumptions about whether or not an individual lives in the same state in which she attended high school. Again, this results in imprecise measurement of high school education.

2D. Public Communication

Adding any courses to a high school requirement can be costly. High-achieving students may forgo advanced placement courses or early college credits to complete the requirement, and these students may learn more about finances from their parents anyway. At the same time, lower-ability students may already struggle with the course requirements currently in place. This makes it important to empirically document the effect of personal finance education in high school on both knowledge and outcomes.

While studies covered by the media often assert that financial education in high school may be ineffective, research suggests that properly measured intensive curricula can improve knowledge, reduce delinquencies, and increase credit scores. The results should encourage policymakers that the benefits of financial literacy education potentially outweigh the costs in states that rigorously implemented their mandates.