It’s post-tax/pre-graduation season, when articles about making better financial decisions crop up faster than spring flowers. Each year around this time, you can expect to see column after column about how Americans don’t understand money matters, packed with advice to new graduates (and others) about saving for retirement, creating a strict budget and sticking to it, and avoiding coffee shop lattes. These articles will lament the horrific state of Americans’ finances — probably noting that the savings rate has plummeted while consumer credit has surged, that roughly half of Americans say they would borrow to cover a $400 emergency, and that about 60 percent of Americans can’t pass a basic financial literacy test.
Statistics like those are inspiring more states to pass laws requiring students to take financial-literacy classes. According to the Council for Economic Education, 19 states now require the study of the subject as a condition for graduating from high school, up from 13 in 2011. The irony is that requiring schools to spend time and money teaching financial literacy is a worse financial decision than any that those high-schoolers are likely to make anytime soon.
That’s because financial education simply doesn’t work. It doesn’t change behavior — as numerous studies have shown. Indeed, the fact that giving people information does not, by itself, change how they act is one of the most firmly established in social science, whether the subject is the dangers of drug use, the value of getting vaccinated or the calories in a restaurant’s bacon cheeseburger. The same is true of finance.
