Financial education courses are easy to find online, along with countless podcasts, webinars and videos from people who say they understand your financial stress and how to get out of it.
Success stories are also easy to find, as any program would want to amplify those, but the aggregate picture appears bleak.
Numerous studies seem to show financial literacy programs just don’t work, where almost every measure of what it means to “work” comes down to changing behavior.
A 2014 analysis, published in the journal Management Science, looked at 201 studies and found interventions to improve financial literacy explain only a 0.1% change in financial behavior. What’s more, the analysis found weaker effects with low-income people.
It’s not just financial literacy that seems to stumble with the approach of teaching information and trying to change behavior. The same is true for preventing drug use and changing health habits.
But putting so much weight on how much people change their financial behavior may be too narrow of a focus when considering if a program works.
Julian Edwards, a family success support coach at Edna Martin Christian Center, said any client who comes to him for financial help identifies a list of goals, including a few they want to try to tackle right away.
After figuring out what a client’s priorities are, Edwards can help develop a plan and meet with them regularly for support and guidance.
“We want to be able to help cultivate a plan that will have their buy-in,” he said.
One of Edwards’ former clients, Twiana Morse, went through the program five or six years ago after a divorce upended the relatively comfortable lifestyle she was used to.
After enrolling in the program, she started by saving $30 from each paycheck and cutting back on unnecessary expenses. It didn’t seem like much at the time, but those were steps on the way to Morse being able to purchase her house about a year and a half ago.
“If I did not have that, I don’t think I would be where I’m at now,” she said of the program.
Edna Martin Christian Center is one of many Centers for Working Families (CWF) locations in Indianapolis. The CWF model, facilitated by United Way of Central Indiana (UWCI), also includes workforce development and income support, creating a more holistic approach that Edwards said is important to getting lasting results.
It’s part of an individualized approach to financial literacy that keeps the focus on specific objectives, which is something the authors of the analysis suggest as a way to improve programs. They refer to it as “just in time” financial education.
“It’s looking at the person holistically and helping the individual and their household continue moving forward and not just looking at how to pay down debt,” said Shannon Jenkins, senior director of family opportunity fund at UWCI. “But once that happens, how are you focusing on the larger picture?”
Another benefit to the approach could be its long-lasting impact. A $3,000 difference in income for a household with a young child is associated with a 17% increase in that child’s future earnings, Jenkins said, which is a series of events made more likely by having job training, income support and financial education in one spot.
That means whatever good comes from financial education now could continue paying off for the next generation.
Contact staff writer Tyler Fenwick at 317-762-7853. Follow him on Twitter @Ty_Fenwick.