Financial Knowledge

Increased knowledge of financial matters enhances an individual’s ability to make informed decisions about how to control and manage their finances. Financial knowledge has implications for how individuals spend, save and invest money, as well as how they budget and set monetary goals. Research shows that lack of financial knowledge is related to debt (Norvilitis et al., 2006) and increased knowledge can lead to individuals engaging in positive financial practices and fewer risky ones (Borden et al., 2008; Hilgert, Hogarth, & Beverly, 2003). Adults with better financial knowledge are more likely to plan for retirement and engage in financial practices that lead to asset accumulation (Lusardi and Mitchell, 2009).

Normally, gains in financial knowledge can be tested immediately upon completion of the program, by asking participants a set of questions that cover a range of personal finance topics. Ideally, both pre and post-tests should be implemented to effectively assess a program’s impact on individuals’ financial knowledge, assuming that participants have had long enough exposure to program interventions (NEFE, 2013). 

Programs should compare data annually. Client data could be collected at intake/enrollment; at 3, 6, or 12 months after point of enrollment; and at termination/exit.


Sources Cited

Norvilitis, J. M., Merwin, M. M., Osberg, T. M., Roehling, P. V., Young, P. and Kamas, M. M. (2006), Personality Factors, Money Attitudes, Financial Knowledge, and Credit-Card Debt in College Students. Journal of Applied Social Psychology, 36: 1395–1413. doi: 10.1111/j.0021-9029.2006.00065.x

Borden, L.M., Lee, S. Serido, J. and Collins, D. (2008). Changing College Students’ Financial Knowledge, Attitudes, and Behavior through Seminar Participation. Journal of Family and Economic Issues, 29 (1), pp 23-40.

Hilgert, M.A., Hogarth, J.M., and Beverly, S.G. (2003). Household Financial Management: The connection between knowledge and behavior. Federal Reserve Bulletin (July): 309-322.

Additional Resources

Campbell, J.Y. (2006). Household Finance. NBER Working Paper 12149. (March).

Courchane, M. and Zorn, P. (2005). Consumer Literacy and Creditworthiness.

Robb, C.A., and Woodyard, A.S. (2011). Financial Knowledge and Best Practice Behavior. Journal of Financial Counseling and Planning, 22(1),60-70.

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