Financial Education Introduction
A major challenge for advancing evaluation in financial education is understanding the broad landscape it covers and the many contours within that landscape. That understanding can best be improved by describing some of the key groups served by financial education, specific aspects of evaluations that affect each group, and also some major issues that confront multiple groups. The main rationale for these descriptions is that they segment the broad and complex landscape of financial education that covers all individuals and reduce it to more manageable pieces so that varied constituencies supporting financial education can more easily appreciate the findings from evaluations of financial education programs.
What the group and issue descriptions that follow demonstrate is that there is wide diversity in evaluations of financial education programs. That diversity arises because there is no single standardized approach to financial education in terms of program purpose, groups served, content or issues covered, instructional methods for the delivery of content, program duration, or some other program feature. For example, financial education programs for children and youth delivered through formal education in school will differ significantly in content and purpose from financial education programs for working adults. Planning for retirement will be of more concern for older adults than for younger adults who have just graduated from a college or university and may be more concerned with paying for their student loans.
The factors that shape a particular financial education program in turn affect the methods used to evaluate a program. The scope or depth of an evaluation also will depend both on the program constraints and the available resources for the evaluation. In this regard, each evaluation of a financial education program will be unique and tailored to fit the group to be served and the conditions of the program for improving financial understanding and financial literacy. Despite the uniqueness, each evaluation provides a microcosm of information. When it is combined with the findings from evaluations of similar programs, the collective literature can provide more insights about what works best for financial education.
A key point that should be remembered in reading through the descriptions that follow is how difficult it is to draw a single conclusion about the effectiveness of financial education based on one study or program. How effective financial education is may depend on the characteristics of the group being served or the issues discussed, the conditions for the education, and the quality of the evaluation. What the accumulated evidence from this paper indicates, however, is that there is a growing body of research showing both positive and nuanced effects from financial education across a wide range of groups and issues. That evidence is likely to increase as more studies are conducted.
Groups and Issues
The six groups and four issues discussed in this paper are shown in Table 1. The groups were selected based on age ranges or a characteristic. The issues selected cut across the different groups.
The first group covers the very young: children who are starting their formal education in pre-school through the completion of elementary school (about ages 3 to 10). The second group increases the ages to youth or teens who are of middle or high school age (about ages 11 to 18). The third group expands the age range to the 19- to 29-year-olds, which means that it is a heterogeneous assortment of young adults, some of whom are enrolled in postsecondary education, others who have completed that education and are starting their work careers, and still others who did not receive a postsecondary education but instead entered the workforce fairly soon after attending high school and are early in their work careers. The fourth group includes the wide age spectrum of working adults who range in age from about age 30 to retirement age (about 55 to 70 years old). These working adults may have completed their postsecondary education, are actively involved in their work and careers, and also may be handling the full financial responsibilities of managing a household with other adults and/or children.
Table 1: List of Groups and Issues
- Groups
- Children: students in pre-school or elementary school (about ages 3 to 10)
- Youth: students in middle school or high school (about ages 11 to 18).
- Young adults: students in postsecondary education and/or young workers with jobs who are deciding on a career or in an early stage of a career (about ages 19-29).
- Working adults: adults with work experience and established careers (about age 30 to retirement).
- Military personnel: adults at all ages until retirement
- Low income consumers: adults at all ages.
- Issues Affecting Multiple Groups
- Student loans
- Homeownership
- Retirement planning
- Financial advising
Of course, not all young or working adults have the same or similar characteristics, so it is worthwhile to make some further distinctions within the broader groups of adults. Two specific adult groups who have received extensive financial education were selected to give examples of distinctions that could be made within a broader group: adults in the military and adults who are low income consumers. After high school, some young adults enlist in the military and then actively participate in military life, sometimes for the large part of their working careers. Accordingly, adults in the military are likely to be different from other young or working adults when evaluating the effects of financial education programs. Similarly, low income consumers are young or working adults with limited financial resources that can restrict consumer choices and alter their financial decisions in ways that differ from those adults with fewer income constraints.
Another important factor to consider when evaluating financial education programs is that they can be issue-focused or targeted at a specific financial decision that often cuts across age ranges. In addition to the descriptions for the six groups, this paper highlights four major issues in financial education that can be viewed from multiple perspectives depending on the characteristics of the group and the various facets of the issue.
