Amid all the hoopla and theater of the national political convention you might have missed a noteworthy report about the financial literacy of the average American adult. It’s worth taking a look during the weekend if you want a break from the presidential race, which seems like it begins again as soon as the election results are in.
There’s not much in the National Financial Capability Study to suggest that people are getting smarter about their finances. “Only 37% of respondents are considered to have high financial literacy, meaning they could answer four or more questions on a five-question financial literacy quiz — down from 39% in 2012 and 42% in 2009,” according to the study.
This is a troubling development. You would think that after the financial crisis, when so many individual investors got badly burned, that they would make a greater effort to understand investing. But the academic evidence suggests that investor education is at best an uphill battle, and at worst a big waste of time.
As the Brookings Institution observed, “None of the four traditional approaches to financial literacy — employer-based, school-based, credit counseling, or community-based — has generated strong evidence that financial literacy efforts have had positive and substantial impacts. “
Indeed. When a broad analysis was done looking at all of the research, the results were deeply disappointing; even when consumers do manage to learn a little, those gains “decayed over time … with negligible effects on behavior 20 months or more” after.