review

Can you help someone become financially capable?

Evidence type: Review i

The study
Outcomes measured
Key findings
Points to consider

The study

This research identifies and analyses 188 papers and articles that present impact results of interventions designed to increase consumers’ financial knowledge (financial literacy) or skills, attitudes, and behaviours (financial capability). It aims to test the hypothesis that such interventions do not affect financial knowledge and/or financial outcomes of those involved and adopts a systematic review process, including meta-analysis, to compare and contrast the findings of the literature.
Studies in the period January 2000 to September 2013 were considered, with 75% of those selected covering interventions in the US, with Africa, Asia, and Latin America also represented in the sample. None of the studies originated in the UK. The studies covered a range of topics taught, delivery methods, size of group, intensity and duration of intervention.
The review includes the use of meta-analysis, a statistical technique that pools data from different studies to test for significance in the enlarged sample of observations.
Studies were selected from a range of sources focusing on those where papers are screened for quality such as peer-reviewed journals. Criteria for inclusion include that a study has a focus on personal financial literacy or capability and that it tests an intervention.
Some studies were identified through considering a number of narrative reviews. There was little overlap in the material considered in these narrative reviews, which presented a variety of findings. (A narrative review discusses and summarises the literature on a particular topic, without generating any pooled summary figures through meta-analysis). Overall, the narrative reviews were not able to draw any firm conclusions about the impact of financial education activities.

Outcomes measured

Financial behaviour: The analysis considered whether the interventions led to increased savings, contributions to retirement savings, defaults on loans and keeping financial records/budgets.

Key findings

Financial behaviour: The meta-analysis suggests that financial education can impact some financial behaviours, including savings (based on data from 6 RCT studies, significant at the 90% confidence interval; p=0.051) and record keeping (based on data from 5 studies, although results not quite significant at the 90% confidence interval; p = 0.134). These are potentially behaviours where individuals can exert greater control than in the case of other outcomes such as loan defaults.
It was not possible to provide insight on the importance of programme characteristics (delivery methods, topics etc.) although the authors state that this may be due to the nature of the sample (small for some subsets) and lack of comparability
Greater emphasis should be placed on the use of rigorous evaluation methods including possible defining common outcomes and using standard tools to assess change
Research should make use of social science impact evaluation registries undertaken by the American Economic Association and 3ie, to provide a common repository of research for future meta-analyses, as well as avoid issues related to publication bias
The authors noted a surprising lack of analysis of the costs and benefits of financial literacy interventions.

Points to consider

Relevance: The findings are useful to anyone interested in implementing and evaluating financial education activities.
Applicability: It should be noted that most of the studies analysed originated in the US and none originated in the UK. This may limit their applicability in a UK context where access to financial services, regulation etc., is likely to differ.
Methodological strengths or limitations:
=The diversity in outcomes and in how they are measured reduces the number of comparable studies for the meta-analysis.
=Where randomised controlled trials have been done, the results of impact appear limited, indicating that perhaps omitted variables or publication bias may be present for studies not employing these rigorous methods.