What are the long-term effects of high school financial education?

Many countries around the world are considering school financial education to prepare students for using financial products responsibly. However, we still know little about the effects of these programs on long-term financial behavior. Most existing studies measure effects of school financial education less than a year following the intervention.

In 2011, Bruhn et al. (2016) studied the impact of a high school financial education program through a randomized control trial with about 25,000 students from 892 schools in six Brazilian states. Half of the 892 public schools were randomly selected to receive teacher training and financial education textbooks in 2010. The textbooks contained case studies that were integrated into the classroom curricula of mathematics, science, history, and Portuguese during the last two years of high school (in 2010 and 2011). Control group schools did not receive training or material. Bruhn et al. (2016) show that, in the short run, the program led to increased financial knowledge, as well as positive effects on savings attitudes, self-reported saving up for purchases, money management, and budgeting. On the flip side, the program led to significantly greater use of expensive financial products such as credit cards, and a higher likelihood of being behind on credit repayments, likely because the program tried to inform students about these products but did not actively discourage their use.

In new research, we use administrative data to follow 16,000 students in the original sample for nine years after graduating high school. Based on students’ name and age, we obtained their taxpayer identification number (CPF). We then used the CPF to consult administrative data housed at the Central Bank of Brazil. These data include bank account ownership (but not account balances), use of various credit products, as well as information on formal employment status and formal microenterprise ownership. We follow young adults from when they finished high school in 2011, until February 2020, just before the COVID-19 pandemic hit Brazil.

Comparing the randomized treatment and control groups, we have three main findings on long-term financial behavior:

• First, the financial education program had no effect on long-run bank account ownership, but a high percentage of students (85 percent) have a bank account after graduating high school .
• Second, treatment students use fewer expensive credit products . Treatment students are 1.4 percentage points less likely to have credit card debt and 0.9 percentage point less likely to use overdrafts, compared to 23 percent of control students with credit card debt and 11 percent of control students with overdrafts.
• Third, the program led to a lower likelihood of having loans with repayment delays , by about 0.9 percentage point, compared to 15 percent of control students with repayment delays (see figure 1).

We thus find that high school financial education can improve students’ long-term financial outcomes. Our study also highlights the importance of examining effects over time since they may differ in the short and long run. In the short run, treatment students were more likely to use expensive sources of credit than control students, while treatment students are less likely than control students to use these sources in the long run. It could be that students experimented with expensive credit initially and then realized that this was not a sound financial decision. It is also likely that the credit they used while still in high school was only for small purchases, whereas in the long term the stakes are higher, and the students have avoided larger amounts of debt.

Finally, our study also shows that financial education can affect employment outcomes. Eight to nine years after graduating, treatment students are 10 percent more likely to own a formal microenterprise than control students  (a 0.69 percentage point increase relative to 6.9 percent of control students with a formal microenterprise). And treatment group students are 1.2 percentage points less likely to hold a job with a written contract, relative to 49.5 percent of control students with a formal job, suggesting that the program caused them to switch occupations from being employees to being business owners. These effects may be attributed to the fact that the program was comprehensive and included modules on work and entrepreneurship.