Opinion: Stop the Tired Argument Asserting Financial Education Doesn’t Work


Calling All Financial Educators: Do Not Give Up!

Billy J. Hensley[Note: Following is an extended version of an article appearing on CNBC.com as part of the education initiative “Invest in You: Ready. Set. Grow.,” which focuses on improving Americans’ knowledge in the areas of saving, spending and investing; and the CNBC Financial Wellness Advisory Council, of which Dr. Hensley is a member.]

About this time each year I expect the predictable articles proclaiming personal finance education simply doesn’t work. Pundits point to poor proficiency in financial literacy “tests,” and programs that show minimal change in consumer’s behaviors to support their position. Their assessment: personal finance education is useless, ineffective and a waste of time. Their solution: stop spending money and effort altogether. This either/or argument is stale and the debate is futile. Let’s get real. 

I’ve spent 20 years in education and I have never seen teachers stop teaching just because every learner in the classroom wasn’t proficient at the time of assessment. If students don’t meet standards in math or reading comprehension should we just give up? No, we pivot. We adjust. We step up our efforts. Achieving financial well-being—much like our overall health—takes a comprehensive approach. Obesity isn’t solved alone by dieting. It could be a combination of walking, exercising and counting calories that leads to success. And should we stop teaching wellness because there is an obesity problem? If you’re of the belief that financial education doesn’t work, allow me to show you the whole picture. 

People Are Not Born with Financial Skills, But They Can Be Learned. Focus on Tactics That Work.

I have been a part of this community for nearly a decade now. As in any industry there are some turf wars, but mostly it’s energetic collaboration among organizations, educators and individuals who have the best intentions of guiding individuals toward financial capability. Unfortunately our field has been saddled with the cliché that the only thing financial education does is tell people to spend less on their lattes. But, we’re evolving. Our community is coalescing around the understanding that to be effective we must focus on what works. The research agenda is becoming more robust and science is providing a deeper understanding of behaviors that will help us identify new tactics for how we can best support people. We have a better understanding of what financial education is and what it is not, and what it can and cannot accomplish. It builds knowledge, boosts confidence and is the cornerstone for better decision making. We’re not inherently born with these skills, so experience shapes our reality and timeliness matters for transactional decisions. Financial education is not a one-time inoculation—it must be reinforced with booster shots throughout life. 

Financial Education Cannot Fix Everything, But to Say All Efforts and Programs Fail is False.

Our community, however, must be transparent and acknowledge financial education doesn’t solve everything. No one in our field should depict education as a silver bullet that creates financial well-being. There are limits. Socioeconomic disparities hinder financial health. Housing is expensive, health care costs can cripple a household budget, and young adults grapple with student loan debt. Education alone cannot overcome the racial wealth gap, gender pay inequality or other barriers to financial capability. While education can help people navigate the financial system as it exists, there are numerous factors outside one’s control that influence ability to apply—or not apply—education to specific situations. Thoughtful policy and regulation, economic conditions, and availability of appropriate financial services are just a few of these influences.

Critics against financial education frequently characterize all efforts, programs and research as a collective failure. This is a slippery slope that negates all of the positive momentum being made. It invalidates leadership in states that have stepped up requiring students be exposed to learning about money as a graduation requirement, and it discourages teachers who are passionate about delivering personal finance instruction in and out of the classroom. Some data analyses pool together everything calling itself financial education without any minimum standard for what actually is effective. When you include weak programs, you get weak results every time. When you filter out weak interventions, your results will show genuine strength.

Simply Passing Along Financial Information Does Not Constitute a High-Quality Financial Education Program.

What are the attributes of a high-quality program? The framework for competent, purposeful and lasting interventions are that they are delivered by well-trained educators who are confident delivering the lessons; they include vetted program materials that come from trusted, unbiased sources; they are comprised of timely instruction presented when it can be applied; they contain relevant subject matter that fits the needs of diverse audiences; and they demonstrate evidence of impact and affect behavior change. Certainly decay in knowledge occurs, but research is showing us how we can mitigate this through ongoing exposure over an economic lifetime.

Education is a field built on a century of learning and development research. Without utilizing the science upon which education is built, how can financial education be expected to demonstrate impact? Before you indict our community, realize the majority of what is called financial education in reality is just passing along financial information. Providing people information does not by itself change behavior. It is, however, a building block. Our field needs to clearly articulate that financial information, financial education, financial well-being, financial literacy and financial capability coexist in one ecosystem, but the terms do not all mean the same thing. It’s a deeper process of regular exposure to information and education that increases knowledge and confidence, which leads to increased satisfaction and stronger outcomes, ultimately driving an individual to act in their own best interest as the current landscape allows. Each is a piece of the puzzle.

There is no downside to encouraging and empowering people to take control of their financial lives. Research continues to prove how it leads to better decision making, heightened confidence and increased self-efficacy. If you impugn the field of financial education as well-meaning people providing latte and travel cost-cutting tips, then you have no understanding of what it takes to create impactful learning.

Billy J. Hensley, Ph.D., is president and CEO of the National Endowment for Financial Education (NEFE), a nonprofit foundation that champions effective financial education. NEFE is the independent, centralizing voice providing leadership, research and collaboration to advance financial well-being.

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