No one is happy with financial literacy. Maybe it’s the questions researchers ask, maybe it’s a generational thing, maybe it’s soft skills. It’s probably a lot of things.
Part-of-the-reason we don’t have a great idea is because we don’t have a great way to test it. A lot of FinLit research follows these steps:
- A natural experiment occurs. Sometimes it’s in time. One cohort has no mandate, another has the mandate. Alternatively it could be a law in one state, but not a neighbor.
- Students get some combination of classes, videos, etc. To me the treatment seems weak, but you be the judge.
- Students answer questions about what they learned.
This structure suffers because it measures what’s easy rather than what’s meaningful. What if we reversed this? What if instead of prioritizing measurement, we prioritizied meaningfulness?
For our start up FinLit Deposit, we’d give every student $100 the first week. If they have at least $100 in the account each subsequent week, they get $25 more. If the account dips below that amount, no deposit. If it recovers, the deposits begin again.
This systems offers students real choices with real money. Save or spend. Invest or rest. Investors often note that paper trading is not the same emotional ballpark as real money. That should apply here too.
We could partially fund this with a grant that studies decision making. What if some kids got physical bills–good day Mr. Franklin- and others direct deposit. Dollars to doughnuts, I’d wager that the mentally accounting will differ.
If grants aren’t available to kickstart this start-up, let’s get some public money. Athletic scholarship total almost $3B. Academic and need scholarships are in the tens of billions. There’s already (!!) $630M spent on financial education. That’s already $200 for each senior. What’s wild is we already do these these kinds of things.
Young people tend to not be great decision makers. So what. No one is fully optimal. If our hypothetical students spend their semester of savings on a concert is that much different than their parents tax-refund choices?
The only problem I see in this is how FinLit Deposit actually makes money. Maybe some financial literacy program actually teaches that.