Concepedia

Financial Literacy, Financial Education, and Economic Outcomes

Justine Hastings, Brigitte C. Madrian, William Skimmyhorn

Annual Review of Economics · 2013 · 1K citations · 74 references

Open access

TL;DR

The article examines whether competitive markets incentivize firms to educate consumers or provide products that enable informed choice. The authors aim to review and synthesize research on financial literacy, financial education, and consumer financial outcomes, assessing measurement practices, evidence of education’s impact, and alternative policy options, while outlining future research directions. They conduct a literature review, evaluate measurement methods, compare evidence on education efficacy and costs, and analyze alternative policy interventions.

Abstract

In this article, we review the literature on financial literacy, financial education, and consumer financial outcomes. We consider how financial literacy is measured in the current literature and examine how well the existing literature addresses whether financial education improves financial literacy or personal financial outcomes. We discuss the extent to which a competitive market provides incentives for firms to educate consumers or to offer products that facilitate informed choice. We review the literature on alternative policies to improve financial outcomes and compare the evidence with that on the efficacy and cost of financial education. Finally, we discuss directions for future research.