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· 9 min read
zach wick


Financial literacy is a body of knowledge necessary to have in order to make well-informed decisions when presented with financial situations. It is generally assumed that financial education can have a positive impact on financial literacy. However, individual characteristics of both the learner and the financial education itself have direct and significant effects on the efficacy of the financial education. This literature review explores how learner wealth, alignment of financial educational content to other desired outcomes, and the nature of the transferred knowledge impact financial education's efficacy.

Does financial education increase financial literacy?

In the most high level view, financial education does have some positive effect on financial literacy. In a meta-analysis of 201 studies comprising 168 papers, Fernandes et. al. found that "interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied..." (2014, p. 1861). Furthermore, Fernandes et. al.'s meta-analysis revealed that "measured knowledge of financial facts had a weak relationship to financial behavior in econometric studies controlling for omitted variable bias" (2014, p. 1873).

A later meta-analysis by Kaiser and Menkhoff of 126 impact evaluation studies found that "financial education significantly impacts financial behavior and, to an even larger extent, financial literacy" (2017, p. 611). This meta-analysis also found "financial education is less effective for low-income clients as well as in low- and lower-middle-income economies" (Kaiser & Menkhoff, 2017, p. 611). This distinction in financial education efficacy along a demographic property is also present in the meta-analysis completed by Fernandes et. al. as well as in individual studies (Fernandes et. al., 2014, p. 1861).

What should financial education teach?

In a study by Postmus et. al., 85.1% of the 195 participants reported a yearly household income of less than $25,000 ( 2015, p. 255). This study sought to understand the impact of a financial education intervention provided to a random sample of female survivors of domestic abuse. Both women in general, and domestic abuse survivors specifically, are noted for being demographic groups at risk for financial challenges (Postmus et. al., 2015). Postmus et. al. note that financial education programs deployed by nonprofit domestic violence organizations speak to topics such as "basic financial management skills, such as saving, budgeting, getting or repairing credit, cash flow management, purchasing a home, predatory lending practices, financing major purchases, investing, and wise spending habits" (2015, p. 251). The financial challenges faced by these two groups are not too far removed from the financial challenges faced by other demographic groups. In a study by Friedline and West, adults born between the early 1980s and 2000s - generally " millennials" - "earn the lowest incomes of their careers while making financial decisions about attending postsecondary education, living independently from families of origin, finding employment, repaying educational debt, purchasing a home, and saving for retirement" (2016, p. 649).

How should financial education teach?

The study by Friedline and West analyzed data collected in the 2012 National Finance Capability Survey (2016, p. 649). This survey was "comissioned by the FINRA Investor Education Foundation and was completed online by a sample of 25509 adults in the United States between July and October 2012, which was nationally representative when population weights were applied" (Friedline & West, 2016, p. 653). Friedline and West's study used the responses of 6865 millennials to show that financial education that "focus solely on financial education or inclusion may be insufficient for facilitating Millennial's healthy financial behaviors; interventions should instead develop financial capability" (2016, p. 653). Friedline and West describe "financial capability" as the combination of the declarative knowledge from financial education as well as the procedural knowledge of how to apply it (2016, p. 653).

This theme of impactful financial education needing to provide both declarative and procedural knowledge can be found in other studies. In their study with female survivors of domestic abuse, Postmus et. al. used a financial education program that adhered to a "reasoned action approach (RAA), a manifestation of the Theory of Planned Behavior" (2015, p. 253). Viewed through the lens of RAA, a successfull financial education is one that "changes participants' knowledge, behavior, and intention to perform the behavior" (Postmus et. al., 2015, p. 253). The curriculum used is this study is specifically constructed to impart both declarative financial knowledge and procedural financial knowledge that is applicable to the lived experiences of domestic abuse survivors. Postmus et. al. did find that learning from such a tailor-made curriculum did significantly improve participant's outcomes.

Furthermore, Postmus et. al. found that "the impact of the curriculum persisted over the full 12-month, post-curriculum, follow-up period" (2015, p. 262). Juxstaposed to this result is a finding by Fernandes et. al. that "even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention" (2014, p. 1861). This juxstapositioning suggests that it may be the case that a financial education aligned with the learner's specific needs will be most effective in the post-intervention period.

