Academic journal article Journal of Financial Counseling and Planning

Translating Financial Education into Behavior Change for Low-Income Populations

Academic journal article Journal of Financial Counseling and Planning

Translating Financial Education into Behavior Change for Low-Income Populations

Article excerpt

The impact that financial education had on the financial behaviors of (a) the agency staff who were trained to deliver the program and (b) the low-income individuals who participated in the program was investigated. Specifically, the researchers examined the relationship between total number of financial education lessons completed, prior financial experience, and improvement in individuals' financial behaviors. The results provide some evidence that financial education may result in improved financial behaviors. However, the findings suggest that prior level of financial experience may matter more than the number of lessons completed. Researchers may want to re-examine the indicators currently being used to show program impact and whether financial knowledge is the appropriate catalyst to foster behavior change.

Key Words: financial education, financial socialization, low-income populations, program evaluation

(ProQuest-CSA LLC: ... denotes formulae omitted.)


High levels of consumer debt, low personal saving rates, and increases in personal bankruptcy filings have generated concern that consumers lack adequate financial skills (Bell & Lerman, 2005; Lyons, Palmer, Jayaratne, & Scherpf, 2006; National Endowment for Financial Education, 2004). As the financial system has grown rapidly more complex, consumers have had to become more actively involved in managing their finances. Yet, many consumers, even those who would describe themselves as "financially savvy," are having difficulty assessing their options and making sound financial decisions. The burden for low-income and disadvantaged individuals can be particularly overwhelming. In the current financial environment, it is easy for low-income and disadvantaged populations to fall victim to predatory lenders and financial scams, especially because many lack adequate financial education (Lyons & Scherpf, 2004). Basic financial management skills are important for all households, but they are particularly critical for low-income households to ensure long-term financial security.

A number of financial education programs have been developed in recent years to address the financial education needs of low-income populations. However, research measuring the effectiveness of these programs has not kept pace. There are a number of reasons why limited research is available. First, researchers face challenges in collecting data from program participants with low financial literacy levels. Low-income participants are often difficult to track and have high program drop out rates and low survey response rates (Anderson, Zhan, & Scott, 2004; Lyons, 2005; Lyons et al., 2006; Lyons & Scherpf, 2004). These factors, coupled with their reluctance to divulge personal information, limit the amount and type of information that can be collected. The result is that survey instruments are often kept short and simple to increase response rates and reduce measurement error.

Second, researchers face challenges collecting impact data because of the nature of the organizations that deliver financial education programs. Most programs that target low-income populations are operated by small non-profit organizations with limited staff and financial resources. Relative to their operating expenses, program evaluations can be expensive to conduct, especially rigorous evaluations that use control groups and have a longitudinal component. In addition, many of the agency staff and volunteers do not have expertise in evaluation and lack the understanding and knowledge about how to measure program impact to show that their programs are working (Lyons, 2005; Lyons et al., 2006). In the end, there are few incentives for instructors to collect data and for participants to provide information.

Most organizations currently conducting program evaluations use only a post-test or a pre- and post-test to collect impact data (Lyons et al., 2006). …

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