Casey Bell

Dan Gorin

Jeanne Hogarth

English

Research Papers in Economics

15
F
inancial education has risen on the agendas and pri-
ority lists of a number of agencies and organizations, 
including the Federal Reserve Board, as evidenced 
by recent hearings on financial literacy in Congress and 
speeches by Federal Reserve Chairman Ben Bernanke.2 
The issue is also a “hot topic” among academics and re-
searchers, and numerous programs have arisen to address 
financial education gaps, targeting a variety of topics from 
student loans and credit card debt to home buying and 
retirement planning.3 Yet, despite the increased attention 
from policy makers and educators—both via the school 
system  and  community-based  education  efforts—we 
know that consumers continue to face financial difficul-
ties. In addition, questions around the effectiveness of fi-
nancial education still loom large. 
In  an  effort  to  address  these  questions,  the  Federal 
Reserve Board conducted a research study focusing on 
the effectiveness of a financial education program for mili-
tary personnel.4 Beginning in 2003, we collaborated with 
Army Emergency Relief (AER), the U.S. Army post at Ft. 
Bliss in El Paso, Texas to provide financial education for 
young enlisted soldiers and to evaluate the impact of that 
education on the soldiers’ financial management behav-
iors. Soldiers attending the Army’s air defender advanced 
individualized  training (AIT)  at  Ft. Bliss  were offered  a 
two-day financial education course taught by staff from 
San Diego City College; funding for the course was pro-
vided by AER.5 At the end of the two-day course, soldiers 
completed a survey of financial behaviors that served as 
a baseline for the evaluation; most of the surveys were 
conducted from 2006 through 2008. A second group of 
soldiers at Ft. Bliss, who did not participate in the financial 
education course, served as a comparison group. Follow-
up surveys were conducted in January 2008 and January 
2009 to provide second data points for those who took 
the financial education course. Specifically, we explored 
the differences in behaviors between those who took the 
course  and  those  who  did  not,  focusing  on  six  topics 
Financial Education – Does It Work 
and How Do We Know?
Research Findings from a Study of Financial 
Education Among Soldiers
By Casey Bell, Dan Gorin, Jeanne Hogarth
Division of Consumer & Community Affairs, Federal Reserve Board1
covered in the course: budgeting, credit, consumer aware-
ness, car buying, insurance, and retirement savings using 
the Thrift Savings Plan (TSP), which is a 401(k)-type retire-
ment savings and investment plan for federal employees 
and the military.
Who Is in the Study?
Soldiers  in  this  study  were  in  their  early  20’s,  and 
predominantly male (86 percent). As might be expected 
when studying a population in their early 20’s, 70 percent 
of the soldiers in our baseline survey were single; by the 
time of the follow-up surveys, 54 percent were still single. 
About 40 percent of the soldiers in this study had some 
post-secondary education.
Because the financial education course was delivered 
during the soldier’s AIT (generally taken within the first year 
of military service), the majority of the soldiers (more than 
90 percent) in the baseline survey had less than one year 
of military service. By the time of the first follow-up survey, 
about two-fifths (40 percent) had more than one year, but 
less than three years of service. Pay grade, or rank, is closely 
correlated with length of service. At the time of the baseline 
survey, 78 percent of the respondents were in the lowest 
two pay grades, but by the time of the first follow-up, only 
45 percent were still in the lowest grades, while the other 
54 percent were now in the next two higher pay grades.6 
Did Financial Education Make a Difference?
To assess whether or not financial education made a 
difference,  we  identified  13  positive  financial  manage-
ment behaviors (for example, tracking spending, having 
an emergency fund, comparison shopping, saving for re-
tirement) and 15 negative behaviors (for example, paying 
overdraft fees, paying bills late, being called by a bill col-
lector,  losing  security  clearance).  Overall,  the  research 
found that soldiers in the financial education group re-
ported more of the positive behaviors and fewer of the 
negative behaviors than soldiers in the comparison group. 
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We wanted to know more specifically which behav-
iors were influenced by the financial education program. 
In order to separate the effects of the financial education 
course  from  other  influences  on  money  management, 
we  included  independent  variables  measuring  years  in 
the military, pay grade, gender, education, race/ethnicity, 
marital status, pre-military experiences (awareness of fam-
ily’s finances, having a high school financial education 
course, and having a savings account in high school), and 
having a credit card (as a proxy for experience). 
Soldiers who had the financial education course were 
more likely than the comparison group to report using an 
informal spending plan, suggesting they kept some sort of 
‘mental account’ of how much they could afford to spend 
(as opposed to doing nothing). However, these soldiers 
were less likely to report using a formal, written budget, 
relative to the comparison group. Also, those who took the 
course were more likely to know the difference between 
discretionary  and  non-discretionary  spending—in  other 
words,  they  understood  the  difference  between  spend-
ing money on needs versus wants. When buying a car, 
those who took the financial education course had higher 
down payment-to-loan ratios than those in the compari-
son group.
Other variables that seemed to influence soldiers’ fi-
nancial management behaviors included previous expe-
rience (having a savings account in high school, being 
aware of parents’ financial situation), education, marital 
status, number of years in the military (a proxy for experi-
ence), pay grade (a proxy for income), race/ethnicity, being 
male, and perceiving oneself as a good money manager.
Research Design Considerations
Measuring behavior change can be extremely chal-
lenging  and  we  recognize  several  limitations  to  our 
study. For example, our measures occur at two points in 
time, but we have not captured what may be happening 
between these two points. By looking at the lapsed time 
between taking the course and the follow-up survey, we 
may be able to explore some of the effects of timing on 
behavior change. 
Our study focused on behaviors that soldiers either 
did or did not report, such as budgeting, saving, or paying 
credit card bills. But we know that for some financial be-
haviors, people can be at different stages in the decision 
making process. We did not measure where soldiers were 
on the behavior continuum or whether they moved from 
one stage to another. For example, if a soldier in the class 
moved from being unaware of the retirement savings plan 
to thinking about signing up for the plan, or gathering 
information to make a decision, we could say the class 
had an effect; however, we did not measure these more 
subtle  behavioral  changes. Thus,  we  may  have  missed 
some of the impacts of the financial education program 
by focusing on actual behaviors rather than also includ-
ing planned behaviors.
The class was delivered primarily as a lecture. Alter-
native formats, such as simulations, experiential events, 
activity-based learning, and case studies may increase the 
relevance as well as the retention of information. It may 
also be that the timing of this course was not optimum 
for learning. Most soldiers took this course on the week-
ends, rather than as part of their regular training in AIT. 
As most high school and college instructors know, it is 
hard to find time in the curriculum to squeeze in a finan-
cial education course. And when the course is an add-on 
to an already busy and tiring schedule, the content may 
not sink in very well.
Conclusion
The financial education program had some positive 
effects on soldiers’ financial management behaviors over 
the longer term. We believe it’s important to continue to 
evaluate  financial  education  programs  and  to  improve 
our measures of financial capability. We also believe that 
while  education  is  necessary,  it  alone  is  not  sufficient 
to establish financially secure families and households. 
Important  complements  include  access  to  information, 
access to financial counseling and advising, and public 
policies  that  provide  consumer  protection. The  Federal 
Reserve Board remains committed to further research and 
support for all of these elements in order to help families 
attain financial stability and security. 
We believe it’s important to continue to 
evaluate financial education programs 
and to improve our measures of 
financial capability. 

Financial education: Does it work and how do we know?

http://www.frbsf.org/publications/community/investments/0908/hogarth_jeanne.pdf

Financial education: Does it work and how do we know?

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