nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2022‒05‒09
two papers chosen by

  1. Time inconsistency and overdraft use: Evidence from transaction data and behavioral measurement experiments By Gill, Andrej; Hett, Florian; Tischer, Johannes
  2. Active Learning Improves Financial Education: Experimental Evidence from Uganda By Tim Kaiser; Lukas Menkhoff; Manuel Menkhoff

  1. By: Gill, Andrej; Hett, Florian; Tischer, Johannes
    Abstract: Households regularly fail to make optimal financial decisions. But what are the underlying reasons for this? Using two conceptually distinct measures of time inconsistency based on bank account transaction data and behavioral measurement experiments, we show that the excessive use of bank account overdrafts is linked to time inconsistency. By contrast, there is no correlation between a survey-based measure of financial literacy and overdraft usage. Our results indicate that consumer education and information may not suffice to overcome mistakes in households' financial decision-making. Rather, behaviorally motivated interventions targeting specific biases in decision-making should also be considered as effective policy tools.
    Keywords: Household Finance,Paycheck Sensitivity,Fintech,Time Inconsistency,Time Preferences,Experiment,Behavioral Measurement
    JEL: D14 D90 G51 G53
    Date: 2022
  2. By: Tim Kaiser; Lukas Menkhoff; Manuel Menkhoff
    Abstract: We conduct a randomized field experiment to study the effects of two financial education interventions offered to small-scale retailers in rural western Uganda. The treatments contrast “active learning” with traditional “lecturing” within standardized lesson-plans. After six months, active learning has a positive effect on savings and investment outcomes, in contrast to small or zero effects for lecturing. After four years, estimates come with substantial uncertainty but are generally larger for the active learning group, such as a 60 percent increase in investments. As an adverse outcome, reported late payment on loans increases by about 30 percent for both treatments. The findings suggest that teaching methods can play an important role in affecting how financial education programs impact financial behavior and outcomes.
    Keywords: financial behaviour, financial literacy, active learning, lecturing, training method, field experiment
    JEL: O16 I21 G53
    Date: 2022

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