Although Definitive Evidence Is Lacking on What Is Most Effective in Improving Financial Literacy, Some Initiatives Have Yielded Positive Results

		Relatively Few Evaluations Have Measured Financial Literacy Programs’ Effect on Consumer Behavior

While there is a fairly extensive literature on financial literacy, relatively  few evaluations of financial literacy programs have been published that  use empirical evidence and even fewer evaluations measured a program’s  impact on the participants’ behavior. The evaluations of financial literacy programs that are most reliable,  useful, and definitive include three key elements, according to some  experts with whom we spoke and literature that we reviewed: they  measure behavioral change, track participants over time, and use a control  group. For example, certain  programs using approaches as diverse as individualized one-on-one credit  counseling, employer-provided retirement seminars, and education  provided in a classroom setting have each been shown to have effective  outcomes. However, the heterogeneity among the programs evaluated and  the nature of the evaluations themselves make generalizing or drawing  conclusions about exactly which methods and strategies are most  effective in improving financial literacy difficult. As a result, it appears that no  single approach, delivery mechanism, or technology necessarily  constitutes the best practice for improving financial literacy. Further, some of these programs have  had a positive impact on participants’ financial behavior and not just on  their knowledge. For example, in  2004, Treasury’s Office of Financial Education and Financial Access  published a list of the elements of a successful financial education  program, which was intended to guide financial education organizations in  developing programs and strategies. Accessibility and cultural sensitivity. Trustee Program approves credit counseling agencies and debtor  education providers to meet requirements of the U.S. Bankruptcy Code. The existence of the Trustee Program’s and HUD’s approval processes for  credit counseling and debtor education and housing counseling  organizations, respectively, suggests that it would be feasible for the  federal government to implement an approval or certification process that  would encompass financial literacy providers more broadly. However,  initiating and developing such a process would require that Congress or  the relevant federal agency or agencies address a number of issues,  including the goals of the program, who would administer the process,  what type of providers it would cover, what criteria or standards would  apply to providers, and what degree of ongoing oversight would be put in  place:    What are the goals of the certification process? What entities would be covered? Further, some of these entities provide broad financial  education, while others focus on very specific topics. Help consumers identify competent providers. Increase public awareness. Most notably, developing,  implementing, and operating a federal process for certifying financial  literacy providers would involve financial costs and staff resources for the  federal agency administering the process. While each certification or  approval process is unique, the experiences of the Trustee Program and  HUD may offer insights into the potential resources that a broader  certification process for financial literacy providers might entail. Appendix I: Scope and Methodology

Our objectives were to examine (1) what is known about which methods  and strategies are effective for improving financial literacy, and (2) the  feasibility of a process for certifying financial literacy providers and the  benefits and challenges of doing so. In addition to these studies, we reviewed other studies and  papers that addressed strategies for improving financial literacy that are  separate from financial education (such as changes in retirement default  options) that we deemed sufficiently reliable for our work because they  were published in peer-reviewed academic journals, written by noted  experts in financial literacy, or widely cited in the field of financial literacy  and education. We also conducted interviews with—and obtained documentation as  applicable from—representatives of federal agencies whose missions  involve consumer education and protection, including the Consumer  Financial Protection Bureau, Federal Deposit Insurance Corporation,  Board of Governors of the Federal Reserve System, Federal Trade  Commission, Department of the Treasury, and Securities and Exchange  Commission; the Financial Industry Regulatory Authority; nonprofit  organizations that provide or advocate for financial literacy and education,  including AARP, American Association of Family & Consumer Sciences,  Consumer Federation of America, Employee Benefit Research Institute,  Institute for Financial Literacy, Jump$tart Coalition for Personal Financial  Literacy, Junior Achievement, National Endowment for Financial  Education, National Foundation for Credit Counseling, and New America  Foundation; one international organization, the Organization for Economic  Co-operation and Development; and one financial services company,  Freddie Mac.
Why GAO Did This Study

Financial literacy plays an important role in helping ensure the financial health and stability of individuals and families, and efforts to improve consumers' financial literacy have grown in recent years. Currently, hundreds of nonprofit, private, and governmental entities provide some form of financial education to Americans. The federal government does not certify or approve organizations in general that provide financial literacy, although the U.S. Trustee Program and the Department of Housing and Urban Development (HUD) have approval processes for financial literacy providers for the purposes of meeting requirements of, respectively, the bankruptcy process and certain housing programs. In response to a mandate in the Dodd-Frank Wall Street Reform and Consumer Protection Act, this report addresses (1) what is known about which methods and strategies are effective for improving financial literacy, and (2) the feasibility of a process for certifying financial literacy providers. To address these objectives, GAO reviewed relevant literature, focusing on evidence-based evaluations of financial literacy programs or approaches; conducted interviews in the federal, nonprofit, private, and academic sectors; and examined the lessons learned from the approval processes of the Trustee Program and HUD.

What GAO Found

Relatively few evidence-based evaluations of financial literacy programs have been conducted, limiting what is known about which specific methods and strategies are most effective. Financial literacy program evaluations are most reliable and definitive when they track participants over time, include a control group, and measure the program's impact on consumers' behavior. However, such evaluations are typically expensive, time-consuming, and methodologically challenging. GAO's review of 29 evidence-based studies evaluating specific programs or approaches indicates that several have been effective in changing consumer knowledge or behavior. For example, several of these studies showed that individualized one-on-one credit counseling, employer-provided retirement seminars, and education provided in a classroom setting have had effective outcomes. However, the diversity of these programs and their evaluation methods makes drawing generalizable conclusions difficult. As a result, it appears that no one approach, delivery mechanism, or technology constitutes best practice, but there is some consensus on key common elements for successful financial education programs, such as timely and relevant content, accessibility, cultural sensitivity, and an evaluation component. In addition, several mechanisms and strategies other than financial education have also been shown to be effective in improving consumers' financial behavior, including financial incentives or changing default options, such as through automatic enrollment in employer retirement plans. The most effective approach may involve a mix of financial education and these other strategies. While a federal process for certifying financial literacy providers appears to be feasible, doing so would pose challenges. Initiating and developing such a process would necessitate that Congress or federal agencies determine which entity would administer the certification, the types of providers that would be covered, the degree of oversight required, and other aspects of the process. Some financial literacy stakeholders with whom GAO spoke cited potential benefits to federal certification. For example, some noted that it might help improve the quality of financial education providers, help consumers identify competent providers, or create greater public awareness about financial education. However, as the experiences of the Trustee Program's and HUD's approval processes show, federal certification would require financial and staff resources for administering the process. Moreover, most financial literacy stakeholders with whom GAO spoke cited additional concerns, including the potential cost and administrative burden to certified entities, the challenge of creating a single process for certifying such a diverse field, and skepticism that certification would improve the quality of financial education providers. Further, the lack of consensus about which financial literacy strategies and approaches are most effective would make certification challenging.