At Treasury, our efforts in recent years to promote greater levels of financial capability have focused on young Americans—and for good reason. Starting financial education at an early age can prepare young people to make informed financial decisions as they enter adulthood, and for the rest of their lives. That, in turn, has positive consequences for the broader U.S. economy. As Treasury Secretary Jacob J. Lew said last month, “helping young Americans build a sound financial foundation is not only important for their futures, it can also strengthen our economy for generations to come.”
But while interest in youth financial capability has continued to grow, existing research on the efficacy of financial education is limited, especially on approaches for elementary and middle school children. That is why Treasury commissioned the Corporation for Enterprise Development (CFED) and the Center for Financial Security at the University of Wisconsin-Madison (CFS) to conduct a first-of-its kind examination of the combination of classroom financial education and in-school savings account access, which could be a promising approach for driving measurable improvements in financial capability.
CFED and CFS designed the research to test the effect of approximately five hours of classroom-based financial education and access to a bank or credit union branch in school, alone and in combination, on three primary measures of financial capability: financial knowledge; financial behavior such as opening and using accounts; and attitudes towards saving and financial institutions. The research took place in elementary school classrooms in two school districts—Eau Claire, Wisconsin and Amarillo, Texas—during the 2011-2012 and 2012-2013 school years.
Overall, the research found improved outcomes from the hands-on financial education approach. Even relatively short classroom financial education significantly improved student financial knowledge, the effects of which persisted through the end of the study period. Both the financial education and access to in-school savings accounts were found to improve students’ attitudes toward saving and about financial institutions. A student with access to banking in his or her school also was more likely to have a savings account than a student who did not.
Beyond the research findings, the research also offers new insights into the process of launching and operating an in-school banking program and connecting such a program to a school-based financial education curriculum. In Amarillo, Happy State Bank (HSB), a Texas-based community bank with 31 locations, expanded its Kids’ Bank program to 15 randomly-selected schools as part of the study. HSB’s Kids’ Bank offers students interest-bearing savings accounts with no monthly fees, no minimum balance and no minimum opening deposit. During the study period, half of students in schools with Kids’ Banks were randomly selected to receive a $25 “seed” deposit* if they opened an account in order to encourage students to participate and save. The incentive had significant results: it increased the likelihood of a student opening an account by 18 percent. There were other lessons learned beyond the controlled study experiment. HSB and Amarillo school officials found that marketing strategies geared toward parents and students, such as public address announcements, hallway posters and presentations at PTA meetings, were also a key factor in boosting Kids’ Bank participation.
Teachers administering the financial education instruction also reported back on their experiences, which could inform future classroom efforts. For example, the Amarillo Independent School District has a large number of economically disadvantaged students (68% qualify for free and reduced price lunch) and teachers found that the curriculum needed to be relevant to students of all income levels in order to increase understanding. These insights also reflected on parent feelings about the program. One school principal reported that a high percentage of economically disadvantaged parents seemed proud that their children had access to the program. Some parents even accompanied their children to the bank when they made deposits into their savings accounts after school.
Going forward, Treasury plans to share the research with schools, community leaders and financial institutions, as well as encourage more research on the implementation of similar activities in more school districts and at different grade levels. This study could also inform the work of both the President’s Advisory Council on Financial Capability for Young Americans and the Financial Literacy and Education Commission as they look for approaches to building the financial capability of young Americans that can be implemented widely.
To view the full study, click here
To view a research brief, click here
Louisa Quittman is the Director for Financial Education in the Office of Consumer Policy at the United States Department of the Treasury.
*The “seed” deposits for savings accounts at the Amarillo, Texas study site were provided through private funds raised by the Center for Public Policy Priorities through the Amarillo Community Foundation.