Training to Save?

Many of us remember the first thing we saved money for, depositing loose change or hard-earned cash in piggy banks. Dean’s son has been saving to purchase a soccer jersey from every country he’s visited with his dad. Annie remembers selling cakes to save money for scouting trips. Little did we know that our parents had ulterior motives for encouraging us to save: they wanted to instill in us a culture of saving at a young age and an understanding of the value of money—in other words, the beginnings of a financial education.

At a time when nearly half of American households carry over credit card balances every month, we wonder: How much did our early financial education affect us?

Evidence of the impact of financial education programs on financial outcomes for adults is mixed. Often, these programs instill greater confidence but not necessarily with better decision-making, so some have argued for a stronger focus on children’s financial education. Let’s teach them while they are young and have yet to form habits, the thinking goes.

As part of Innovations for Poverty Action’s efforts to evaluate poverty-reduction programs, we posed this question: Would financial education trainings for children in a developing country, with one of the lowest savings rates in Africa, help instill a culture of saving and good financial decision-making in these kids? Would a program like this affect the children’s self-esteem? Or is an additional psycho-social program necessary to affect social and financial knowledge, attitudes, and behavior? IPA conducted a randomized evaluation in Ghana led by Jim Berry, Dean Karlan, and Menno Pradhan to answer these questions.

For the study, fifth and seventh grade students from 135 schools in three regions of Ghana were randomly divided into three groups. Schools in the first group were offered a straightforward financial training curriculum called the Honest Money Box (HMB) program, which taught basic financial planning and budgeting. The second group was given the opportunity to enroll in the Aflatoun program, which taught the same financial skills and added personal rights and responsibilities as well as a social and financial enterprise component. A third group of schools were enrolled in neither program, but we collected data on them, so that we could reliably compare their students’ outcomes with those in the Aflatoun and HMB programs.

In both the Aflatoun and the HMB programs, schools were provided a metal, padlocked box. Students could make deposits into and withdrawals from this box, and a teacher recorded each transaction in a ledger book and the student’s passbook. In addition, the Aflatoun program adapted social messages and activities to the Ghanaian context. The Aflatoun program focused on cultural heritage and community, thus trying to encourage savings and better financial attitudes by fostering a collective sense of empowerment. By contrast, the HMB program just focused on personal finances and the importance of savings, training students to save regularly and to spend responsibly, with the aim of cultivating responsible financial management.

The three-group study design allowed us to evaluate the effects of financial education on children’s behaviors and attitudes in a more detailed way. The HMB group showed us the effects of financial education alone on these outcomes, while the Aflatoun group allowed us to see what happened when those skills are embedded in a larger program of social and collective empowerment. Measuring the same outcomes in the group that didn’t receive any extra education also gave us a view into how kids develop without the intervention.

Now that you know the basics of what we did, what do you think we found? The answers, and a longer description, will be published in the Fall 2012 issue of SSIR. Two respondents who get the answer right will be randomly selected to win either a copy of Dean’s book More Than Good Intentions or a free annual digital subscription to SSIR. So vote now by selecting one answer to the four possible results below.

Read more stories by Annie Duflo & Dean Karlan.