Redefining Successful Financial Education

Abstract

Financial education interventions are considered successful when they help households make better financial decisions. However, this fails to account for the general equilibrium consequences of such an intervention. We redefine successful financial education as one where such interventions result in large enough effect sizes to move the market to an equilibrium where firms find it in their interest to unshroud product features to all consumers. We then assess a new product-specific rules of thumb-driven consumer financial education program. Our intervention improves knowledge and outcomes for newly-educated consumers. It is, however, a Pareto-improvement only under a narrow set of conditions. Positive treatment effects for a small fraction of retail consumers may come at the cost of other uninformed consumers. They are not enough to move the market to an unshrouded equilibrium, questioning the effectiveness of such an intervention.

Keywords: financial education, financial literacy, household finance

JEL Classification: G22, G5, G52