NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sandro Ambuehl

Department of Management UTSC
Rotman School of Management
University of Toronto
105 St. George Street
Toronto, ON, M5S 3E6
CANADA

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NBER Working Papers and Publications

October 2014The Effect of Financial Education on the Quality of Decision Making
with B. Douglas Bernheim, Annamaria Lusardi: w20618
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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