The ripple effect of financial education from students to parents

Financial literacy is a vital skill that can extend beyond individual financial wellbeing to influence broader economic stability and participation, particularly in today's global economy. Educating vulnerable adult populations can be challenging, however, largely due to logistical constraints like budget limitations and adults' competing priorities.

But research shows that school-based financial education can not only empower students, it can also filter through to their parents. Such an approach can be used to enhance financial literacy within households, as well as supporting society-wide economic empowerment.

In 2023, I published the results of a study into the effects of a school-based financial education initiative that was launched in 2016. The programme was for students in grades nine through 11 living in six urban areas across Peru. It integrated financial education lessons into regular classes, supported by specially designed workbooks that covered essential topics like budgeting, financial products and responsible consumption.

Teachers received thorough training and resources so they could effectively deliver the curriculum over 16 to 32 hours, depending on the grade. Schools were carefully selected and randomly assigned to either participate in the programme or serve as a control group.

This financial education programme led to significant financial literacy gains among the students. Relative to the control group, scores in a financial literacy exit exam increased significantly among the treatment group. The provision of financial education also led to modest immediate changes in financial autonomy and savviness.

But what about upward intergenerational spillovers? The study revealed an unexpected ripple effect of financial education on these students' parents. By engaging over 20,000 students and examining credit bureau records of over 10,000 parents, this research shows that students can be conduits of valuable financial knowledge, benefitting low-income families in particular.

My study shows that financial education lessons in schools generally have a modest effect on parents’ financial behaviour, but there are significant spillovers from children to parents within lower income households.

In fact, there were four noteworthy results among the families of participants, even though they were not directly targeted by the programme:

Parents experienced a 26% decrease in the probability of having a loan or other bills in arrears. This suggests that their children's exposure to financial education may have indirectly improved their financial management skills.

On average, the parents of participants experienced a 5% increase in their credit scores. This indicates a tendency towards more responsible and informed financial behaviour after their children participated in the financial education course.

The data showed a 40% increase in parents' current debt levels. This rise may seem counterintuitive, but it actually suggests improved credit access – a cornerstone of economic mobility, when managed wisely.

Families with daughters in the programme saw unique benefits, such as a 6.7% increase in credit scores and a 28% reduction in loan arrears. This illustrates a gender-specific element to the impact of financial education on households. It also suggests that, in many families, daughters may have a stronger voice when it comes to money matters. They may be shaping household financial choices in ways that sons are not.

These findings challenge traditional assumptions about financial education, which often focus on parent-to-child knowledge transfer. Instead, this Peruvian programme reveals that when children gain financial literacy they can become unintentional but effective educators of their parents. And this can lead to positive shifts in household attitudes to finances.

The evidence gathered from this study offers valuable insights for policy-makers. These findings underscore a ripple effect from financial literacy that extends well beyond the classroom. And so, integrating financial education into school curricula could be a viable and cost-effective strategy for widespread economic empowerment.

Such a strategy could have far-reaching economic benefits for regions with minimal adult financial education participation. By bypassing the typical barriers hindering adult education, like time and resource limitations, this approach could help financial knowledge to permeate communities more efficiently.

It also aligns with global goals, such as the UN Sustainable Development Goals (SDGs), to enhance economic inclusion, showing that school-based financial education could be a strategic and efficient investment in the wider economy.

As the world grapples with financial complexities and uncertainties, integrating financial education into the fabric of school curricula could equip the next generation with the tools needed for financial empowerment. This would ensure that economic growth and stability reach all sectors of society – from classrooms and homes, to communities and beyond.