A New History of Investment in Financial Education across the United States
Research into historical spending on financial education and its impacts.
Investment in financial education across the U.S. varies from state to state. Besides the resources spent by states on classes for students in middle through high school, there is investment coming from the nonprofit sector. These organizations run out-of-school programs, develop education products, and provide teacher professional development programs. To date, few studies have assessed the impact of this investment in financial education on individual outcomes. Part of the challenge is that public records on financial education that people are exposed to, and data on people’s financial behaviors come from different sources. The project called A New History of Investment in Financial Education across the United States addressed this gap by assembling data on students’ exposure to relevant academic content standards, as well as non-profits’ program service expenses.
This research is the product Knology and support from the National Endowment for Financial Education ® (NEFE), which began in 2018. The initial research plan focused on understanding the return on investment of state mandates for financial education by looking at individual economic security outcomes captured in the national Survey of Household Economics and Decisionmaking (SHED), with an eye towards improving policy. That remained true throughout the project, and we expanded the scope to include information on nonprofit spending and activities related to financial education. This made sense given that a report from the Consumer Finance Protection Bureau showed that nonprofit organizations make substantial investments in financial education in some states.
The overarching research question for the study was to identify the impact of greater spending on youth financial education for low- and moderate-income U.S. residents. Today, various states have financial education requirements for high school graduation, but what was lacking was data on historical spending on financial education by state and year. One of our first steps was to try to fill this gap going back roughly two decades. We looked at financial education activities from state requirements and academic standards which students would be exposed to, as well as those from financial education nonprofits. We performed internet searches and reviewed state board of education websites and other online resources to understand existing state requirements and mandates as well as graduation requirements for each state. We supplemented this with two historical compilations of data on nonprofits’ spending on financial education. First, focusing on a single organization, we gathered program service expenses and other data for Council for Economic Education state councils using IRS 990 Forms databases. The national office of the Council for Economic Education also generously supported this effort. Second, zooming out, we gathered total expenses by financial education nonprofits using data from the National Center for Charitable Statistics. After we finished gathering the data, we connected this information to outcomes reported in the SHED survey.
One of the major products that has emerged from our work is a new, robust research database that features information on financial education dating back to the early 1990s. Locating the data needed for our analysis proved one of the more challenging aspects of the project, with some states showing large gaps in their public records. We made adjustments to our study based on these issues that allowed us to answer the research question we had originally asked, but this challenge highlighted the importance of the work we did. As states and nonprofits invest in financial education, measuring the impact of their work is crucial for making decisions about future investments and programming. The database was one of the key components of our study. The second were the responses submitted by thousands of individuals who completed the SHED survey in the last seven years.
Findings & Implications
The data shows that states sharply increased financial education for students after the Great Recession of the early 21st century. Overall, our analysis showed modest connections in several outcome areas, where “connections” indicates that we can identify relationships between trends but not causation. Among them, we found that increases in spending on financial education per student in public schools is associated with a small, yet positive change in people’s assessments of their own financial health. Increased financial education mandates for public schools is also linked to a decrease in financial fragility. This means that people are more likely to be able to cover emergency expenses. However, we did not find that financial education is associated with people’s ability to afford routine healthcare. And surprisingly, the data showed that increasing spending by financial education nonprofits is connected to a lower likelihood to have retirement savings accounts. This may mean that nonprofits are reacting to, rather than causing, these behaviors. Lastly, different analytical tools suggest that the story is more complicated than these general trends. For example, there are specific thresholds of spending by financial education non-profits -- relating to total expenses or program service expenses -- that are associated with especially good or especially bad retirement savings or financial fragility outcomes.
These findings have implications for policy makers and state boards of education, nonprofit organizations, researchers interested in studying financial education, and journalists covering this area. Financial education coursework seems to be helpful in encouraging people to adopt healthier financial behaviors, but states still need to implement economic policies that address persistent, fundamental issues such as access to healthcare and jobs. For their part, nonprofits’ investment in financial education seems to be an important complement to public schools’ coursework. Our analysis suggests that there may be room for these organizations to expand their investment and increase their impact. Crucial to accomplishing that goal will be collecting data on the groups that have benefitted from nonprofit-led efforts, including both students and educators. Lastly, researchers now have access to clean baseline data and other resources from which they can begin to perform more detailed analysis of spending on financial education.
In working on this study, we relied on recommendations and input from various organizations and partners. This included the Council for Economic Education and its various state-level affiliates, the Jump$tart Coalition for Personal Financial Literacy, and a handful of advisors from academia and the nonprofit world with relevant expertise. Their insights were valuable in shaping the research direction as well as pointing us to resources that we may not otherwise have used.