As a first example, consider the issue of how best to pay for a college education. It can be a concern of high school students, college students, and their adult parents and can involve learning about saving, financial aid, and loan or debt management. Second, housing decisions affect adults at all stages of life, whether they involve renting, buying a house using a mortgage from a financial institution, or some other real estate transaction. Third, retirement planning is not a topic solely of interest only to older adults because it typically takes a lifetime of work to accumulate sufficient wealth for retirement security. Fourth, the complexity of financial decisions involving such matters as taxes, banking, investing, credit, debt, or insurance means that adults at all ages may have to seek financial advice from different sources to manage their finances. Technological advances will change how financial advice is delivered to different groups as shown by the shift to robo-advising for investment decisions.
Content Outline and Approach
The ten descriptions follow a similar format for ease of presenting complex material and findings. Each one contains an initial overview of the target group or issue and provides a rationale for why it is important to focus on that group or issue. The first section of each description then highlights some of the key programs and resources used to deliver financial education to that group or for that issue. The second section discusses major topics or outcomes in financial education for that group or issue and provides a concise review of the literature on evaluation studies of programs and research about it. The third section offers a brief explanation of the typical evaluation practices for studies of that group or issue and identifies any major concerns with the conduct of studies. The concluding fourth section turns to public communication and suggests how best to connect the evaluation or research findings with a larger audience of the public and convey the essential findings in non-technical language.
Two points should be noted about the approach adopted for the content outline and structure of this paper. The first one is that the basic purpose of the paper to provide a general understanding of financial education programs for different groups or issues and the related evaluations or research studies. The paper is intentionally limited in length so that it could easily be read in a short period of time. It also necessarily omitted technical details so that it could be read by a wide audience. These readers might include financial educators responsible for creating resources or delivering programs, professionals from for-profit, non-profit, or government organizations concerned with improving financial education, and academics who might want to learn more about financial education or are responsible for conducting evaluations.
The second point is that the paper primarily serves as a selective guide to evaluations and research studies in financial education to reduce the complexity of the broad topic by dividing it up into parts that can be more easily comprehended. Persons reading this paper, however, who want more information about a study cited can consult the references listed at the end of the paper, which in most cases contain a link to a publication website. Nevertheless, it also should be understood that the paper is not meant to serve as a framework or manual for conducting evaluation studies (such as NEFE’s Evaluation Toolkit Manual) nor was it intended to be an exhaustive review of the literature in financial education. Guides to conducting evaluations or reviews of the research literature related to financial education or financial literacy can be found in other complementary and worthwhile documents, articles, or books (e.g., OECD, 2013; CFPB, 2014; Lusardi & Mitchell, 2014; Xiao, 2016).
Contributors and Timeline
The preparation of this paper was a collaborative project with multiple personnel. In April 2016 the National Endowment for Financial Education (NEFE) convened a full-day meeting of 17 participants in Washington DC to discuss the concept for the paper and to seek consensus on its content and format. William Walstad (University of Nebraska-Lincoln) served as the project leader at the meeting and was designated as the editor for the paper. Eight meeting participants volunteered to serve as the primary writers of paper sections: Carlos Asarta (University of Delaware); Elizabeth Breitbach (Loras College); William Bosshardt (Florida Atlantic University); Julie Heath (University of Cincinnati); Barbara O’Neill (Rutgers University); Carly Urban (Montana State University); Jamie Wagner (University of Nebraska at Omaha) and Jing Jian Xiao (University of Rhode Island). Most section authors also served as reviewers on a section written by another author. Another participant at the meeting, Carlo de Bassa Scheresberg (George Washington University), also served as a reviewer. More details about the authors of this paper are provided in the appendix.
The preparation of the paper involved multiple phases of writing, review, and revision. The assigned authors wrote drafts of their section descriptions that in most cases were reviewed by the assigned reviewers. These preliminary drafts then were submitted to the project editor, who offered comments and suggestions for revision and returned them to the authors. The assigned authors then prepared final drafts of each description and submitted them to the editor. The editor wrote an introduction and conclusion for the document and also standardized the style and format for the ten descriptions. References from all descriptions were combined and placed into one section at the end of the document so that they would be easy to access and use. A draft of the entire paper was sent to all contributors for final comments and suggestions. A final version was prepared based on this additional review and then submitted to NEFE.