Financial Literacy Education Research
The following article was taken from COHEAO's recent whitepaper Financial Literacy on Campus.  Click here to read the full whitepaper.


Optimizing Efficacy: Factors that Improve Retention & Effectiveness


While most agree that we need to increase the financial literacy of today’s students, the effectiveness of financial literacy education itself has been widely scrutinized. On one hand, there has been a proven positive correlation between financial literacy education and positive financial behavior: a Department of Treasury study in 2002 showed that individuals receiving personal finance education have higher savings rates and net worth on average, and participate more often in retirement programs (U.S. Department of the Treasury, 2002). On the other hand, there is other research which shows no correlation between financial literacy education and subsequent positive financial behavior (Mandell & Klein, 2009).

One of the biggest challenges in measuring the efficacy of personal finance education is that financial education content varies greatly. While the standards set by the financial education core competencies identified in the National Strategy for Financial Literacy (U.S. Department of the Treasury, 2010) offer a level of comfort, the delivery methods, age, and other factors play a major role in learning retention and effectiveness. Three qualities which this paper examines are relevance, interaction and repetition.


as it pertains here, refers to the topic’s pertinence or probability that it will be needed in the short-term future. The effectiveness of personal finance education is increased when it is personalized and can be applied to the student’s own situation. Several studies have demonstrated that personal finance education is most effective when the learner is seeking to accomplish a financial goal, such as purchasing a home or setting up a retirement account (Freddie Mac, 2001; Mandell & Klein, 2007; McCormick, 2009). Students are often managing their own money for the first time when they begin college, so in theory, this would be an ideal time to deliver correlated financial literacy education.

Two organizations which do an excellent job at enhancing their financial literacy lessons with relevance are the Student Money Management Center at the University of North Texas, and The Stockton Center for Economic and Financial Literacy at Stockton College. Both organizations have found great success through peer-to-peer workshops, in which the students deliver lessons through well-prepared workshops which are relevant to college student life (iGrad, 2012). Not only are the lessons perceived as more relevant due to the peer-driven content, but students are more open to discussing financial topics, and perhaps more importantly, their own situations, in these type of settings.


is crucial to the process of “understanding.” Interaction forces the student to apply learned concepts to situations in their own life, and can actually alter the “method” of learning. There are two distinctly different methods of learning, “deep learning” and “surface learning” (Marton & Saljo, 1976). Deep learning focuses on the meaning or understanding. It requires additional effort, but is much more effective for long-term retention and application to real-life situations (Leamnson, 1999). Surface learning involves memorization and is very ineffective for long-term retention. Incorporating interactive exercises can help invoke the additional effort needed for deep learning, and increase long-term retention and application (Hake, 1998; Crouch, 2001).

One simple but effective example of adding interaction into a traditional lecture format is the “i>clicker system”, which is utilized by Bill Pratt to increase the interaction in his personal finance class at East Carolina University (iGrad, 2012). The “i>clicker” is used to record and immediately display aggregated feedback to questions asked in the lecture, allowing students to measure how their situations stack up to the average responses from their peers.


can also be a highly effective educational tactic, when employed correctly. Research has shown that retention is higher when education is presented and reinforced in similar settings (Xue, Dong, Chen, Lu, Mumford & Poldrack, 2010). While the repetition of information exposure is more commonly linked to short-term retention, the repetition of interactive exercises and tests has been proven to be effective at enhancing long-term retention (Roediger & Karpicke, 2006).

Two schools which have employed repetition to boost the effectiveness of their financial literacy education are Monroe College and California State University Bakersfield. Both schools take a multi-channel approach to financial literacy by integrating personal finance lessons into various initiatives like interactive online curriculum, new student orientations, classroom courses and workshops, email communications and student events (iGrad, 2012). These multi-channel approaches have helped to spread the message regarding the importance of these issues as well as increasing exposure.

Many people reference, discuss, and even create research studies on financial literacy education as if it is a universally compatible piece of the equation. However, there are many variables on how financial literacy education is delivered which can greatly influence its effectiveness and thus the conclusions that are drawn from studies which reference it. The three factors presented here – Relevance, Interaction and Repetition – are three variables which have shown to have a great impact on retention and understanding, and should be used in the delivery of financial literacy whenever possible.

This article was taken from COHEAO's recent whitepaper Financial Literacy on Campus.  Click here to read the full whitepaper.