Our financial capability – being in control of managing our money – is crucial to our financial health. Without it, we may struggle to pay off debts, pay bills on time, buy a house, save for unexpected emergencies or for our future. Yet achieving financial capability is difficult. Basic financial literacy and numeracy skills can go some way to solving the problem, but it’s not immediately clear how best to achieve this as financial education seems to have little impact on financial capability. It doesn’t help that financial decisions are often one-off, or infrequent, while the consumer finance market is dynamic and ever-evolving, meaning that financial education may easily become outdated.
“Objective observers generally admit that research to date does not demonstrate a causal chain from financial education to higher financial literacy to better financial behaviour to improved financial outcomes, in part due to biases, heuristics, and other non-rational influences on financial decisions.” This fairly damning quote comes from Lauren Willis, Professor of Law at Loyola Law School and consumer finance specialist.