When the Messenger Is Worth Shooting

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April is cruel for other reasons. It’s Financial Literacy Month, when well-meaning experts bear the bad news: many of us are financial fools.

The 30-day marketing blitz sweeps up Congress, banks, state capitols, pollsters and personal finance columnists in an annual lamentation--and scolding--that Americans, the kids especially, don’t know much about money. To help, Bank of America, for example, is sponsoring a workshop series to educate low-income people.

Just one problem: Fewer and fewer people think this kind of stuff works. At a forum on financial literacy on Tuesday, Columbia professor Anand Marri, who also heads economic education at the Federal Reserve Bank of New York, said the 850 financial literacy curriculums he and his colleagues reviewed are "not achieving behavior change." Moreover, a lot of the courses and nonprofits are sponsored for less-than-pure motives. "A lot of financial institutions supporting this are doing it to increase their customer base," Marri says.

That's not to say Americans don't need help with their money. They do, and some experts are re-thinking financial literacy education. On April 7, the Consumer Financial Protection Bureau launched a pilot project to help public libraries become hubs of "unbiased and accurate" financial information. Rather than develop another financial video game for kids, the CFPB is trying to make good advice available to adults at the times they're making major financial decisions. The ultimate hope is that the energy and dollars behind the financial literacy movement, which often come from big financial firms, flow into solutions that actually work.

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What doesn’t work well, according to two academic studies released last year, is forcing high school students to memorize facts about compound interest and credit scores. One study Apps That Nudge, Nag and Manipulate You Into Financial Health 201 previous studies and found a 0.1% effect of financial literacy courses on behavior -- an improvement that diminished rapidly over time. reviewed by a Harvard Business School professor and two other economists found personal finance courses in high school "have no effect on financial outcomes."

What worked? More training in math, which suggests requiring financial literacy classes -- as 17 states do -- is less effective than improving the teaching of basic subjects.

In addition to being ineffective and boring, the lessons of financial literacy curriculums often end up sounding patronizing and obvious. Check your credit report. Rebalance investments. Budget. The fact that most people don't bother to do these things is taken as a sign of their financial illiteracy. For example, 61 percent of 2,000 U.S. adults in a survey sponsored by Experian Consumer Services this month admitted to not having a budget. That result, admonished the National Foundation for Credit Counseling, "underscores [the] need for financial education."

But the existence of a budget hardly inoculates you against financial setbacks. Moreover, for many, "budgeting doesn't work." That's the conclusion of Bill Harris, the former CEO of Intuit and PayPal who founded online wealth manager Personal Capital. Spending rarely fits in consistent categories from month to month, Harris says. "Life doesn't work that way."

Meaningful help for consumers could come from simpler financial products and more reliable, independent advice about how to use them safely. From annuities to mortgages, insurance policies to credit cards, many products are often complex for complexity's sake, while conflicts of interest abound among financial advisers and insurance brokers. The Consumer Financial Protection Bureau has cracked down on some credit products, but investments are off limits for the new regulator. The Securities and Exchange Commission could take to task advisers who don't act in clients' best interests -- those that don't act as fiduciaries -- but it hasn’t done so four years after the passage of the Dodd-Frank Act.

Yesterday, Bank of America was Another $783 million for deceptive practices, including improperly charging consumers for financial protections such as credit monitoring and debt relief in the face of job loss. Given Financial Literacy Month's very limited success, maybe the real lesson is to warn people of deceptive practices, encourage them to focus on math, and think of every week as "Watch Your Wallet Week."

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