A study published in the latest issue of the Journal of Financial Literacy and Wellbeing reveals a novel solution to a persistent problem – how to improve financial literacy among adults. The study, titled “Spillover effects of financial education: The impact of school-based programs on parents,” reveals that school-based financial literacy programs can dramatically improve the financial literacy of not only students, but also their parents.
The impact of poor financial education is significant, as many adults are nearing retirement age with only marginally improved financial literacy compared to 40 years prior. A tough nut to crack indeed.
The Journal of Financial Literacy and Wellbeing, published by Cambridge University Press, is headed by Annamaria Lusardi, a professor at George Washington University and Academic Director of the Global Financial Literacy Excellence Center, and Flore-Anne Messy, Principal Administrator in the Directorate for Financial and Enterprise Affairs of the Organization for Economic Cooperation and Development (OECD).
The study’s findings suggest that children may be the key to unlocking access to improved financial literacy for adults. By teaching children basic financial concepts and skills, such as budgeting and saving, they become more confident and capable. As a result, they feel empowered to share their newfound knowledge and best practices with their parents – an opportunity that may not have existed prior.
Overall, the study highlights the cascading benefits of financial literacy – not only for individuals but also for society as a whole.
Financial Education Program in Peruvian Public Schools
A study conducted by Frisancho examined the effects of a financial education program on nearly 20,000 teenagers in public schools across six different regions in Peru. The program was delivered to 300 public schools, and half of the students received the financial education while the other half did not.
Although the parents and guardians of the students were not enrolled in the classes themselves, they evidently talked with their children about what they learned. This resulted in significant improvements in financial literacy and behaviors for the students who took part in the program.
Frisancho was able to compare credit scores of parents and guardians, thanks to Equifax, and noted that those whose children received financial education demonstrated marked improvements compared to those whose children did not.
It was found that low-income parents benefitted most from the program, experiencing a 26% reduction in the probability of default and a 5% increase in average credit score.
This research suggests that financial education programs for teenagers can generate positive outcomes, not only for the students but also for their parents.
Education Increases Financial Literacy in Peruvian Teens and Their Parents
Recent research conducted in Peru has revealed that financial education has had a positive impact on both teenagers and their parents. Led by Universidad del Pacifico economist, Monica Yanez-Pagans, the study measured credit scores and the size of portfolios in arrears for two groups; teenagers who attended financial workshops and parents who were educated by their children on financial matters.
The results showed that parents of daughters experienced a significant 6.7% increase in their credit score and a 28% decrease in the size of portfolio in arrears. Interestingly, there was no significant increase observed in the parents of sons who received financial education. The researchers theorized that this could be due to the fact that daughters tend to be more effective in communicating financial knowledge and information to their parents.
Despite this observation, it is important for retirees and near-retirees to keep an open line of communication with their children when it comes to retirement finance issues. Not only can they help improve their financial literacy but also offer valuable insights and advice.
So, why not take the first step and start a conversation today?