In this article we review the literature on financial literacy, financial
education, and consumer financial outcomes. We consider how financial literacy
is measured in the current literature, and examine how well the existing
literature addresses whether financial education improves financial literacy or
personal financial outcomes. We discuss the extent to which a competitive market
provides incentives for firms to educate consumers or offer products that
facilitate informed choice. We review the literature on alternative policies to
improve financial outcomes, and compare the evidence to evidence on the efficacy
and cost of financial education. Finally, we discuss directions for future
research.
We examine a natural experiment and a field experiment that provided direct information on school test scores to lower-income families in a public school choice plan. Receiving information significantly increases the fraction of parents choosing higher-performing schools. Parents with high-scoring alternatives nearby were more likely to choose nonguaranteed schools with higher test scores. Using random variation from each experiment, we find that attending a higher-scoring school increases student test scores. The results imply that school choice will most effectively increase academic achievement for disadvantaged students when parents have easy access to test score information and good options from which to choose.
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