Financial education for adults

Evidence Rating  
Some Evidence
Evidence rating: Some Evidence

Strategies with this rating are likely to work, but further research is needed to confirm effects. These strategies have been tested more than once and results trend positive overall.

Health Factors  

Adult financial education programs often cover topics such as basic budgeting, bank use, and credit management. Specialized education programs can focus on preparing for divorce, bankruptcy, credit building and counseling, homeownership, retirement, or other relevant topics. Financial education may be provided in groups or as one-on-one coaching, in person, over the phone, or online. Programs can be offered through non-profit organizations, for-profits, government entities, and employers, and often serve individuals with lower incomes.

Expected Beneficial Outcomes (Rated)

  • Improved financial literacy

  • Improved financial behavior

Evidence of Effectiveness

There is some evidence that financial education for adults improves financial literacy and increases positive financial behaviors1, 2, 3, 4. Additional evidence is needed to confirm effects.

Financial education can increase budgeting and saving, including saving for retirement1, 2, 3, but may not change borrowing behavior, such as loan defaults2, 3. A study of two financial coaching programs for people with low to moderate incomes suggests it may increase saving and budgeting and decrease debt5. However, effects vary widely2, 3. More intense programs may be more effective2; however, effectiveness will be limited unless programs also include interventions to improve financial circumstances and support wealth building for participants with low incomes6.

Experts suggest that programs designed for specific audiences, focused on a distinct topic, and delivered just before a relevant financial event may be more likely to change participants’ financial behavior than other programs2, 7. A large study of military personnel and small studies examining programs that support survivors of domestic abuse, individuals participating in an Individual Development Account (IDA) program, and individuals with low incomes living in subsidized housing appear to support this recommendation8, 9, 10, 11, 12. One-on-one style counseling or coaching that encourages participant involvement and includes goal setting and tracking may also increase the likelihood of changing participants’ financial behavior and increase savings and paying down debt5, 13.

Equity Analysis

Inconclusive impact on disparities

The impact of financial education interventions on disparities in financial knowledge and literacy, such as basic budgeting or bank use, are inconclusive. Studies have found varying effects2, 3 and have suffered from high levels of attrition among target populations10, 12. Available evidence suggests financial education interventions may be less effective for people with low incomes than for those with higher incomes2, 16, though recent work shows this gap in effectiveness may be decreasing1. Additionally, financial education interventions alone do not remove structural barriers to basic financial services, such as opening a bank account or securing a mortgage. These barriers disproportionately impact people of color and those with low incomes and they need to be addressed to support individual behavior change6, 17.

Financial education alone does not increase wealth for people with low incomes; their economic circumstances also limit their opportunities to engage in positive financial behaviors, such as saving for retirement. Comprehensive interventions that address the root causes of racial wealth disparities are needed in conjunction with financial education for people with low incomes to reduce the racial wealth divide6. These interventions should also help address the high levels of distrust that people of color have of financial institutions, a result of their long history of exclusion from supportive banking services and targeting by predatory lending and unfair financial services that trap them in excessive debt18.

Historical Context

The racial wealth gap is a result of centuries of exploitation of human capital and theft of the assets of people of color, including Blacks, Hispanics, and Native people. One false narrative suggests that the racial wealth gap exists because of differences in financial behaviors and knowledge between racial and ethnic groups in the US6. This narrative ignores the long history of policies and practices that permitted the legal, illegal, and extralegal seizure of assets of people of color that continues today. This history is reinforced by institutionalized racism embedded in policies that limit wealth building opportunities and prevent the economic stability of minority populations and populations with low incomes. For example, homeownership in the US is central to building and transferring household wealth; however, redlining and discriminatory housing policies have denied this opportunity for millions of households of color18.

Equity Considerations

• How can financial education interventions meet the needs of your local residents? What other services or comprehensive interventions could be integrated with financial education interventions to improve financial stability and support wealth building?
• Which financial education activities best support participants trying to navigate structural barriers to financial services?
• How can your community help change existing structural and systemic barriers that reinforce the racial wealth divide? Which local partnerships and community organizations could support comprehensive interventions, including financial education, for your residents with low incomes?
• What education or outreach efforts does your community need to understand and support efforts to address the root causes of racial wealth disparities?

Implementation Examples

Several government agencies provide financial tools or curriculums. The Financial Literacy and Education Commission of the US Department of the Treasury, for example, has a national financial education website, MyMoney.gov (US Treasury-FLEC Resources). The US Department of Housing and Urban Development (HUD) administers the Family Self-Sufficiency Program, which has a financial education component14 and the Federal Deposit Insurance Corporation (FDIC) offers Money Smart, a financial education curriculum that can be used by individuals, financial institutions, or other organizations (FDIC-Money smart). In 2021, 37 states and Washington, DC engaged in legislation related to improving financial literacy15.

