I am just back from Denver, where I attended a conference titled “Implications of a Quarter Century of Research in Personal Finance,” organized by the National Endowment for Financial Education and Tahira Hira from Iowa State University. A group of researchers met over three days to discuss what we have learned so far on this important topic. I headed a team that addressed the question, “What learning strategies, interventions, and delivery methods hold the most promise for effective financial education outcomes?”
As we reviewed the many papers that have been written on this topic, we faced the difficulties commonly encountered when looking at the existing work. Navigating the bulk of existing literature and figuring out the common findings is a challenge, but our analysis of that extensive literature led us to what we called a “cautious optimism” about the effects of financial education. Along with this optimism, we are mindful of several difficulties inherent in evaluating financial education interventions. First is the issue of self-selection: i.e., are the people who attend financial education programs those with an existing interest in the subject, and is it their interest or the content of a program that motivates them to make certain financial decisions? Second is the dearth of details regarding program content, frequency, delivery method, and goals (to improve knowledge or change behavior or to satisfy a legal requirement) of the programs that are reviewed in the literature. This lack of information makes it hard to evaluate what makes a program effective (or ineffective). Third, one has to be mindful of the size of the intervention. Small interventions, for example, providing information on a particular issue cannot transform naïve investors into Warren Buffetts.
The team identified places where financial education seems most effective and methods to make financial education more effective. The most effective place for financial education was concluded to be the workplace; important methodology was judged to be that relating to adult education and to informal learning.
There are many (some obvious) reasons why the workplace is an ideal venue in which to provide financial education. First, this is where many adults are and also where many important financial decisions are made, e.g., how much to contribute to a retirement account, how to invest retirement wealth, whether to annuitize retirement wealth, and the list goes on. There are also benefits to employers in making sure that workers save for retirement and avoid financial problems, as financial problems and/or worries can affect worker productivity and morale. One benefit to both employers and employees, which in my view is not discussed enough, is that financial education can make people aware of and able to take advantages of benefits an employer offers (for example, employer matches of retirement contributions) or better understand and take advantage of tax-favored assets.
Financial education has normally been conceived of as being delivered in a classroom, but one has to think more broadly and creatively about adult education. In contrast to young students, adults have a rich set of experiences that shape how they view their financial situation. Additionally, financial education can be made more effective with reference to theories of learning that offer important suggestions and insights. One such theory is Mezirow’s transformative learning theory. This theory has been around for over 30 years and has been used as a framework to help make sense of learning and teaching in numerous disciplines—health and medical education, intercultural relations, psychology, environmental sciences, higher education, instructional technology, archaeology, human resource development, just to mention a few. I mention the importance of theory here because, in my view, one of the reasons why financial education has not been as effective as it could be or has not been given the attention it deserves is because it is not considered within a rigorous and theoretical framework.
Even within such a framework, it is possible to incorporate different ways of learning, including informal learning. Informal learning is increasingly becoming recognized as significant to workplace education. Instead of having employees participate in traditional workshops or training sessions, employers are creating conditions in which workers can learn from each others. Financial educators, policy makers, and program planners will do well to recognize that financial education efforts can be successful outside of the formal settings that are the traditional venue for financial education.
As I have mentioned in previous blogs, to run a successful conference you need to have good people, good papers, and good food. Having provided, I hope, a little glimpse of the energetic discussion that went on throughout the meetings in Denver (as well as the informal learning that occurred outside of the meeting rooms!), let me turn to the topic of food. Our meals were a blend of French and Italian cuisine. We went to a wonderful French bistro one night where we tried pâté, saucissons, onion soup, and a wonderful pistachio-crusted trout. The Brown Palace hotel, where we stayed, provided us with succulent breakfasts. At a lunch one day we had gourmet pizza. Some were surprised by this lunch choice. Not me. Give me pizza, and I am happy!