The Database Fellowship Training Program
As an extension of this project, in 2022, NEFE & Knology launched the Financial Education Database Training Fellowship. The Fellowship was designed to help a small group of emerging scholars use the database and mapping tool to contribute to a new wave of financial education research.
The cohort brought together a group of six US-based scholars with life experiences in Africa, Asia, Europe, and North America. For more on their backgrounds, click here. Between April and September, 2022, they participated in a series of seminars in which NEFE and Knology staff offered advice on the use of the database and mapping tool, while also assisting with the design and implementation of Fellows' research agendas.
Our Fellows built on our earlier work by exploring the impact of financial education mandates on a variety of behaviors and attitudes. They found that these mandates are associated with a number of positive outcomes—for example, a higher likelihood of having emergency savings, providing financial assistance to extended family or friends, and having a positive sense of financial well-being. Through their work, our Fellows demonstrated how valuable the database and mapping tool are, while also launching a new wave of research that will prove useful in improving outcomes from financial education investments.
The Fellowship culminated in the development of either a peer-reviewed article or poster presentation. In addition to their chosen final output, Fellows also discussed their research findings in a series of webinars facilitated by NEFE. These webinars were open to the public, and were recorded to allow for broader dissemination. Click here to learn more about these sessions, and to watch the recordings.
Work with our database and mapping tool suggests that these resources have many valuable future uses. Among other things, they can be used to support improvements to mandates in the public school system, and to help with the development of financial education courses for college students.
In recognition of our contributions to the field of financial education research, in December, 2022, Knology was chosen to be the first recipient of NEFE’s Innovation Award. We believe that developing education programs that advance financial well-being is core to human rights and human dignity. Without solid financial education, we leave the most at risk in our society to be victimized by predatory opportunists, living in a world of unmanageable individual debt, and creating instability in our entire economy.
We hope that this award draws attention to the need for better datasets so research can support better policy, and that it can stimulate rapid innovation in financial education policy.
Products & Resources
With this project, we produced a suite of resources for policy makers and state education board members, researchers, and educators. It is our hope that this research serves as a catalyst for conversation about financial education spending in ways that improve policy and foster meaningful change.
The Project Report
This publication tells the story of this project, from beginning to end. It describes the groups and individuals who contributed to the project, our methods for building the database, how we used the database for research, and the lessons we learned throughout the process.
The Financial Education Mapping Tool offers maps that represent changes in financial education investments and financial health outcomes from 2001 to 2019. Designed as a Shiny app, the interactive Mapping Tool enables users to manipulate variables such as types of financial education investment and types of financial health indicator, as well as compare data across states and years.
Database & R Package
This is the database of historical investment in financial education and financial health outcomes for residents across the United States. This complete database is open access and is offered in .CSV format and as an R package titled KnologyFinEdSpending.
The SHED Crosswalk
This resource offers a comparison of the Survey of Household Economics and Decisionmaking questions and response categories for each year from 2013 to 2021. The SHED is a valuable public dataset and the crosswalk tool can help users ensure their analysis of the data is accurate.
Behind the Research: The Big Picture
This article is one of a pair of stories that give a view into our process of designing a complex research process. We explore the questions that inspired our work and how we navigated unexpected intricacies of working with these types of financial education data.
Behind the Research: Defining the Terms & Gaps
This is the second article that offers deeper insight into our research process. This story illustrates our experience of encountering gaps in our data sources and how we adapted our approach to fill in the missing pieces of financial education information.
NEW DIRECTIONS IN FINANCIAL EDUCATION RESEARCH
This report provides an in-depth account of the Financial Education Database Training Fellowship, detailing the outputs each Fellow produced and sharing their thoughts on the program.
ADVANCING RESEARCH ON FINANCIAL EDUCATION INTERVENTIONS
This article provides access to the recorded webinar presentations each of our six Fellows made, while also including an introduction to the Fellowship by Dr. Dwyer.
Report on the findings citation: Dwyer, J. T., Field, S., Thomas, U. G. & Flinner, K. (2021, February 9). A new history of investment in financial education across the United States. Knology. https://knology.org/article/a-new-history-of-investment-in-financial-education-across-the-united-states/
Database and R Package reference: Dwyer, J. T., Field, S., Attaway, E. (2021). KnologyFinEdStateSpending: A Database of Financial Education Activities in the U.S. by State and Year. R package version 1.0.0. Knology. https://gitlab.com/knologyresearch/KnologyFinEdStateSpending
New Directions in Financial Education Research reference: Knology (2022). New Directions in Financial Education Research. Knology Publication #NPO.174.822.01, Knology.
Photo credit: Bianca Ackermann on Unsplash.