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State Financial Education Mandates: It’s All in the Implementation

State Financial Education Mandates: It’s All in the Implementation

Policymakers have promoted financial education as a means of combating low-levels of financial literacy and negative financial behaviors among the U.S. population. However, previous research on the effectiveness of financial education has found, at best, mixed evidence that it improves financial well-being, often due to data and methodological limitations. We address some of the limitations of previous research. Our analysis uses the Federal Reserve Bank of New York/ Equifax Consumer Credit Panel in combination with detailed information on the mandates passed in three states after the year 2000. We then employ a new statistical approach that compares the changes in credit scores and default in states after implementation of the mandate to the changes in comparable states that did not pass mandates. By focusing our analysis on individual states with intensive mandates where the implementation is well documented, we are able to more accurately assess the effect of financial education on financial outcomes. We find that if a rigorous financial education program is carefully implemented, it can improve the credit scores and lower the probability of delinquency for young adults. 

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