Many people share a strong pessimism about the future of
Social Security while secure pensions from a lifetime of working for the same
company have followed the path of buggy whips. So in spite of decades in which
the nanny state tried to protect people from life, people feel less secure than ever.
As usual and when all else fails, the experts turned to
education. Teaching people about the miracle of compound interest and providing
GPS guides to navigate the forest of investment alternatives and complex
securities would empower consumers to make wise investment decisions. But as
usual it failed according to a paper by three academics who analyzed 168 papers
covering 201 prior studies. The paper, “Financial Literacy, Financial Educationand Downstream Financial Behaviors” was made available online in January and
will appear in a forthcoming journal, Management
Science. The authors concluded that
These interventions cost billions of dollars in real spending and larger opportunity costs when these interventions supplant other valuable activities. Our meta-analysis revealed that financial education interventions studied explained only about 0.1% of the variance in the financial behaviors studied, with even weaker average effects of interventions directed at low-income rather than general population samples.
