The academic literature on financial literacy is growing, but a paper by renowned academic Annamaria Lusardi has provided the first worldwide meta-analysis showing how beneficial it can be. In fact, it was so good that it won a MAIA!

The MAIA judges and co-founder Michael Gilmore were impressed to see evidence of the effects of financial education in such a far-reaching study. 

Gilmore said, “Financial literacy is essential and can help millions escape poverty and stay on top of their money. But it is incredible seeing just how well it works and how valuable it can be as quantified by high-level research.”

MAIA Judge, and Director of the SKBI Institute for Financial Economics at Singapore Management University, Professor David Fernandez, added

“Published this year in a top-level academic journal, the richness and rigour of this paper will set the standard for a very long time. With top-tier testimonials from the European Commission and the OECD, the conclusions could not be clearer: Financial education affects financial knowledge and downstream behaviours.”

The paper, “Financial education affects financial knowledge and downstream behaviors”, was co-authored by Annamaria Lusardi, a University Professor of Economics and Accountancy at the George Washington University School of Business (GWSB). She is also the founder and academic director of GWSB’s Global Financial Literacy Excellence Center.

The paper is the culmination of a decade’s worth of Professor Lusardi’s research. The findings are based on 76 randomized financial education experiments across 33 countries on six continents and involved a sample size of over 160,000 people. 

Professor Lusardi explains the scope of the work and collaboration behind the paper,

“The research caps a collaboration involving a multi-country team of scholars who considered more than a thousand published studies before concentrating on randomized control trials—the gold standard of rigorous evaluation.”

The results were conclusive.

“The paper offers the first worldwide meta-analysis showing that financial education not only works, but it works well, and it is cost-effective,” Professor Lusardi says. “It provides solid evidence that financial education improves both financial knowledge and behaviour, particularly when it comes to budgeting, savings, and credit.”

The findings proved the benefits of financial education for both individuals and society. However, what was surprising was how transformative this education can be.

“According to this data, the effects of financial education are three to five times greater than reported in previous studies. This elevates financial education as a powerful pathway for boosting financial knowledge, inclusion and, ultimately, financial well-being around the world, especially for women, minorities, and other vulnerable groups,” Professor Lusardi says.

“This extensive work confirms what those receiving financial education have told us: It changes lives. Financial knowledge allows people to rise out of poverty, to secure their children’s futures; it opens doors to education, to valuable careers, and to safer retirement.”

The paper and the research behind it provide conclusive proof of the advantages of teaching people about money no matter their social level, culture, or country. Moreover, its impact will lead to lasting change.

“This research gives policymakers, educators, the financial industry, entrepreneurs, and others the rigorous data they need to put cost-effective, high-impact, and scalable financial education within reach,” the professor says. 

“The paper’s findings are a game changer.” 

However, there is a lot more that needs doing. Professor Lusardi explains, “This paper’s findings are a game changer. It is imperative that we escalate the push for financial education and that we do so with urgency. 

“New global threats, such as the COVID-19 pandemic, extreme weather, and war, require that we empower people to achieve better life outcomes, including during times of financial upheaval.

“We know what is needed. And now we know how it can be done.”

MAIA co-founder, Michael Gilmore, said, “Teaching financial literacy can transform lives. Research like this really helps get that message across and lead to change at every level of society.”

If you want to know more, you can read the paper here or email us at the MAIAs.