NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Effect of Financial Education on the Quality of Decision Making

Sandro Ambuehl, B. Douglas Bernheim, Annamaria Lusardi

NBER Working Paper No. 20618
Issued in October 2014, Revised in August 2016
NBER Program(s):   PE

We introduce a method for measuring the quality of financial decision making built around a notion of financial competence, which gauges the alignment between individuals' choices and those they would make if they properly understood their opportunities. We use it to document the potential pitfalls of the types of brief rhetoric-laden interventions commonly used for adult financial education. Motivational rhetoric can render the effects of such interventions indiscriminate even when people appear to understand and internalize the targeted concepts. Conventional methods of evaluation involving financial literacy, self-reported decision strategies, and directional effects on choices do not reliably detect these deficiencies.

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Document Object Identifier (DOI): 10.3386/w20618

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