Financial wellbeing and some problems in assessing its link to financial education

Tatom, John (2010): Financial wellbeing and some problems in assessing its link to financial education. Published in: Networks Financial Institute Working Paper Series , Vol. Networ, No. 2010-WP-03 (1 October 2010): pp. 1-14.

Abstract

In 2009, the National Endowment for Financial Education initiated a project to study the “Implications of a Quarter Century Research in Personal Finance.” As part of that effort, one of the major themes chosen was to study the measurement and evaluation of participant outcomes. This paper is part of the investigation of measurement and evaluation. It focuses more on what the macro-measures of financial wellbeing are that financial education is aimed at improving and the extent to which these larger scale measures can be improved by financial education, as well as obstacles to good evaluations and limitations of correlation outcomes. The case for improving financial education rests upon (1) the hypothesis that financial education can improve financial wellbeing, (2) the documented low state of financial literacy and individual satisfaction with their financial knowledge, behavior and financial outcomes of consumer decision making, and finally (3) the stress that recent financial shocks have put on household wellbeing. This article also reviews some of those recent changes and the initial recovery from the most recent shock to wellbeing. Section I reviews macro measures of wellbeing and the principal measures and approaches of most studies of the effects of financial education programs. Section II reviews the extent of two major shocks to household net worth in the past decade, some of the potential stress for households this created and the implications for the importance of financial education. Section III reviews some of the principal obstacles to effective assessment and the difficulties with reliance on simple correlations of financial programs and outcomes for such assessments.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial wellbeing, financial education, educational assessment.
• Subjects: A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A20 - General; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I21 - Analysis of Education; G - Financial Economics > G0 - General > G00 - General

References

Caskey, John P. (2006). “Can Personal Financial Management Education Promote Asset Accumulation?” in John A. Tatom, Editor, Assessing Adult Financial Literacy and Why It Matters, Financial Forum Series, Networks Financial Institute at Indiana State University, 14-29, August.

Bernheim, Douglas and Daniel Garrett (2003). “The Effects of Financial Education in the Workplace: Evidence from a Survey of Households, Journal of Public Economics 87, 1487-1519.

Bernheim, Douglas, Daniel Garrett and Dean Maki (1997). “Education and Saving: The Long-Term Effects of High School Financial Curriculum Mandates, NBER Working Paper #6085, July.

Burkhauser, Richard, Alan Gustman, John Laitner, Olivia Mitchell, and Amanda Sonnega (2009). “Social Security Research At The Michigan Retirement Research Center,” Social Security Bulletin, 69 (4), 51-64.

Collins, J. Michael and Collin O’Rourke (2009). “Still Holding Out Promise: The Impacts of Financial Education,” paper presented at the Networks Financial Institute Conference “Improving Financial Literacy and Shaping Financial Behavior,” May 14-15.

Danes, Sharon M. and Heather Haberman (2004). “Evaluation of the NEFE High School Financial Planning Program: 2003-2004.” http://hsfpp.nefe.org/load File.cfm?contentid=273.

Danes, Sharon M. and Heather Haberman (2007). “Teen Financial Knowledge, Self-Efficacy, and Behavior: A Gendered View,” Financial Counseling and Planning, 18 (2), 48-60.

Financial Literacy and Education Commission (2006). Taking Ownership of the Future: The National Strategy for Financial Literacy, U.S. Treasury.

Freddie Mac Corporation (1999). “Executive Summary: Freddie Mac National Consumer Credit Survey,” Posted on the Freddie Mac website (www.freddiemac.com), September.

Glazermand, Steven, Dan Levy and David Myers (2002). “Nonexperimental Replications of Social Experiments: A Systematic Review,” Mathematica Policy Research Discussion Paper, September.

Hangen, Eric (2007). “Case Study: Impacts of Homeownership Education and Counseling on Purchasing Power of Clients of INHP, Indianapolis, IN,” Center for Housing Policy, November.

