Financial Education and Savings Outcomes in Individual Development Accounts

This study is a quantitative look at the effects of financial education on savings outcomes for the poor in Individual Development Accounts (IDAs). It examines the relationship between the hours of financial education attended by IDA participants and savings outcomes.

IDAs are targeted at the poor. They provide subsidies through matches and require participants to attend financial education. Participants accrue matches as they save to build assets that increase long-term well-being and financial self-sufficiency. Financial education makes people more aware of financial opportunities, choices and possible consequences. It may help individuals develop skills to accumulate savings. There is growing recognition of the importance of financial education as it relates to saving. IDA programs require financial education, but there is no systematic evidence that this requirement is essential. Study findings indicate that:

• Financial education has signficant effects and courses need not be long to take advantage of them;
• Few hours of general financial education increases saving;
• It is important to note that the effects may diminish or reverse as course-hours increase.