Private non-profits, such as the National Endowment for Financial Education, provide financial education resources and training tools for youth and adult learners at all income levels (NEFE).

Implementation Resources

CFPB - Consumer Financial Protection Bureau (CFPB). Resources for financial educators.

FDIC-Money smart - Federal Deposit Insurance Corporation (FDIC). Money Smart: A financial education program.

FTC-Consumer.gov - Federal Trade Commission (FTC). Consumer protection basics.

MyMoney.gov - US Department of the Treasury (US Treasury). MyMoney.gov. Federal Financial Literacy and Education Commission (FLEC).

NCUA-Mycreditunion.gov - National Credit Union Administration (NCUA). Consumer assistance center: Financial resources

NEFE - National Endowment for Financial Education (NEFE).

Footnotes

* Journal subscription may be required for access.

1 Kaiser 2022 - Kaiser T, Lusardi A, Menkhoff L, Urban C. Financial education affects financial knowledge and downstream behaviors. Journal of Financial Economics. 2022;145(2):255-272.

2 Kaiser 2017 - Kaiser T, Menkhoff L. Does financial education impact financial literacy and financial behavior, and if so, when? World Bank Economic Review. 2017;31(3):611-630.

3 Miller 2015e* - Miller M, Reichelstein J, Salas C, Zia B. Can you help someone become financially capable? A meta-analysis of the literature. World Bank Research Observer. 2015;30(2):220-246.

4 Fernandes 2014 - Fernandes D, Lynch JG, Netemeyer RG. Financial literacy, financial education, and downstream financial behaviors. Management Science. 2014:1-23.

5 Urban-Theodos 2015 - Theodos B, Simms M, Treskon M, et al. An evaluation of the impacts and implementation approaches of financial coaching program. Washington, DC: Urban Institute; 2015.

6 FRB-Hamilton 2017 - Hamilton D, Darity WA. The political economy of education, financial literacy, and the racial wealth gap. Federal Reserve Bank of St Louis Review. 2017;99(1):59-76.

7 FRB-Hathaway 2008 - Hathaway I, Khatiwada S. Do financial education programs work? Federal Reserve Bank of Cleveland. 2008: Working Paper.

8 Skimmyhorn 2016* - Skimmyhorn W. Assessing financial education: Evidence from boot camp. American Economic Journal: Economic Policy. 2016;8(2):322-343.

9 Hetling 2015* - Hetling A, Postmus JL, Kaltz C. A randomized controlled trial of a financial literacy curriculum for survivors of intimate partner violence. Journal of Family and Economic Issues. 2015.

10 Reich 2015* - Reich CM, Berman JS. Do financial literacy classes help? An experimental assessment in a low-income population. Journal of Social Service Research. 2015;41(2):193-203.

11 Grinstein-Weiss 2015* - Grinstein-Weiss M, Guo S, Reinertson V, Russell B. Financial education and savings outcomes for low-income IDA participants: Does age make a difference? Journal of Consumer Affairs. 2015;49(1):156-185.

12 Collins 2012 - Collins JM. The impacts of mandatory financial education: Evidence from a randomized field study. Journal of Economic Behavior & Organization. 2012;95:146-158.

13 Mende 2015* - Mende M, van Doorn J. Coproduction of transformative services as a pathway to improved consumer well-being: Findings from a longitudinal study on financial counseling. Journal of Service Research. 2015;18(3):351-368.

14 US HUD-FSS - US Department of Housing and Urban Development (US HUD). Family Self-Sufficiency (FSS) Program.

15 NCSL-Financial Literacy 2021 - National Conference of State Legislatures (NCSL). Financial Literacy 2021 Legislation. 2021.

16 Fernandez 2014* - Fernandez J, Holman T, Pepper JV. The impact of living wage ordinances on urban crime. 2014;53(3):478-500.

17 Brookings-Klein 2021 - Klein A, Karaflos M. Universal bank accounts necessary for families to bank on Child Tax Credit. Washington, DC: The Brookings Institution; 2021.

18 Finsel 2022* - Finsel C, Watson Grote M, Libby M, Mahon C, Sherraden MS. Financial Capability and Asset Building With a Racial- and Gender-Equity Lens: Advances From the Field. Families in Society. 2022;103(1):86-100.

Date Last Updated