88388 Finance & PSD Impact JAN 2014 The Lessons from DECFP Impact Evaluations ISSUE 26 Our latest note highlights recent research showing the effectiveness of financial education in schools in Brazil. The Impact of High School Financial Education: Large-Scale Experimental Evidence from Brazil Miriam Bruhn, Luciana Leão, Arianna Legovini, Rogelio Marchetti, and Bilal Zia Research in economics and psychology to December 2011. It provided highlights how preferences about inter- complementary support, training, and temporal choices (today vs. tomorrow) instruction tools to teachers to enable quality formed in early life can have profound delivery. The instruction used new textbooks effects on future economic and financial with interactive classroom exercises on decision-making. The ability to control financial education themes, take-home temptation and delay gratification, in exercises such as creating household particular, has been shown to improve budgets with parents, and role playing lifetime academic, economic, and social assignments. As such, the intensity of outcomes. Willpower and self-control are treatment was much stronger than typical key determinants of such behavior and have one-off financial education workshops. been shown to resemble a muscle which requires repeated practice to become We study the impact of this financial stronger. education program on student and parent outcomes using a randomized control trial. Financial education is one way to equip This study represents the largest such individuals to make prudent financial evaluation in the financial education decisions, and the psychological insights literature, covering 868 public high schools above suggest that introducing such in six Brazilian states with approximately instruction early and repeatedly – in 20,000 students. schooling years – can have beneficial effects throughout adulthood. Calls for such school Student Financial Outcomes based programs are widespread: the U.S. We collected data in schools through three Consumer Financial Protection Bureau now rounds consisting of baseline (Aug 2010), officially recommends introducing and follow-up 1 (Dec 2010), and follow-up 2 building key financial education concepts (Dec 2011). Follow-up survey results show throughout the K-12 school years, as do the that the program caused a quarter of a UK and Australian governments. Many standard deviation improvement in students’ developing countries including Brazil, financial knowledge, as measured by a SAT- Colombia, India, Indonesia, and Uganda are like financial proficiency test. In fact, the introducing financial education in their entire distribution of scores shifted to the school systems as well. right with students at all levels of capability showing marked improvements in test In a new paper, we study a comprehensive scores. On financial behavior, we find a financial education program in Brazilian statistically significant increase of 1.4 high schools that offered repeated percentage points in saving up for instruction and exercises on responsible purchases, and significant improvements in inter-temporal financial choices spanning the likelihood of making budgets and three academic semesters, from August 2010 negotiating prices and payment methods. Do you have a project you want evaluated? DECRG-FP researchers are always looking for opportunities to work with colleagues in the Bank and IFC. If you would like to ask our experts for advice or to collaborate on an evaluation, contact us care of the Impact editor, David McKenzie (dmckenzie@worldbank.org) autonomy index aggregates a series of Parent Financial Outcomes questions designed to measure whether We also examine “trickle-up” effects of the students feel empowered, confident, and program on parents to test whether students capable of making independent financial can act as agents of change in their decisions and influencing the financial households. Parents in treatment schools decisions of their households. The intention were significantly more likely to report that to save index includes a series of questions their children discuss financial matters with that identify preferences over hypothetical them at home and that they volunteer to help savings and spending scenarios. Our organize household budgets. In addition, we analysis finds strong and statistically detect improvements in parental financial significant treatment effects on both these knowledge on standard financial literacy measures, with an effect size ranging questions used in the literature. And finally, between 0.08-0.12 of a standard deviation. we find significant improvements in parental financial behaviors, with an increase of 0.67 Policy Implications percentage points in the savings rate and 1. Financial education can be an effective improvements in the likelihood of keeping tool in improving financial outcomes of household budgets. students when delivered in a comprehensive manner and over a In addition to these indirect effects, our study complemented the student program significant period of time. with a standard adult workshop on financial 2. Key complementary benefits can be education for parents. This involved a DVD- derived by involving the entire based intervention where parents in treated household, students and parents, as schools were randomly assigned to either a indicated by the trickle-up and parents’ financial education screening or a health workshop impacts. education screening. Although the 3. Student preferences on saving intentions attendance at these workshops was low, we detect further improvements in the and financial autonomy are important percentage of disposable money saved by pathways for improved financial students from families that attended the behavior. financial education workshops. Hence, these workshops helped parents reinforce the The findings of this study are already being messages taught to the students. used to guide policy discussions on the impact of financial education in schools. Student Preferences The Ministry of Education in Brazil has We finally study the mechanisms of impact recently approved a continuation of the to shed light on how and why the program financial education program to 3,000 public influenced students’ financial behavior. To high schools, and the development of a pilot do so, we use new indices of financial project for primary schools. Furthermore, autonomy and intentions to save, which other governments in the region have were constructed with the assistance of a expressed keen interest in developing local education survey firm. The financial similar programs. For further reading see: Bruhn, Miriam, Luciana Leao, Arianna Legovini, Rogelio Marchetti, and Bilal Zia. “The Impact of High School Financial Education: Experimental Evidence from Brazil ,” World Bank Policy Research Working Paper no. 6723, December 2013. Recent impact notes are available on our website: http://econ.worldbank.org/programs/finance/impact