Helman, Ruth, Craig Copeland and Jack VanDerhei (2010). “The 2010 Retirement Confidence Survey: Confidence Stabilizing, But Preparations Continue to Erode,” Employee Benefit Research Institute Issue Brief, No. 340, March.

Hirad, Abdighani and Peter M. Zorn (2002). “Prepurchase Homeownership Counseling: A Little Knowledge is a Good Thing,” in Low-Income Homeownership: Examining the Unexamined Goal, Nicholas Retsinas and Eric Belsky, Editors, Washington D.C.: Brookings Institution Press, 146-174.

Hoover, K.D. and M.V. Siegler (2008). “Sound and Fury: McCloskey and Significance Testing in Economics,” Journal of Econometric Methodology 15, 1-37.

Huston, Sandra B. (2009). “Measuring Financial Literacy: Establishing Guidelines for Instrument Development,” paper presented at the Networks Financial Institute Conference “Improving Financial Literacy and Shaping Financial Behavior,” May 14-15.

Jacob, Katy, Sharyl Hudson and Malcolm Bush (2000). Tools for Survival: An Analysis of Financial Literacy Programs for Lower-Income Families. Chicago: Woodstock Institute.

Lerman, Robert I. and Elizabeth Bell (2006). “Financial Literacy Strategy Strategies: Where Do We Go From Here?” in John A. Tatom, Editor, Assessing Adult Financial Literacy and Why It Matters, Financial Forum Series, Networks Financial Institute at Indiana State University, pp. 30-45, August.

Lusardi, Annamaria (2006). “Financial Literacy and Financial Education: Review and Policy Implications,” in John A. Tatom, Editor, Assessing Adult Financial Literacy and Why It Matters, Financial Forum Series, Networks Financial Institute at Indiana State University, pp. 46-55, August.

__________(2009). Overcoming the Saving Slump, Chicago: The University of Chicago Press.

Mandell, Lewis (2006). “Financial Literacy: If It’s So Important, Why Isn’t It Improving,” in John A. Tatom, Editor, Assessing Adult Financial Literacy and Why It Matters, Networks Financial Institute Financial Forum Series, 56-61.

McCloskey, D.N. (1985). “The Rhetoric of Economics,” Journal of Economic Literature 21, 481-517.

__________, and S.T. Ziliak (1996). “The Standard Error of Regressions,” Journal of Economic Literature 34, 97-114.

McCormick, Martha Henn (2009). “The Effectiveness of Youth Financial Education: A Review of the Literature,” Journal of Financial Counseling and Planning Education, 20 (1), 70-83.

Meier, Stephan and Charles Sprenger (2007). “Discounting Financial Literacy: Time Preferences and Participation in Financial Education Programs,” Federal Reserve Bank of Boston Public Policy Discussion Paper No. 07-5.

President’s Advisory Council on Financial Literacy (2009). 2008 Annual Report to the President, January 6.

Scholtz, John Karl and Ananth Seshadri (2008). “Are All Americans Saving ‘Optimally’ for Retirement?” Michigan Retirement Research Center Working Paper 2008-189, September.

Schreiner, Mark and Michael Sherraden (2006). Can The Poor Save? Saving and Asset Building in Individual Development Accounts. New Brunswick, NJ: Transaction Publishers.

Staten, Michael, Gregory Elliehausen and Christopher Lundquist (2002). “The Impact of Credit Counseling on Subsequent Borrower Credit Usage and Payment Behavior,” Credit Research Center Monograph #36, March.

Utkus, Stephen P. and Jean A. Young (2010). “Resilience in Volatile Markets: 401(k) Participant Behavior September 2007—December 2009,” Vanguard Research, March.

Walstad, William B., Ken Rebeck and Richard A. MacDonald (2009). “The Effects of Financial Education on Financial Literacy and Financial Attitudes,” paper presented at the Networks Financial Institute Conference “Improving Financial Literacy and Shaping Financial Behavior,” May 14-15.