This result of enhanced efficacy due to content aligning with the specific needs of learners is significant enough that financial education has been used as a secondary concern in order to positively affect a primary concern. Courtney et. al. developed a smoking cessation study protocol to "evaluate the potential of co-managing financial stress as a means of enhancing smokers' capacity to quit smoking" (2014, p. 1602). While this "two-group parallel block randomized (ratio 1:1) open-label clinical trial (RCT) with allocation concealment" study protocol is not accompanied by the actual performance of the study protocol outlined, the authors do note that "financial stress consistently predicts lower probabilities of sustained abstinence, even after controlling for nicotine addiction, psychological stress and use of cessation aids" (2014, pp. 1602 - 1603).

When should financial education teach?

Aligning financial education with a particular learner's specific needs for increased efficacy can mean simply aligning the curriculum's financial content with it's non-financial content. Financial education efficacy can also be augmented by the temporal proximity of financial education to the immediate needs of the learners. While this temporal proximity of financial education to learner needs can be seen in the study by Postmus et. al., it also can be be seen in a study by Gerrans. In their study, Gerrans writes "The undergraduate years, therefore, appear to present a teachable moment when students could acquire financial knowledge and skills, as well as develop the attitudes of behavior required for financial independence" (2020, p. 1). In this regard, the results of these individual studies are also borne out in the meta-analysis by Fernandes et. al. who write "We suggest a real but narrower role for 'just-in-time' financial education tied to specific behaviors it intends to help" (2014, p. 1861).

It remains unclear which of facet of financial education, either temporal proximity of the instruction or the alignment of the content to more generalized goals, has the greatest effect on financial literacy. In either case, it appears that temporal proximity of financial education to the behaviors that it seeks to modify can help provide the procedural knowledge that is a necessary component of such financial education being successful. Gerrans found that among undergraduate students who receive financial education during these formative years "retain significant objective and subjective financial literacy effects, with modest decay, three years after completing a unit of personal finance education" (2020, p. 1). Notably, this study found a "sustained positive effect for checking the affordability of purchases, which remained for three years after the unit" (Gerrans, 2020, p. 16). This result suggests that learners who receive financial education temporally near behaviors using that information are likely to retain the learned knowledge for much longer than the knowledge gained from purely declarative financial education.


Financial education's impact on financial literacy as evidenced in human behavior attenuates over time. The rate of attenuation can be slowed however by aligning financial education content to the immediate needs of the particular learners and providing the instruction at a time just before the learners will need to apply it. These results indicate that financial education is most effective when it imparts both declarative and procedural knowledge. This result arises both via a meta-analysis of the literature and in particular studies looking at demographic groups known to be at-risk for financial problems. Educators should take these themes into account when designing and providing financial education.


Brugiavini, A., Cavapozzi, D., Padula, M., & Pettinicchi, Y. (2020). On the effect of financial education on financial literacy: Evidence from a sample of college students. Journal of Pension Economics & Finance, 19(3), 344-352.

Fernandes, D., Lynch, J. G., & Netemeyer, R. G. (2014). Financial literacy, financial education, and downstream financial behaviors. Management Science, 60(8), 1861-1883.

Friedline, T., & West, S. (2015;2016;). Financial education is not enough: Millennials may need financial capability to demonstrate healthier financial behaviors. Journal of Family and Economic Issues, 37(4), 649-671.

Gerrans, P. (2021). Undergraduate student financial education interventions: Medium term evidence of retention, decay, and confidence in financial literacy. Pacific-Basin Finance Journal, 67,


Iterbeke, K., De Witte, K., Declercq, K., & Schelfhout, W. (2020;2019;). The effect of ability matching and differentiated instruction in financial literacy education. evidence from two randomised control trials. Economics of Education Review, 78,


Kaiser, T., & Menkhoff, L. (2017). Does financial education impact financial literacy and financial behavior, and if so, when? The World Bank Economic Review, 31(3), 611-630.

Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence: Theory and evidence. Journal of Economic Literature, 52(1), 5-44.

Postmus, J. L., Hetling, A., & L. Hoge, G. (2015). Evaluating a financial education curriculum as an intervention to improve financial behaviors and financial well-being of survivors of domestic violence: Results from a longitudinal randomized controlled study. The Journal of Consumer Affairs, 49(1), 250-266.

Wagner, J. (2019). Financial education and financial literacy by income and education groups. Financial Counseling and Planning, 30(1), 132.

Xiao, J. J., & O'Neill, B. (2016). Consumer financial education and financial capability. International Journal of Consumer Studies, 40(6), 712-721.


This work was created for Educational Foundations & Inquiry 6420 Research in Education at Bowling Green State University to fulfill a requirement to construct a literature review of an area of personal interest.