“Just in time education”? Just in time is too late

This is a slightly modified version of the blog I wrote for the Wall Street Journal, which is posted here: http://blogs.wsj.com/experts/2015/09/21/why-just-in-time-financial-education-is-too-late/

Several people and institutions have been advocating for “just in time” education as an alternative to financial education. I take this to mean that financial education should be provided at the point of sale. Academic studies have found that financial knowledge decays over time, and “just in time” proponents see on-the-spot education as a way to address that challenge.

But there are problems with the “just in time” concept. For starters, all education—not just financial knowledge—erodes over time. If I were to re-test my undergraduate and graduate students a few months after they finish a course (any course!), the results would deviate from those of their final exams. This hardly means we should sidestep teaching entirely, to replace it with targeted information that is dispensed only as needed. Do you want to go to a Shakespeare play tonight? Here is what he wrote and why he is so famous. No need to bother with a literature course in college. “Just in time” ignores the value that comes from education.   

The second reason I question “just in time” is that my academic research shows that financial literacy brings benefits. Financially knowledgeable individuals are more likely to plan for future events, to save, and to invest in higher return assets. But that knowledge is important before they take those actions. Indeed, it is what positively influences their behavior.

For example, those who know about the power of interest compounding understand the importance of starting to save early. For those with no financial literacy, there is really no point of sales benefit – no big sign that states “Come here if you have not started to save yet.” If “just in time” is their only option, these people will not receive any education. They will learn about the value of saving when they are close to retirement, when it is already too late.

This underscores the more basic problem with the “just in time” argument: Most financial decisions are not made at the point of sale. Consider a home mortgage. By the time buyers come to a broker or a loan officer at the bank, many decisions have already being made. The buyers may have decided on the house they want to buy. But what if they have chosen a property they cannot afford or they have not searched for the best offer? At that point, “just in time” education is again too late. Consumers need financial knowledge before the dream of home ownership is formed.

“Just in time” education reflects a pretty grim view of financial education, which it seems to see as a bitter medicine that should be dispensed in a targeted dose—nothing more—and only when needed. The prevalence of financial illiteracy, combined with the many financial decisions we constantly must make, demands a more comprehensive cure than that.

I was inspired to write this post after I was contacted by a student in the personal finance course I have been teaching at the George Washington University. He asked whether I was also teaching an advanced course on the subject. That message came just in time!