Does Financial Education Work?

Studies show that money lessons have to be relevant to kids' immediate experiences.

Lately, financial education for kids and adults seems to be right up there with Mom and apple pie as a crowd-pleaser. Nearly everyone acknowledges that financial literacy is a worthy goal, and more than a dozen states require some form of personal-finance education in high schools. There’s just one problem: It doesn’t seem to be working.

That was the sobering conclusion of a panel of experts at a conference on lifecycle saving and investing that I recently attended at Boston University. The problem, the participants agreed, is that broad-based efforts to improve financial literacy don’t hit people when they really need it. The best time to provide financial education, says Annamaria Lusardi, director of the Financial Literacy Center sponsored by the Rand Corp., Dartmouth College and the University of Pennsylvania’s Wharton School, is “when people actually have to make financial decisions.” (At Dartmouth, for example, new employees are given a simple, one-sheet walk-through of the retirement plan during orientation. The handout is then supplemented by short videos that explain such principles as compounding and diversification and offer profiles of real people telling how they save and invest.)

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Janet Bodnar

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.