Rightsizing Expectations

Impacting Financial Well-Being

If the goal is to influence an individual’s financial well-being, then each element of the ecosystem must be explored for areas of relative strength and weakness. Care should be taken to consider the role of idiosyncratic factors and subjective outcomes as well-being is self-defined.

Impacting Financial Behaviors and Outcomes

Many times the goal is to influence the outcomes an individual experiences (e.g., raise a credit score) via impacting their decisions and behaviors. It should be noted that objective outcomes such as income level and credit score materially impact the choice set the individual faces going forward. Additionally, certain outcomes take consistent behaviors over time to achieve. Finally, positive and negative shocks can change an individual’s circumstances suddenly and necessitate a new set of decisions and actions. Behavioral interventions sometimes can increase financial knowledge on a specific topic via effective financial information; however, the appropriate expected outcome of a behavioral intervention is behavior change, not knowledge gain.

Impacting Financial Capability

Financial knowledge alone cannot overcome issues of lack of access to appropriate and affordable financial products and services. It can, however, help the individual to optimize the situation they are in. The purpose of financial education is to systematically grow an individual’s knowledge base and decision-making skill. The appropriate expected outcome of a knowledge intervention is knowledge gain, not necessarily behavior change.

Quality and Dose Matter

Both knowledge influencers and behavioral influencers can be of varying quality. Low quality interventions cannot be expected to have intended knowledge gains or behavior impacts.

Small-dose and one-time interventions (e.g., single workshop, five-minute video before a decision) cannot be expected to have the same impact as comprehensive programming or engagements.

A Note About Family and Friends

Family and friends are strong influences on many individuals’ knowledge and behaviors. However, they are not included as catalysts for change in this framework because by nature the influence may or may not be intentional and varies widely. Family and friends are included in external factors.

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